INTERLIANT INC, 10-K, 2000-03-29

INTERLIANT INC
10-K, 2000-03-29
BUSINESS SERVICES, NEC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

|X| ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
or
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM . . . . . . . . TO . . . . . . .
COMMISSION FILE NUMBER 0-26115

---------------
INTERLIANT, INC.

(Exact name of registrant as specified in its charter)
---------------

DELAWARE 13-3978980
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

TWO MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
(Address of principal executive offices, zip code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914)640-9000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK, $.01 PAR VALUE PER SHARE

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file Such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. | |

The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based on the closing price of Common Stock on March 2, 2000 of
$41 11/16 as reported on the Nasdaq National Market, was approximately $588.0
million. Shares of Common Stock held by each officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.

As of March 2, 2000, 47,304,514 shares of Common Stock, $.01 par value per
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share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Document Part of Form 10-K

Portions of the Definitive Proxy Statement Part III
with respect to the Annual Meeting of Shareholders,
to be filed not later than 120 days after the close
of the Registrant's fiscal year

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Table of Contents

PART I

Item 1. Business............................................................ 4
Item 2. Properties.......................................................... 40
Item 3. Legal Proceedings................................................... 40
Item 4. Submission of Matters to a Vote of Security Holders................. 40

PART II

Item 5. Market for the Company's Common Equity and Related
Stockholder Matters......................................................... 40
Item 6. Selected Financial Data............................................. 41
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................................... 43
Item 8. Financial Statements and Supplementary Data......................... 51
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure......................................... 71

PART III

Item 10. Directors and Executive Officers of the Registrant..................71
Item 11. Executive Compensation..............................................71
Item 12. Security Ownership of Certain Beneficial Owners and Management......71
Item 13. Certain Relationships and Related Transactions......................71

PART IV

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K......71
Item 15. Signatures..........................................................76

Interliant is a registered trademark of Interliant, Inc. This Report on
Form 10-K contains trademarks of other companies. These trademarks are the
property of their respective holders.

All references to "we," "us," "our," or "Interliant" in this Report on
Form 10-K means Interliant, Inc. For purposes of this Report on Form 10-K, the
company whose business we acquired in March 1999, the name of which was
Interliant, Inc., is referred to as Interliant Texas. We changed our name from
Sage Networks, Inc. to Interliant, Inc. after acquiring Interliant Texas.

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PART I

THE STATEMENTS IN THIS REPORT ON FORM 10-K THAT ARE NOT DESCRIPTIONS OF
HISTORICAL FACTS MAY BE FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT
MANAGEMENT'S CURRENT VIEWS, ARE BASED ON CERTAIN ASSUMPTIONS AND ARE SUBJECT TO
RISKS AND UNCERTAINTIES, INCLUDING, BUT NOT LIMITED TO, THE INFORMATION SET
FORTH UNDER THE CAPTION "RISK FACTORS", AS WELL AS OTHER RISKS DETAILED HEREIN.
ACTUAL RESULTS COULD DIFFER MATERIALLY FORM THOSE CURRENTLY ANTICIPATED AS A
RESULT OF THE FOREGOING OR OTHER FACTORS.

We currently file reports, proxy statements and other information with
the SEC. Such reports, proxy statements and other information can be inspected
and copied at the public reference facilities maintained by the SEC at:

Room 1024 Suite 1400
450 Fifth Street, N.W. Northwest Atrium Center 13th Floor
Judiciary Plaza 500 West Madison Street Seven World Trade Center
Washington, D.C. 20549 Chicago, Illinois 60661 New York, New York 10048

Copies of material can be obtained at prescribed rates from the Public
Reference Section of the SEC at:

450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549

The SEC maintains a World Wide Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC. The address of the site is http://www.sec.gov.

ITEM 1. BUSINESS

Our Company

We are a leading application service provider, or ASP, providing our
customers with a broad range of outsourced e-business solutions. Our customers
face significant challenges in doing business on the Internet due to its
technical complexity, their lack of technical skills, the cost of implementation
and ongoing support and the time necessary to implement solutions. By providing
comprehensive outsourced solutions that combine our hosting infrastructure with
Internet professional services expertise, we can rapidly design, implement,
deploy and effectively manage cost-effective e-business solutions for our
customers.

As an ASP, we provide:

o hosting infrastructure for our customers' network-based
applications, which allows our customers to store their
databases, applications or Web sites on equipment owned and
maintained by us or on our customers' equipment located in our
data centers;

o Internet professional services for designing, implementing and
deploying these network-based applications; and

o operations support, systems and applications management and
customer care for our customers and their end-users.

Our services portfolio consists of the following solutions:

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Web Hosting. We provide virtual, dedicated and co-located Web hosting
services. These range from simple, low-end, marketing-oriented Web sites on a
server shared by many customers to high-end, Web-based, mission-critical
applications on hardware dedicated to a specific customer.

Messaging/Knowledge Management. We offer a range of messaging and
knowledge management hosting solutions for the Lotus Notes/Domino and Microsoft
Exchange platforms. These solutions provide our customers with the
infrastructure needed to support e-mail and other messaging methods for internal
and external communication, project team collaboration and document sharing and
to improve business process automation and workflow. We also provide outsourced
messaging solutions based on industry-standard e-mail technologies, such as POP
and SMTP, as well as proprietary messaging solutions, including our eReach for
messaging.

Customer Relationship Management. Our Customer Relationship Management
(CRM) solutions, which are based on software provided by companies such as Onyx
and Pivotal, provide geographically distributed sales and marketing
organizations with all the elements needed to deploy sales force automation,
partner relationship management and other CRM solutions quickly and at a
reasonable cost.

E-Commerce. We provide e-commerce solutions based on IBM Net.Commerce,
Microsoft SiteServer, Mercantec SoftCart and other applications. Our e-commerce
solutions allow our customers to create and manage electronic storefronts and
provide end-to-end online e-commerce solutions.

Distributed Learning. Our distributed learning solutions, which are
based on software provided by Lotus, Macromedia and other companies, allow our
customers to create online learning and training environments.

Infrastructure/Security Solutions. Our infrastructure/security
solutions allow our customers to implement and deploy technologies that enhance
the performance of their hosted e-business solutions. These technologies include
managed firewall services, load balancing, and caching solutions from vendors
such as Cisco Systems, Check Point Software, ArrowPoint Communications, and
Alteon WebSystems.

Internet Professional Services. We implement, enhance and support all
of our ASP solutions with Internet professional services, either provided by our
own consultants or by our business partners. Our Internet professional services
include capabilities to create intranet, extranet and application hosting
solutions for our customers, as well as provide network implementation, security
implementation and back-end Web development projects. These services are a key
part of our ASP service delivery, enabling us to provide our customers with an
end-to-end outsourced solution.

We have three state-of-the-art primary data centers, located in
Atlanta, Georgia, Houston, Texas and Vienna, Virginia. These data centers are
monitored on a 24x7 basis and include sophisticated monitoring and diagnostics,
24x7 customer support, multiple high speed network connections to the Internet
and uninterruptible power supplies, fire suppression and external fuel
generators.

We have grown rapidly since our inception in December 1997, acquiring
23 hosting and related Internet service businesses through February, 2000. In
addition, we have established strategic relationships that enable us to provide
complete, scalable and reliable ASP services to our customers and business
partners. Our current strategic alliances include partnerships with IBM, Dell

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Computer, BMC Software, Lotus Development, Microsoft, UUNET Technologies,
Network Solutions, Cisco Systems and Onyx.

In February 2000, we acquired reSOURCE PARTNER, Inc. and Soft Link,
Inc. These acquisitions expand our business into the Enterprise Resource
Planning (ERP) market by extending our service offerings to include the
implementation and hosting of PeopleSoft solutions. reSOURCE PARTNER is a
leading provider of hosting services for outsourced human resources and finance
solutions and a certified PeopleSoft partner and Soft Link, Inc. is an
international professional services firm that specializes in expert-level
implementation and management support to PeopleSoft customers. As part of our
acquisition of reSOURCE PARTNER, we also acquired a data center in Columbus,
Ohio. Except where specifically stated, the acquisitions of reSOURCE PARTNER,
Inc. and Soft Link, Inc. are not reflected in this Report on Form 10-K.

Industry Background

Growth of the Internet. The Internet is experiencing significant growth
and is emerging as a global medium for communications and commerce.
International Data Corporation ("IDC") estimates that the number of Web users
worldwide will increase from approximately 142.2 million at the end of 1998 to
502.4 million by the end of 2003, a 29.0% compounded annual growth rate. IDC
also estimates that the number of Web users in the United States will increase
from approximately 62.8 million at the end of 1998 to 177.0 million by the end
of 2003, a 23.0% compounded annual growth rate. During this same period, the
number of business Web sites in the United States is projected by Forrester
Research, Inc. to increase from approximately 650,000 in 1998 to approximately
2.6 million in 2002, a 41.1% compounded annual growth rate. This growth in the
number of Web users and number of Web sites is being driven by a number of
factors including the large and growing installed base of personal computers,
easier and less expensive alternatives for Internet access, an increase in the
number of networked applications and the proliferation of broadband technologies
that promise consumers faster, more convenient access to the Internet.

Growth in Business Use of the Internet. The dramatic growth in usage
combined with enhanced functionality and accessibility have made the Internet an
increasingly attractive medium for businesses to disseminate information, engage
in e-commerce, build customer relationships, streamline and automate
data-intensive processes and communicate more efficiently with dispersed
employees.

In the last several years, businesses have emerged with operating
models that are exclusively dependent on the Internet, while traditional
businesses of all sizes are working quickly to establish a Web presence. Many of
these businesses establish their initial online presence with a simple, static
brochure for marketing purposes. As they become more familiar with the Internet
as a communications platform, an increasing number of businesses are
implementing more complex, mission-critical applications on the Web for sales,
customer service, customer acquisition and retention, employee communications
and e-commerce between suppliers and business partners. IDC projects that
worldwide commercial business commerce on the Internet will grow from
approximately $27.4 billion in 1998 to approximately $1.0 trillion by 2003, a
compounded annual growth rate of 104.5%.

Trend Toward Outsourcing. According to IDC, firms worldwide are now
spending approximately 30% of their overall IT services budgets on outsourcing.
These services include network consulting and integration, network and desktop
outsourcing, information services consulting and outsourcing and application
outsourcing. Reasons for the growth in outsourcing include the desire of
companies to focus on their core businesses, the increased costs that businesses
experience in developing and maintaining their networks and software
applications, the fast pace of technological change that shortens time to
obsolescence and increases capital expenditures as companies attempt to
capitalize on leading-edge technologies, the challenges faced by companies in
hiring, motivating and retaining qualified application engineers and IT
employees and the desire of companies to reduce deployment time and risk.

Emergence of the Application Service Provider Industry. Companies are
increasingly relying on software applications to improve business process and
functions, develop new sales channels, improve customer relationships and reduce
costs. In addition, both new and traditional businesses are developing complex
Web sites to leverage e-commerce opportunities. However, given the

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shortage of qualified IT professionals, the increasing cost and complexity of
applications and the importance of time to market cycles, many companies are
finding it increasingly difficult to manage the quality of their IT assets.

Application service providers combine Internet professional services,
network and application management and hosting capabilities to deliver
applications as a service to their customers. Customers access applications that
are remotely hosted and managed by the ASP using the Internet or leased lines.
Typically, ASPs offer their services on a contractual basis, charging customers
a monthly fee. In contrast to traditional application outsourcing arrangements,
where the application outsourcer is responsible for managing custom built
applications for one customer, the ASP offers primarily packaged applications
and manages those applications for multiple customers from a centrally located
facility. Dataquest Research Services forecasts the worldwide ASP market will
grow from $889 million in 1998 to $22.7 billion in 2003, representing a
compounded annual growth rate of 91.2%.

We believe that the ASP model offers customers the following
advantages:

o Improved time to market. With rapid implementation
methodologies and applications management expertise, ASPs
enable customers to take advantage of the functionality of new
applications, without the difficulties associated with long
implementation cycles and attracting qualified IT talent. In
addition, ASPs attempt to minimize customization, therefore
reducing the time and total expense associated with any
specific application implementation;

o Improved performance. As the complexity of applications and
networks increases, customers are finding it difficult to
manage and maintain the performance of their IT systems. By
offering service level agreements and utilizing the latest
technology, ASPs are able to offer guaranteed levels of
service that are not easily attainable by customers' internal
IT departments;

o Focus on core competencies. By outsourcing the delivery and
management of certain applications, customers can better
utilize scarce internal IT resources;

o Access to best-of-breed applications and technology. ASPs
utilize the latest data center technologies, network
management tools and leading applications to provide a wide
range of solutions. Customers of ASPs, therefore, have the
flexibility to select the best-of-breed solutions, from
multiple technology vendors, for many of their
mission-critical functions; and

o Reduced total cost of ownership. Until recently, the
implementation of applications required either the development
of in-house software applications or the customization of
existing packages, making each implementation unique and
costly. It also made implementation time frames and costs
unpredictable. By outsourcing to an ASP, companies are able to
better forecast and plan for monthly IT expenditures.

Our Opportunity

The emerging ASP market is fragmented and is currently being served by
a range of companies, most of which, such as those described below, offer only a
portion of the services provided by full service ASPs:

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o telecommunications companies and Internet service providers
which typically provide data center facilities and network
connectivity;

o hosting companies, which typically provide data center
facilities, network connectivity and computer and storage
hardware;

o software companies, which typically provide application and
database software; and

o IT services companies, which typically provide implementation
services and post implementation support.

As a full service ASP, we provide this entire range of services,
including data center facilities, network connectivity, computer and storage
hardware, systems and applications management, application development tools,
application and database software, implementation services and post
implementation support. Through these capabilities, we can rapidly design,
implement, deploy and effectively manage cost effective e-business solutions for
our customers. We believe that a significant market opportunity exists for an
internationally recognized ASP with the scale and expertise to offer a wide
range of outsourced e-business solutions to businesses of all sizes.

Our Solution

We design, implement and deploy ASP solutions that enable our customers
to effectively manage e-business solutions in a rapid and cost effective manner.
We offer the technological expertise, partnering ability and understanding of
the business and licensing models which we believe are essential to succeed in
the ASP marketplace. We provide solutions to customers ranging from small
businesses to large enterprises in a variety of vertical markets across a wide
range of industries. We believe we have developed the infrastructure, resources,
systems and application management expertise and industry relationships to
capitalize on this emerging market opportunity.

We provide the following advantages to our customers:

Rapid Implementation. Designing, implementing, and deploying e-business
solutions is a complex problem requiring appropriate staff with the correct
skill sets. Our hosting solutions provide our customers with our pre-configured
infrastructure and our experienced team of consultants to rapidly implement
their e-business solutions.

Comprehensive Hosting Solutions. Our hosting solutions provide our
customers with continuously available remote access to mission-critical
applications and data. These solutions help to ensure that our customers'
applications and Web sites are continuously online and deliver data rapidly to
users. Our primary state-of-the-art data centers provide high-quality
performance and reliability through features such as a redundant, high-speed,
secure network architecture, continuous monitoring, alternate power sources,
environmental controls, regular data back-ups and a fault-tolerant hosting
platform. Our Network Operations Centers monitor our network on a 24x7 basis and
allow our staff to minimize service interruptions.

Customer Service. We are dedicated to providing the highest quality
customer service. Our customer service organizations can address technical
problems on a 24x7 basis. We have invested in advanced customer service software
and call routing technology to streamline the customer service process. We also
offer a self-service customer support alternative, which

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provides online access to account and billing data and site statistics such as
disk storage capacity and bandwidth utilization.

Cost-Effective Solutions. Our customers benefit from the capital and
labor investments that we have made to support hosting and other Internet
services. For customers to replicate our performance and reliability, they would
be required to make significant expenditures for hardware, data center
facilities, connectivity and personnel. We believe that our hosting solutions
are significantly more cost-effective and reliable than in-house solutions, both
for businesses with low-end application requirements as well as for those
businesses whose Internet operations are mission-critical and require
sophisticated application support.

Services

Our services portfolio consists of the following solutions:

Web Hosting Services

We offer a comprehensive suite of solutions to meet the current and
future Web hosting needs of our customers. We provide virtual, dedicated and
co-located hosting services. The following table sets forth certain information
with respect to our Web hosting services.

- -------------------------------------------------------------------------------------------------------------
Hosting Services Price Web Site Profile Key Features Customer Benefits
- ----------------------- -------------------- --------------------- -------------------- ---------------------
<S> <C> <C>
Virtual $20-$350 Static Web Shared space on Economical
per month Pages, moderately Interliant-owned
Accessed sites server

Dedicated $100-$5,000 Dynamic Web Dedicated Greater server
per month Content, heavily Interliant-owned resources
Accessed sites server in shared requiring
rack minimal
customer
maintenance

Co-Located $500-$40,000 Mission-critical Secure cabinet Greater
per month Applications for customer- customer
owned server control/access
to hardware
- -------------------------------------------------------------------------------------------------------------

</TABLE>

The foregoing prices are representative of products marketed under the
Interliant brand and may not be representative of our products marketed under
other brand names. Customers generally pay monthly, quarterly or annual fees for
the services used, as well as one-time fees for installation and any equipment
purchased by the customer.

Virtual Hosting. Our virtual hosting solution provides customers with
all the elements needed to establish a basic presence on the Web at a reasonable
cost, making it an economical solution for relatively simple or moderately
accessed Web sites. This entry-level service is known as virtual hosting because
the customer's home page has its own domain name and appears to

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exist as a stand-alone server. It operates with the speed and efficiency of our
high-speed connections and its location at our facility remains invisible to Web
site visitors. Customers are able to have their own Web site with a domain name
at a fraction of the cost of maintaining it themselves. Because customers do not
need to invest in costly hardware or personnel to accommodate future growth, we
believe this solution also maximizes the customers' flexibility.

Dedicated Hosting. As companies increase the complexity, level of
traffic or reliance on their Web sites, they may prefer to host their Web site
on a dedicated server, which is typically owned and maintained by us. A
dedicated server provides greater server and network resources to our customers
than virtual hosting and allows them to configure their hardware to optimize
site performance. Customers receive a high level of site security, maintenance
and technical support without the prohibitive costs of setting up and
maintaining their own server and Internet connection. We support most leading
Internet hardware and software system vendor platforms, including Solaris, which
operates on a Sun Microsystems platform, Microsoft Windows NT, which operates on
an Intel/PC platform and Linux, which operates on a Cobalt Networks platform.

Co-located Hosting. We provide co-located hosting services in each of
our primary data centers for customers with sophisticated, mission-critical
applications. This solution allows the customer to own and access their servers
on a 24x7 basis while delegating the day-to-day management of their Web site to
our IT specialists. In addition, co-located servers are housed in separate,
limited-access rooms in our data centers.

Messaging/Knowledge Management

We offer our customers a broad spectrum of messaging/knowledge
management solutions. These solutions allow a customer's widely distributed work
force to share software applications hosted on computers owned and managed by
us. Our messaging/knowledge management solutions provide feature-rich e-mail and
other types of messaging for internal and external communication. These
solutions also support workgroup and project team collaboration and document
sharing, business process automation and workflow, as well as proprietary or
custom applications built for this platform.

We provide hosting for messaging/knowledge management applications
based on the Lotus Notes/Domino and Microsoft Exchange platforms. We also
provide outsourced messaging solutions based on industry-standard e-mail
technology, such as POP and SMTP, as well as proprietary messaging solutions,
including our eReach for messaging. We host these solutions on both shared and
dedicated servers at one of our data centers or on the customer's premises.
Customers can connect to our servers using the Internet or a variety of private
network options, including frame relay, dedicated lines and local dialup access
in more than 100 Countries.

Customer Relationship Management

Our customer relationship management (CRM) solutions provide
geographically distributed sales and marketing organizations with all the
elements needed to quickly deploy sales force automation, partner relationship
management or other customer relationship management solutions. Our CRM
offerings are based on software from leading CRM software providers such as
Onyx. Our solutions are hosted on both shared and dedicated servers at one of
our data centers or on the customer's premises.

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E-Commerce Capabilities

We offer a variety of e-commerce solutions to help businesses create
and maintain a successful electronic commerce presence on the Web. E-commerce
provides businesses the ability to sell products and services on the Internet.
Our e-commerce offerings include:

o Net.Commerce from IBM, which allows our customers to rapidly
plan, create and implement a fully manageable e-commerce Web
site using the IBM Net.Commerce software platform;

o SiteServer from Microsoft, which allows our customers to
rapidly plan, create, and implement a fully manageable
e-commerce Web site using the Microsoft SiteServer software
platform;

o SoftCart from Mercantec, which allows users to create
sophisticated e-commerce Web sites that include order taking,
credit card processing and order fulfillment;

o CyberCash from Cybercash, Inc., which offers users a full
suite of Internet payment solutions, including credit card
services, micropayment and Internet check transactions; and

o ShopSite from Open Market, which allows users to build and
maintain catalogs of products or services to sell over the
Internet.

Distributed Learning

Our distributed learning solutions allow our customers to create online
training and learning environments. We offer comprehensive solutions for
corporate and academic customers based on software from vendors such as Lotus.
These solutions include sophisticated course and student management systems and
online facilitation. Deployment of existing courses is very rapid, with students
typically able to access courses within a few days following registration.

Infrastructure/Security Solutions

Our infrastructure/security solutions allow our customers to implement
and deploy technologies that enhance the performance of their hosted e-business
solutions. These technologies include managed firewall services, load balancing
and caching solutions from vendors such as Cisco Systems, Check Point Software,
ArrowPoint Communications, and Alteon WebSystems.

Internet Professional Services

We implement, enhance and support our ASP services with Internet
professional services, either provided by our own consultants or by our business
partners. These services are a key part of our ASP service portfolio, enabling
us to provide our customers with end-to-end outsourced solutions.

Our Internet professional services include capabilities to create
intranet, extranet and application hosting solutions for our customers, as well
as provide network implementation, security implementation and back-end Web
development projects. In addition, we provide support for our customers'
enterprise networking needs. We address the complete spectrum of services,
including desktop and network server support, network architecture and design,

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strategic technology planning and application development and implementation. We
scale our Internet professional services to meet each client's needs.

Customers

We have established a diversified customer base across our service
offerings. Our customer contracts range in duration from one month to three
years. Our customers include end-users representing a variety of business types,
ranging from small businesses to large enterprises. We also sell our services to
Web consulting firms, Internet service providers, network integration companies,
system integrators and other Internet-related companies who resell them to their
customers. We do not believe that the loss of any one customer would materially
adversely affect us.

Strategic Relationships

Our strategic relationships and partnerships with leading technology
companies allow us to provide a wide range of services to meet our customers'
needs. The following is a description of selected companies with whom we have a
strategic relationship:

IBM. We are a Premier Partner in the IBM Partnerworld Business Partner
program for Service Providers, as well as an IBM Strategic Alliance Partner. We
began offering the IBM Net.Commerce Hosting Server product line in January 1999
as an end-to-end e-commerce solution. IBM currently lists Interliant on its Web
site as one of a select group of partners that are able to offer this product.
We are also hosting IBM Net.Commerce solutions, Start and Pro, for dedicated
server customers who maintain large e-stores and require large scale
implementations.

On October 22, 1999 we signed an agreement to create a sales and
marketing alliance to deliver application hosting solutions that combine IBM
e-business hardware and software with our hosting services. The first two
services being addressed under this alliance are: Interliant's eReach
application management service and hosted e-commerce solutions deploying IBM
WebSphere and IBM Net.Commerce. These solutions will be brought to market
through IBM's and our direct sales forces and IBM's and our Business Partner
channels. The alliance agreement includes obligations for both parties to work
together on joint marketing and sales activities. This agreement will expire on
December 31, 2000, unless terminated sooner upon 90 days advance written notice
by either party.

Lotus Development. We believe we are a leading partner of IBM's Lotus
software division and are a Lotus Net Service Provider/Alliance Partner. We
provide a variety of messaging and hosting services for Internet, intranet and
extranet applications operating on Lotus Notes/Domino. We are currently listed
by Lotus on several sections of Lotus' Web site as one of a select group of
partners that provide hosting services for Lotus Notes/Domino and other Lotus
application solutions and have twice been recognized with Lotus' highest
recognition, the Lotus Beacon Award, most recently in January 1999.

We are party to a Joint Development Agreement with Lotus Development,
dated April 27, 1998, which is scheduled to expire on April 27, 2000, subject to
automatic renewal for additional one-year terms unless terminated by either
party upon prior written notice. Under this agreement, together with Lotus we
co-developed Lotus' Domino Instant! Host now known as the Lotus Hosting
Management System (LHMS) platform, which enables application developers to
deploy and offer Web-based collaborative applications. Under the terms of this
agreement, we share joint development responsibilities with Lotus. Terms of this
agreement include:

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o We are obligated to contribute proprietary computer code owned
by us, to name one of our employees as the project liaison and
to provide non-dedicated architectural and project management
assistance to Lotus.

o Lotus is obligated to contribute substantially similar type of
intellectual property and personnel resources to the project.

o Lotus is obligated to pay us a royalty equal to 25% of the net
revenues received from licensing LHMS. The royalty percentage
may be adjusted at the request of Lotus not more than once
with respect to each new release of LHMS, however, such
adjustment may not reduce the royalty percentage by more than
half the percentage in effect at that time.

o We must pay Lotus at its standard rate for all copies of LHMS
which we desire to license.

o If Lotus engages in product development or promotional
activities which impact its ability to generate revenues from
the sale of LHMS, the agreement will terminate and Lotus will
be obligated to pay us up to $250,000 in penalties depending
upon the amount of royalties paid to us through the date of
termination.

Microsoft. We are a Microsoft Certified Solution Provider ("MCSP") at
the Partner level. The Partner designation is the highest attainable level in
this program. We believe this designation provides us with preferred access to a
broad range of Microsoft resources and is a distinguishing factor for software
development firms and systems integrators looking to identify sources for
advanced hosting services such as those offered by Interliant.

Our status with Microsoft provides us with the following:

o access to a local, field-based Microsoft representative;

o a corporate-based business development manager;

o designated points of contact in the customer units and
product groups;

o enhanced technical support;

o advance product notification;

o advance product releases;

o participation in beta programs;

o joint marketing programs; and

o sales leads and new business development opportunities
generated by Microsoft.

We are one of ten designated Microsoft Application Service Providers,
defined by Microsoft as being able to provide superior infrastructure, service
and performance for hosted applications on the Microsoft platform.

13
<PAGE>

We are also designated as a rapid deployment partner for various
Microsoft products. As such, we are responsible for providing feedback on
Microsoft products in the advanced hosting and managed application markets prior
to release of those products and by doing so we have been able to provide
services and gain expertise on these products before the general market.

Additionally, we are currently engaged in several strategic initiatives
with Microsoft, as described below.

We have entered into a co-marketing and promotion agreement whereby
Microsoft will include our advertisements in a catalog that is inserted into
every FrontPage 2000 product box that is packaged for retail sale, as well as a
catalog that is inserted into every full package product versions of Office
Developer, Office Standard, Office Small Business, Office Professional and
Office Premium. Microsoft has also agreed that it will issue a press release on
its Web site highlighting our joint involvement in the promotion of FrontPage
2000. In return, we have agreed to feature Front Page 2000 on our Web site with
greater frequency and visibility than any competing product and have agreed to
offer either free Web hosting with a value of up to $105 or free or reduced
registration and set up fees with a value of up to $500, in order to induce the
public to host a FrontPage 2000 Web site. This agreement remains in effect until
the earlier of the initial release of the next version of FrontPage, Microsoft
ceasing to produce FrontPage, or December 31, 2000.

We are also participating in a Microsoft initiative called the Complete
Commerce program. In conjunction with selected other MCSP's, we will incent
customers seeking to engage in e-commerce activities on the Web to enter into
this program by offering a specially priced, all inclusive storefront hosting
package that integrates shipping, credit card processing and tax elements. The
service will also include consulting and development of the storefront
application Web site, back-end integration and hosting activities. Microsoft
will provide resources to help us market this program, including promotional
activities, marketing activities and participation in the customer engagement
activities. Our marketing activities for the Complete Commerce program commenced
in April 1999.

We are also participating in a Microsoft initiative called the Complete
Commerce Phase II program. This program will launch end-to-end hosting solutions
for corporate procurement, customer relationship management and accounting
customers.

We are participating in Microsoft's Office Online pilot program and
have plans to offer Microsoft's desktop productivity suite over the Internet. As
part of this strategic initiative, we will deliver hosted and customized Office
2000 solutions, instant software updates and service releases. We will allow
customers to pay for services on a monthly basis. In addition, our hosting of
Office 2000 will provide small- to medium-sized businesses a new, pay-per-use
option for familiar Office applications including, Microsoft Word, Microsoft
Excel, Microsoft PowerPoint, Microsoft Access, Microsoft FrontPage and Microsoft
Outlook.

We are also engaged in research and development efforts with the
Microsoft Exchange 2000 Product Team to develop a robust hosting platform for
collaborative applications running on Exchange 2000.

All of these initiatives supplement our current shared and advanced
dedicated server offerings for Microsoft NT 4.0, IIS 4.0, SQL, 6.5/7.0,
FrontPage 98, FrontPage 2000 and Office Server Extensions. Dedicated and shared
server offerings based on Windows 2000 are currently under development. We plan
to launch these service offerings in the second half of 2000.

14
<PAGE>

Any aspect of this relationship may be terminated at any time by either
party. We currently have no material financial commitments under any of these
agreements or programs; and we do not expect either of these agreements to
generate any material financial commitments for us in the future.

We also have a strategic partnership with UUNET Technologies to be our
primary connectivity provider on a worldwide basis. See "Technology and Network
Operations--Connectivity."

Since our initial public offering in July 1999, we have entered into
the following additional strategic relationships:

Network Solutions. We have entered into a strategic alliance with
Network Solutions, Inc. to deliver enhanced Internet identity and hosting
services for small and medium-sized businesses. Under the terms of this
agreement, Interliant and Network Solutions will offer and promote our
respective products and services to each other's existing and potential
customers. In particular:

o We will continue to offer our customers the benefit of Network
Solutions' registration services in the .com, .net and .org
top-level domains to help them establish their unique Internet
identities;

o We will provide access to the dot com directory (TM) through
a link on our Web site;

o Network Solutions will promote our services on its Web site,
on the dot com directory and in a variety of other promotional
campaigns. Network Solutions will continue to refer customers
to us as an Alliance Program member and the two companies will
engage in joint sales efforts with the goal of offering those
customers the benefits of our hosting and both parties'
services;

o Network Solutions will also expedite the registration process
for our customers and will provide dedicated advanced account
management for our customers with 24x7 support; and

o Interliant and Network Solutions will explore joint
development of a rentable application offering that would
allow small and medium-sized businesses to leverage the power
of an Internet-based hosted application without the
traditional Infrastructure required to host and administer
one.

Cisco Systems. We have entered into a strategic relationship with Cisco
Systems to provide comprehensive solutions to our customers utilizing Cisco
Systems access and switching products. As part of an Interliant overall IT
solution including design, installation, project management and post-sales
support, we are authorized to distribute Cisco Systems products, both
domestically and on a multinational scale, at substantial discounts to the
retail prices available generally. This relationship also grants us substantial
discounts on Cisco Systems products allocated for our internal uses.

Onyx. We have entered into a strategic relationship with Onyx, a leader
in e-business software and a professional services provider, to provide
comprehensive solutions for Onyx's customer relationship management
applications, Onyx Front Office and Onyx Enterprise Portal. As part of this
relationship, Interliant will provide European Customers with application set

15
<PAGE>

up and configuration at its data center, operating system and application level
administration as well as customer support for Onyx Front Office and Onyx
Enterprise Portal. Outside of Europe, these implementation services will be
initially offered through Interliant partnerships with Onyx system integrators.

In addition to the above relationship, Onyx has selected Interliant as
one if its ASPiN partners. Onyx ASPiN is a global program that includes
software, hardware and services companies working together and independently to
deliver a wide-ranging set of unique hosted offerings based on the Onyx Front
Office product family.

Dell Computer Corporation. In February 2000, we entered into an
alliance agreement with Dell under which we will collaborate to bring Web-based
services to market. Under the terms of the agreement, Interliant will provide
certain services to Dell. As part of the deal, Dell has agreed to sell its
PowerEdge servers and PowerVault storage products to us for use in our hosting
service.

BMC Software. We have executed an agreement with BMC Software under
which we have agreed to standardize BMC Software's monitoring products to
support our hosting platforms and customer premise servers. BMC Software will
also join us in co-marketing activities intended to promote our respective
products and services. We will also promote one another's products and services
to our respective current and potential customers.

@viso Limited. In February, 2000, we and @viso Limited, a company
incorporated under the laws of England and Wales and owned 50% by Softbank
Holdings, Inc. and 50% by Vivendi, S.A., agreed to form a corporation,
Interliant Europe B.V., to be owned 51% by us and 49% by @viso Limited. Through
Interliant Europe, we plan to launch Web hosting, application hosting and
related services in continental Europe. @viso has loaned us the amount required
to purchase our equity interest in Interliant Europe (approximately $7.7
million). We have also agreed to license some of our technology and intellectual
property to and to enter into a service agreement with Interliant Europe.

Acquisition Program

We have completed 23 acquisitions through February, 2000 and we intend
to seek additional acquisitions. We seek to identify businesses which will add
application expertise and service offerings, customers, added sales capabilities
and/or geographic coverage while generating a positive rate of return on
investment. Furthermore, we intend to capitalize on the business practices of
acquired companies that we believe will best maintain our competitive advantages
and ensure ongoing delivery of high quality hosting services to our customers.
The acquisition candidates we review can be large, and their acquisition by us
could have a significant and lasting impact on our business.

The following table sets forth certain information with respect to the
23 acquisitions completed by us since our inception.

16
<PAGE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Date Name Primary Focus Location at Acquisition
- -------------------------------- ------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
May 1998................... Tri-Star Web Creations Web hosting New York
June 1998.................. HostAmerica Web hosting Georgia
June 1998.................. All Information Systems Web hosting Texas
July 1998.................. Software Business Web hosting California
Technologies Web
Hosting business unit
July 1998.................. DevCom Web hosting California
July 1998.................. Maikon Web hosting Texas
August 1998................ ICOM Web hosting California
September 1998............. GEN International Web hosting Florida
December 1998.............. Dialtone Web hosting Florida
February 1999.............. DigiWeb Web hosting Washington, D.C.
February 1999.............. Telephonetics Multimedia Florida
International
February 1999.............. Net Daemons Associates Professional Services Massachusetts,
California and Colorado
March 1999................. Interliant Texas Messaging, CRM, Texas and London,
e-Commerce, Distributed England
Learning
May 1999................... Advanced Web Creations Web hosting New Jersey
August 1999................ Daily-e Professional Services New York
September 1999............. Sales Technology CRM London, England
November 1999.............. Triumph Technologies Professional Services, Massachusetts
and Triumph e-business security
Development solutions
December 1999.............. The Jacobson Group Professional Services Massachusetts
February 2000.............. reSOURCE PARTNER, Inc. ASP Ohio
February 2000.............. Soft Link, Inc. Professional Services Minnesota
- --------------------------------------------------------------------------------------------------------------
</TABLE>

Once we acquire a company, a multi-disciplinary team engages in a
detailed integration process. Technical integration often involves physically
moving the acquired company's equipment into one of our facilities and migrating
acquired company customers onto our hosting platforms. Our platforms are
typically more robust than that of the acquired company and standardization
allows us to manage the servers more efficiently. We also intend to continue to
integrate customer service operations at our primary data centers. By
centralizing customer service, we believe that we can improve performance while
reducing cost. We also intend to continue transitioning acquired company
operations onto a consistent billing platform. This platform will be serviced by
our personnel at a centralized location and employ uniform systems and
procedures to operate multiple billing systems.

Sales and Distribution

Our sales and marketing group sells our ASP solutions to our customers
through the following sales channels:

Direct Sales, which sells ASP solutions to large enterprises and other
businesses whose Internet operations are mission-critical.

17
<PAGE>

Telesales, which acquires new customers through inbound calls generated
through traditional media and outbound telesales to pre-qualified potential
customers.

Internet Marketing programs that drive potential customers to our Web
site or our telesales group. Customers can purchase Web hosting services on a
24x7 basis from our Web site at www.interliant.com.

Indirect Sales consisting of reseller and referral partners, such as
Web consulting firms, Internet service providers, independent software vendors,
network integration companies and system integrators. These distribution
partners have established relationships with our prospective customer base as
well as sales forces capable of selling our ASP solutions. These indirect sales
channels extend our market reach and assist in the delivery of complete
solutions to meet customer needs. We offer our partners a discount from our
retail price on both products and services.

Marketing

We market our ASP solutions using a variety of media and channels. We
intend to continue investing in building the Interliant brand worldwide, using
print advertisements in key industry publications, broadcast advertising, direct
marketing and online advertising, such as general rotation and keyword-specific
Web banner advertisements, as well as other marketing techniques. In addition,
we intend to employ a number of other marketing tactics and communications
vehicles, such as product literature, trade shows, promotions with key hardware
and software vendors, direct response programs and our Web site to generate
leads and increase awareness of our brand. Our products are available from our
primary Web site at www.interliant.com as well as at www.appsonline.com. We
expect to increase our marketing expenditures in order to support our brand
marketing and lead-generation efforts. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

When an acquired company's brand is already well-established, we may
for a period of time continue to market certain products and services under that
brand to capitalize on the competitive advantages the acquired brand may bring
to us. Our long-term goal, however, is to migrate most of our acquired product
offerings to our brands.

Technology and Network Operations

We have developed a secure, reliable, high-performance and scalable
hosting solution, which we believe provides a significant competitive advantage
in the market. This solution is comprised of multiple hosting platforms that
incorporate automated functionality and a network infrastructure that includes
multiple Internet data centers and is monitored on a 24x7 basis. Our strategy in
developing our ASP solutions focuses on utilizing internally created
technological innovations that we integrate with leading software and hardware
providers.

ASP Hosting Platform. Although industry-standard Web servers are
adequate for basic Web hosting, we believe that efficiently managing large
numbers of Web sites and users on a single server or managing complex,
Internet-based applications requires significant technological innovations. We
have developed proprietary hosting platforms that permit us to integrate
existing hardware and software products, such as those from Microsoft, Cisco
Systems, Compaq, Dell and Network Appliance, to create our hosting platform. We
have also developed Web server applications designed to improve performance in a
virtual server environment and we have implemented resource monitoring tools
designed to report and address scarcity of shared computer processing

18
<PAGE>

units and memory resources. Our solution is scalable, allowing servers to be
added while being monitored centrally, independent of where they are located.

Facilities and Operations. We have three state-of-the-art data centers,
located in Houston, Texas; Atlanta, Georgia and Vienna, Virginia. Our customer
service and network monitoring infrastructures are based in these primary data
centers. In order to provide our customers with high-quality service, we have
invested substantial resources in building our network infrastructure.

We have designed our network to minimize the effect of any
interruptions. Our high-speed network is designed to continue operating in the
case of software or hardware failures. Our data centers feature separate,
redundant fiber and power connections, back-up diesel generators, environmental
control systems and uninterruptible power supplies designed to provide on-site
power for up to four weeks. Systems receive full daily back-ups and off-site
storage. We also provide remote access management and reporting tools. Quality
and security are paramount concerns for our customer base. Consequently, we
employ several security measures, including firewall, intrusion monitoring and
site security monitoring, limited access electronic card key measures and the
physical separation of servers from administrative workstations. We have also
implemented monitoring systems to identify potential sources of failure, limit
downtime and notify our staff of any problems. Although we have attempted to
build redundancy into our network and hosting facilities, our data centers are
subject to various single points of failure and a problem with one of our
routers or switches could cause an interruption in the services we provide to
some of our customers.

Our Vienna, Virginia facility is a world-class data center located
within a mile of MAE-East, the major East Coast data hub to the Internet,
facilitating the most scalable Internet connectivity and reliable network
services available. Originally an America Online data center, this 22,270
square-foot facility features the latest in state-of-the-art equipment and
design, including MGE Uninterruptible Power Systems, multi-carrier connectivity,
environmental monitoring and conditioning and end-to-end physical security
systems. We believe these features ensure stable, reliable operation of
applications.

Historically, our Houston data center housed our application hosting
operations and our Atlanta center housed our Web hosting operations. Each of
these centers, as well as our data center in Vienna, Virginia, are capable of
providing a full range of ASP hosting. We anticipate that over time the
functional distinctions between our data centers will diminish.

Our Network Operations Centers are responsible for monitoring our
entire network, server farm and hosted applications on a 24x7 basis. We monitor
each piece of equipment, including routers, switches and servers. The NOCs also
monitor all Internet and telecommunications connections and ensure that they are
functional and properly loaded. The design of the NOCs enables systems
administrators and support staff to be promptly alerted to problems and we have
established procedures for rapidly resolving any technical problems that arise.
The NOCs are fully integrated into our customer service facilities.

Connectivity. We offer connectivity to our systems from virtually
anywhere in the world, enabling customers to deploy global solutions. Customers
can access us:

o via the Internet;

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<PAGE>

o through X.28 connections provided by Compuserve and Equant,
N.V. in more than 105 countries;

o through dedicated lines at a bandwidth they specify;

o over Frame Relay through AT&T, Sprint and MCI Worldcom; or

o domestically via a toll-free number.

We utilize multiple DS-3 connections to the Internet provisioned
directly off a SONET ring from each of our three primary data centers. In
addition, we currently utilize four OC/3 sized circuits from our Atlanta
facility and another single OC/3 connection from our Virginia facility.
Internally developed management and monitoring systems provide insight into the
performance of our entire network, as well as consistency of security measures
across all of our current hosting platforms.

By utilizing top tier connectivity providers and developing private
peering arrangement with bandwidth providers, we are able to offer highly
resilient, redundant and high speed connectivity between the Internet and each
of our data center facilities.

On February 17, 1999 we entered into an agreement with UUNET
Technologies to be our primary connectivity provider on a worldwide basis. The
agreement is scheduled to expire on February 19, 2002, subject to automatic
renewal for an additional year unless either party notifies the other of its
intent not to renew. Terms of this agreement include:

o UUNET Technologies has agreed to provide and we have agreed to
purchase monthly minimum levels of connectivity ranging from
100 Mbps to 600 Mbps of bandwidth.

o Upon execution of this agreement we were committed to purchase
100 Mbps of bandwidth per month.

o Our minimum monthly bandwidth purchase commitment increased to
300 Mbps in December 1999 and will increase to 600 Mbps in
December 2000.

o We have agreed that, if during the second and third years of
this agreement, we obtain over 600 Mbps of bandwidth per month
for our Internet traffic, we will purchase 51 % of all
bandwidth in excess of 600 Mbps from UUNET Technologies. If we
do not purchase 51% of all bandwidth over 600 Mbps from UUNET
Technologies, we are obligated to pay UUNET Technologies
$21.66 for each Mbps we are obligated but fail to purchase
from them.

Under the terms of the agreement, the connectivity may range in
capacity from T-1 to DS-3 to OC-12 which are the technical names of the physical
telecommunications connections or pipelines that will be used to transport data.
A larger pipeline can carry a greater volume of data at a greater speed. For
example, a T-1 can carry 1.544 megabytes per second; a DS-3 can carry 44.736
megabytes per second and an OC-12 can carry 622 megabytes per second. At our
Atlanta data center, we have four OC-3 connections to diverse hubs in UUNET
Technologies' network, each of which can carry 155.52 megabytes of data per
second and use diverse fiber for redundancy. In addition to the connectivity
provisions, our companies have agreed to develop and implement a joint marketing
program including:

20
<PAGE>

o allowing us to resell UUNET Technologies services through
our network of resellers;

o cooperating on mutually beneficial hosting and co-located
remarketing agreements; and

o cooperating on an international co-location facilities
agreement.

Our minimum financial commitment during each year of the agreement is
as follows: $0.7 million in year one, $2.1 million in year two and $4.1 million
in year three.

Customer Service

We view customer service as a critical part of our business strategy.
As of December 31, 1999, our customer service group had 176 employees located
mainly in our primary data centers. This group is responsible for providing
customer service to all of our customers as well as our resellers and referral
partners, including helping customers to use our ASP solutions.

We have invested in advanced customer service software and call routing
technology to streamline the customer service process. Through our customer
service systems, customer service representatives can generally resolve any
issue in a timely manner via e-mail or our toll-free number. We also offer a
self-service customer support alternative, which provides online access to
account and billing data and site statistics such as disk storage capacity and
bandwidth utilization. Certain customer accounts also have access to dedicated
support engineers who are familiar with each unique configuration or requirement
a larger customer may have.

A focused support team handles all the application hosting support
requirements via several mechanisms including a facilitated discussion database
environment available over the Internet where customers, application developers
and support technicians can discuss pertinent issues and build a relevant
knowledge base. Our Web hosting customer service operations are supported by the
Vantive Support system, a customer/asset management tracking application that
enables a customer service representative to view a customer's entire account,
including past and recent interactions with such customer. This database
categorizes all reported problems so that if a particular problem reoccurs,
customer service representatives can view its prior resolution and provide
timely and accurate customer service.

Competition

The market served by us is highly competitive. Although barriers to
entry and continued growth are increasing, there are still few substantial
barriers to entry. We expect that we will face additional competition from
existing competitors and new market entrants in the future. The principal
competitive factors in this market include:

o quality of service, including network capability, scalability,
reliability and functionality;

o customer service and support;

o variety of services and products offered;

o price;

21
<PAGE>

o brand name;

o Internet system engineering and technical expertise;

o timing of introductions of additional value added services
and products;

o network security;

o financial resources; and

o conformity with industry standards.

We may not have the resources, expertise or other competitive factors
to compete successfully in the future.

Our current and potential competitors include:

o other ASPs, such as USinternetworking, FutureLink and Corio;

o other Web hosting and Internet services companies such as
Metromedia/AboveNet Communications, Exodus Communications,
Digital Island, GlobalCenter, Globix, NaviSite, Digex, Data
Return and local and regional hosting providers;

o national and regional Internet service providers such as
Concentric Network, MindSpring Enterprises, UUNET
Technologies, PSINet and Verio;

o global telecommunications companies including AT&T, British
Telecommunications, Telecom Italia and Nippon Telegraph and
Telephone;

o other Internet professional services companies such as iXL
Enterprises, USWeb/CKS and Breakaway Solutions; and

o regional and local telecommunications companies, including the
regional Bell operating companies such as Bell Atlantic and US
West.

Many of our competitors have substantially greater financial, technical
and marketing resources, larger customer bases, longer operating histories,
greater name recognition and more established relationships in the industry than
we do. As a result, certain of these competitors may be able to develop and
expand their network infrastructures and service offerings more rapidly, adapt
to new or emerging technologies and changes in customer requirements more
quickly, take advantage of acquisition and other opportunities more readily,
devote greater resources to the marketing and sale of their services and adopt
more aggressive pricing policies than we can. In addition, these competitors
have entered and will likely continue to enter into joint ventures or consortia
to provide additional services competitive with those provided by us.

Intellectual Property Rights

We rely on a combination of copyright, trademark, service mark, trade
secret laws and contractual restrictions to establish and protect certain
proprietary rights in our services. We have no patented technology that would

22
<PAGE>

preclude or inhibit competitors from entering our market. The steps taken by us
to protect our intellectual property may not prove sufficient to prevent
misappropriation of our technology or to deter independent third-party
development of similar technologies. The laws of certain foreign countries may
not protect our services or intellectual property rights to the same extent as
do the laws of the United States. We also rely on certain technologies that we
license from third parties. These third-party technology licenses may not
continue to be available to us on commercially reasonable terms. The loss of the
ability to use such technology could require us to obtain the rights to use
substitute technology, which could be more expensive or offer lower quality or
performance and therefore have an adverse effect on our business.

To date, we have not been notified that our services infringe on the
proprietary rights of third parties, but third parties could claim infringement
by us with respect to current or future services. From time to time, we are
notified that the content of one of our customer's sites infringes on a third
party's trademark or copyright. In response, we take steps pursuant to the
Digital Millenium Copyright Act to inform the customer of such claim and, where
appropriate, terminate a customer's service. We expect that participants in our
markets will be increasingly subject to infringement claims as the number of
services and competitors in our industry segment grows. Any such claim, whether
meritorious or not, could be time-consuming, result in costly litigation, cause
service installation delays or require us to enter into royalty or licensing
agreements. Such royalty or licensing agreements might not be available on terms
acceptable to us or at all. As a result, any such claim could have an adverse
effect upon our business.

Government Regulation

We are not currently subject to direct federal, state or local
government regulation, other than regulations that apply to businesses
generally. Only a small body of laws and regulations currently applies
specifically to hosting and commerce activities, or access to the Internet. Due
to the increasing popularity and use of the Internet, however, it is possible
that laws and regulations with respect to the Internet may be adopted at
international, federal, state and local levels, covering issues such as user
privacy, freedom of expression, pricing, characteristics and quality of products
and services, taxation, advertising, intellectual property rights, information
security and the convergence of traditional telecommunications services with
Internet communications. Although sections of the Communication Decency Act of
1996 that, among other things, proposed to impose criminal penalties on anyone
distributing "indecent" material to minors over the Internet were held to be
unconstitutional by the U.S. Supreme Court, similar laws may be proposed,
adopted and upheld. The nature of future legislation and the manner in which it
may be interpreted and enforced cannot be fully determined and, therefore,
legislation similar to the Communications Decency Act could subject us and/or
our customers to potential liability, which in turn could have a material
adverse effect on our business, results of operations and financial condition.
The adoption of any such laws or regulations might decrease the growth of the
Internet, which in turn could decrease the demand for our services, increase the
cost of doing business or in some other manner have an adverse effect on our
business.

We collect sales and other taxes in the states we have offices and are
required by law to do so. We currently do not collect sales or other taxes with
respect to the sale of services or products in all states and countries in which
we have offices and may be required by law to do so. One or more jurisdictions
have sought to impose sales or other tax obligations on companies that engage in
online commerce within their jurisdictions. A successful assertion by one or
more jurisdictions that we should collect sales or other

23
<PAGE>

taxes on our products and services, or remit payment of sales or other taxes for
prior periods, could have an adverse effect on our business.

In addition, applicability to the Internet of existing laws governing
issues such as property ownership, copyright and other intellectual property
issues, taxation, libel, obscenity and personal privacy is uncertain. The vast
majority of such laws were adopted prior to the advent of the Internet and
related technologies and, as a result, do not contemplate or address the unique
issues of the Internet and related technologies. Changes to such laws intended
to address these issues could create uncertainty in the marketplace that could
reduce demand for our services, increase the cost of doing business as a result
of costs of litigation or increased service delivery costs or could in some
other manner have an adverse effect on our business.

Any new legislation or regulation, or the application of laws or
regulations from jurisdictions whose laws do not currently apply to our
business, could have an adverse effect on our business.

Executive Officers

The following table sets forth certain information with respect to the
executive officers and directors of Interliant:

Name Age Title
---- --- -----
<S> <C>
Leonard J. Fassler....................................... 68 Co-Chairman, Director
Bradley A. Feld.......................................... 34 Co-Chairman, Director
Herbert R. Hribar........................................ 48 Chief Executive Officer, Director
James M. Lidestri........................................ 39 President
Francis J. Alfano........................................ 38 Senior Vice President, Mergers and
Acquisitions
Edward A. Cavazos........................................ 31 Senior Vice President, Legal and
Business Affairs and Assistant
Secretary
Paul E. Chollett......................................... 40 Senior Vice President, Finance and
Administration
Bruce S. Klein........................................... 41 Senior Vice President, General
Counsel and Secretary
Jennifer J. Lawton....................................... 35 Senior Vice President, ASP Solutions
Kristian Nelson.......................................... 36 Senior Vice President, Operations
Richard C. Rose.......................................... 52 Senior Vice President, Sales
William A. Wilson........................................ 54 Chief Financial Officer and Treasurer

</TABLE>

Leonard J. Fassler is one of our co-founders and has been one of our
Co-Chairmen and a Director since our formation in December 1997. Mr. Fassler was
also our Secretary from December 1997 through April 1999. From 1992 to 1996,

24
<PAGE>

Mr. Fassler was a Co-Chairman of AmeriData Technologies, Inc. ("AmeriData"), a
New York Stock Exchange-listed reseller of computer equipment and provider of
computer consulting and other services that was acquired by General Electric
Capital Corporation in 1996. Mr. Fassler was a co-founder of AmeriData which
grew into a company with sales in excess of two billion dollars a year and
locations in ten countries at the time that it was acquired. Mr. Fassler holds a
bachelor's degree in business administration from City College of New York and a
law degree from Fordham Law School.

Bradley A. Feld is one of our co-founders and has been one of our
Co-Chairmen and a Director since our formation in December 1997. Since 1995, Mr.
Feld has been the President of Intensity Ventures Inc., a company that helps to
establish, advise and operate software companies. From 1993 to 1995, Mr. Feld
was the chief technology officer of AmeriData. From 1985 to 1993, he was
president of Feld Technologies, Inc., a computer consulting firm founded by Mr.
Feld to develop and implement information technology solutions for a wide
variety of businesses, which was acquired by AmeriData in 1993. Mr. Feld earned
a bachelor of science degree and a master of science degree from Massachusetts
Institute of Technology. Mr. Feld is a General Partner of SOFTBANK Technology
Ventures IV, L.P., SOFTBANK Technology Ventures V, L.P. and SOFTBANK Technology
Advisors Fund, L.P., venture capital funds. Mr. Feld is a director and
co-chairman of Message Media, Inc. and director of a number of privately held
companies.

Herbert R. Hribar became our Chief Executive Officer effective January
31, 2000. Prior to joining us and since July 1998, Mr. Hribar had been President
and Chief Operating Officer of Verio, Inc., a domain-based Web hosting company.
Prior to Verio, Mr. Hribar was President of Ameritech Cellular in Chicago,
Illinois and President of Ameritech Europe in Brussels, Belgium. Mr. Hribar is a
graduate of the U.S. Naval Academy in Annapolis and has advanced degrees in
engineering, business, and computer science.

James M. Lidestri has been our President since June 1999. Mr. Lidestri
served as our Executive Vice President from March 1999 until June 1999. From
March 1996 to March 1999, Mr. Lidestri was the President and Chief Executive
Officer of Interliant Texas. From February 1995 to March 1996, Mr. Lidestri was
employed at IBM Corporation, a vendor of technology systems, products, services
and software and financing where he served as Group Manager of the Collaborative
Services Division. As Group Manager, Mr. Lidestri was responsible for developing
market and product strategies for network-based collaborative services, with a
primary focus on Lotus Notes. From November 1990 to February 1995, Mr. Lidestri
served in a number of executive positions at Sprint Corporation, a global
communications company, including Director of Business Operations. Mr. Lidestri
holds a bachelor of science degree in computer science from Rensselaer
Polytechnic Institute and a masters degree in business administration from New
York University.

Francis J. Alfano has served as our Senior Vice President, Mergers and
Acquisitions since December 1998. From January 1997 to November 1998, Mr. Alfano
was Vice President of Business Development at GE Capital Information Technology
Solutions, Inc., formerly AmeriData. From July 1994 to December 1996, Mr. Alfano
was Director of Taxes at GE Capital Information Technology Solutions, Inc. From
January 1991 to June 1994, Mr. Alfano was employed by Ernst & Young, an
accounting, tax and consulting firm and was a senior manager in the tax
department at the time of his departure. From 1984 to 1990, Mr. Alfano was
employed as a Certified Public Accountant with various public accounting firms.
Mr. Alfano holds a bachelor of science degree in business administration from
the University of Arizona and is a Certified Public Accountant.

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Edward A. Cavazos has served as our Senior Vice President, Legal and
Business Affairs since March 1999. In April 1999, he became our Assistant
Secretary. From March 1997 until he joined us, Mr. Cavazos was Senior Vice
President, General Counsel of Interliant Texas. From May 1994 until March 1997,
Mr. Cavazos was an associate attorney at the law firm of Andrews & Kurth, L.L.P.
In addition, Mr. Cavazos served as an Adjunct Professor at the University of
Texas School of Law from January 1998 through May 1998 and as an Adjunct
Professor at the University of Houston Law Center from September 1996 through
December 1996 and September 1997 through December 1997. Mr. Cavazos holds a
bachelor of arts degree in philosophy from the University of Texas and a law
degree from the University of Texas.

Paul E. Chollett has served as our Senior Vice President, Finance and
Administration since March 1999. From July 1996 until he joined us, Mr. Chollett
was Senior Vice President and Chief Financial Officer of Interliant Texas. From
July 1993 to July 1996, Mr. Chollett was the Director of Finance and
Administration in the Audit Division of the accounting firm of Arthur Andersen
LLP. In this role, Mr. Chollett was responsible for managing the financial, risk
management and quality control aspects of the firm's audit practice. Mr.
Chollett holds a bachelor of science degree in accounting from the University of
Houston at Clear Lake City. Mr. Chollett is a Certified Public Accountant.

Bruce S. Klein has served as our Senior Vice President, General Counsel
since December 1998. In April 1999, Mr. Klein became our Secretary. From April
1998 to November 1998, he was our General Counsel, Vice President. Mr. Klein had
previously been of counsel to the law firm of McCarthy, Fingar, Donovan, Drazen
& Smith, L.L.P, prior to which he was of counsel to the law firm of Spitzer &
Feldman P.C., in each case engaged in the general practice of law, with
experience in mergers and acquisitions and general corporate and business law.
Mr. Klein is admitted to practice law in New York and Massachusetts and holds a
bachelor's degree in business administration from Rutgers University and a law
degree from Western New England College School of Law.

Jennifer J. Lawton has served as our Senior Vice President, Consulting
and Technology since February 1999. In March 2000, her title was changed to
Senior Vice President, ASP Solutions. From May 1992 until she joined us, Ms.
Lawton was the Chief Executive Officer of Net Daemons Associates, Inc., a
provider of Web development and system integration activity for Internet and IT
Networks which was acquired by Interliant in February 1999. Ms. Lawton is a
co-founder of Net Daemons Associates, Inc. Ms. Lawton holds a bachelor of
science degree in applied mathematics from Union College.

Kristian Nelson has served as our Senior Vice President, Operations
since March 1999. From July 1997 until he joined us, Mr. Nelson was Senior Vice

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President, Operations of Interliant Texas and was responsible for the direction
and control of all operational aspects of Interliant Texas's business including
product development, customer service and application and data center services.
From June 1996 through May 1997, Mr. Nelson served as Vice President, Operations
at GST Telecommunications, a full-service telecommunications provider. In this
role, Mr. Nelson was responsible for the oversight and control of GST Internet
Inc., the Internet subsidiary of GST Telecommunications. From June 1995 to
January 1996, Mr. Nelson was a Senior Management Consultant in the Technology
Strategy Practice area at Gartner Group, Inc., a company which provides IT
advisory services and consulting, where his responsibilities included providing
technical consulting services to Fortune 500 companies. From May 1986 to May
1995, Mr. Nelson was the Product Assurance Information Technology Director at
Lockheed Martin Corporation, a diversified technology company. At Lockheed
Martin, Mr. Nelson was responsible for developing and implementing information
technology strategic planning for the Product Assurance Group. Mr. Nelson holds
a bachelor of science degree in management science from Orlando College.

Richard C. Rose has served as Senior Vice President, Sales since
January 2000. He served as President of Telephonetics, our wholly owned
subsidiary, from September 1999 to January 2000. From June 1998 until August
1999, Mr. Rose was a Vice President at Compucom, a large computer support
company, where he was responsible for sales in the company's Southeast region.
Prior to that time, Mr. Rose was Chairman and Chief Executive Officer of
Dataflex Corporation, a full service computer integrator, from 1984 until June
1998. Mr. Rose attended the U.S. Naval Academy and holds a bachelor of science
degree in mathematics from the University of Miami.

William A. Wilson has served as our Chief Financial Officer since
September 1998 and as our Treasurer since August 1999. During the period from
February 1998 to July 1998, Mr. Wilson served as Vice President, Finance and
Chief Financial Officer at XCOM Technologies, Inc., a competitive local exchange
carrier. From October 1997 to February 1998, Mr. Wilson served as a consultant
to several private companies. From June 1997 to October 1997, Mr. Wilson served
as Senior Vice President, Finance and Chief Financial Officer of Computervision
Corporation, a software publishing and development company. Prior thereto, Mr.
Wilson was Executive Vice President and Chief Financial Officer of Arch
Communications Group, Inc., a wireless messaging company, from June 1996 to June
1997 and was Vice President, Finance and Chief Financial Officer of Arch
Communications Group, Inc. from January 1989 to June 1996. Mr. Wilson received a
bachelor of arts degree from Luther College, a master of science degree from
Northeastern University and a masters degree in business administration from
Babson College. Mr. Wilson is a Certified Public Accountant.

Employees

As of December 31, 1999 we had 745 employees, of which 113 were in
sales, distribution and marketing, 305 were in engineering and service
development, 176 were in customer service and technical support, 144 were in
finance and administration and 7 were in acquisition integration. None of our
employees are represented by a labor union and we believe that our employee
relations are good.

Risk Factors

In addition to the other information included in this Report on Form
10-K, you should consider the following risk factors. This Report on Form 10-K
contains forward-looking statements covered by the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements involve risks and uncertainties that may affect our business and

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prospects. Our results may differ significantly from the results discussed in
the forward-looking statements as a result of certain factors which are listed
below or discussed elsewhere in this Report and our other filings with the
Securities and Exchange Commission.

We are a young company with an evolving business model.

We have a limited operating history and may not successfully implement our
business plan.

We have a limited operating history. We were incorporated in December
1997 and began offering Web hosting services in February 1998. Through February,
2000, we have completed 23 acquisitions. As a result of our limited operating
history and numerous acquisitions, our business model is still developing. Our
business and prospects must be considered in light of the risks frequently
encountered by companies in their early stages of development, particularly
companies in the new and rapidly evolving Internet services market. Some of
these risks relate to our ability to:

o implement our sales and marketing strategy to support our
business and build the Interliant brand;

o identify, acquire and integrate strategic acquisitions and
then cross-sell our expanding range of branded services to the
customer bases of the acquired companies;

o provide reliable and cost-effective services to our customers;

o continue to build our operations and accounting
infrastructure to accommodate additional customers;

o respond to technological developments and new products and
services offered by our competitors;

o develop and offer new products and services or differentiate
such products and services from those offered by our
competitors;

o enter into strategic relationships with application software
vendors and other strategic partners that further advance our
objective to become a full service ASP;

o build, maintain and expand distribution channels; and

o attract and retain qualified personnel.

We may not be successful in accomplishing these objectives. If we are
not successful, our business could be adversely affected.

We have a history of significant losses and cash flow deficits, which may
increase in the future.

Since our inception in December 1997, we have experienced operating
losses and negative cash flow from operations for each quarterly and annual
period. We experienced net losses of approximately $53.9 million and $10.7
million in the years ended December 31, 1999 and 1998, respectively. As of
December 31, 1999, we had an accumulated deficit of approximately $64.8 million.
The revenue, cash flow and income potential of our business model is unproven
and our limited operating history makes it difficult to evaluate our

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prospects. We anticipate that we will incur increased expenses, losses and cash
flow deficits as we expand our sales and marketing initiatives to continue to
grow the Interliant brand, fund greater levels of product development, continue
to build out our data centers, implement centralized billing, accounting and
customer service systems, implement strategic relationships and continue our
acquisition program.

We have experienced significant growth in revenues, primarily
attributable to acquisitions. This growth rate is not necessarily indicative of
future operating results. Our future results will depend not only on continuing
our acquisition strategy but also on internal growth. We expect that future
acquisitions will increase our operating expenses and operating losses. As a
result, we expect to incur significant additional operating losses. We cannot
give any assurance that we will ever achieve profitability on a quarterly or
annual basis, or, if we achieve profitability, that it will be sustainable.

Our operating results may fluctuate in the future. As a result, period-to-period
comparisons of our results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance.

Our operating results may fluctuate in the future as a result of a
variety of factors, some of which are outside of our control. These factors
include:

o the quality and timing of acquisitions we complete and our
ability to successfully integrate these acquisitions into
our business;

o the demand for our services, pricing pressures in our market
and changes in the mix of products and services sold by us
and our competitors;

o technological issues, including technical difficulties
affecting the Internet generally or our hosting operations
in particular and increased technological demands of our
customers;

o the amount and timing of our costs related to our marketing
efforts and service introductions by us or our strategic
partners; and

o economic conditions specific to the hosting and consulting
industries.

Historically, fluctuations in our operating results have resulted
principally from completed acquisitions. Due to the factors described above, our
operating results may not be indicative of future operating results. In
addition, our future operating results for any particular period may differ
materially from our expectations or those of investors or security analysts. In
this event, the market price of our common stock would likely fall dramatically.

We only recently began to offer many of our products and services and we intend
to offer new products and services in the future. If our products are not
accepted by the market or have reliability or quality problems, our business may
suffer.

We have recently introduced new hosting solutions such as multimedia
hosting or integrated text, graphics, video, information and sound capabilities
on our customers' Web sites and the ability to rent software applications

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instead of purchasing them, as well as enhanced Internet services such as
e-commerce and consulting services. If these and other new hosting solutions and
enhanced Internet services that we may introduce in the future fail to gain
market acceptance, our business could be adversely affected. In addition, if
these newly introduced hosting solutions and enhanced Internet services have
reliability, quality or compatibility problems, market acceptance of these
products could be greatly hindered and our ability to attract new customers
could be adversely affected. We cannot offer any assurance that these new
solutions and services are free from any reliability, quality or compatibility
problems.

The continued growth of the market for our products and services may not
materialize.

Our market is new and rapidly evolving. Whether the market for our
products and services will continue to grow is uncertain. Our business would be
adversely affected if the market for our services does not continue to grow or
if businesses reduce or discontinue outsourcing these services.

Our success depends in part on continued growth in the use of the
Internet. Our business would be adversely affected if Internet usage does not
continue to grow. Internet usage may be inhibited for a number of reasons, such
as:

o security and privacy concerns;

o uncertainty of legal and regulatory issues concerning the
use of the Internet,

o inconsistent quality of service; and

o lack of availability of cost-effective, high-speed
connectivity.

We are growing rapidly, principally through acquisitions, which presents the
following risks.

The success of our business plan depends on our ability to make additional
acquisitions. Our acquisition program entails significant risks.

We intend to pursue opportunities to expand our business through the
acquisition of selected companies in targeted markets. The acquisition
candidates we review can be large, and their acquisition by us could have a
significant and lasting impact on our business. We cannot guarantee that:

o we will be able to identify appropriate acquisition
candidates or negotiate acquisitions on favorable terms; or

o we will be able to obtain the financing necessary to
complete all projected future acquisitions.

Acquisitions involve numerous risks, including adverse effects on our
operating results from increases in amortization of intangible assets, inability
to integrate acquired businesses, increased compensation expense associated with
newly hired employees and unanticipated liabilities and expenses. In addition,
we cannot guarantee that we will realize the benefits or strategic objectives we
are seeking to obtain by acquiring any particular company and any acquired
company could significantly underperform relative to our expectations. In
particular, acquired companies have often experienced modest revenue declines
immediately following the closing of the acquisition.

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Because we have only recently completed many of our acquisitions, we are
currently facing all of these challenges and we have not established our ability
to meet them over the long term. As a result of all of the foregoing, our
acquisition strategy could adversely affect our business.

The success of our business plan depends on the successful integration of
acquisitions.

From February 1998 through February, 2000, we have acquired 23
businesses and are currently pursuing additional acquisitions. Our future
performance will depend in large part on our ability to integrate these
businesses or any future acquired businesses with our existing operations
successfully and profitably. To integrate acquired businesses, it is often
necessary or desirable to accomplish one or more of the following:

o consolidate their billing and accounting systems into our
systems and implement financial and other control systems;

o relocate the servers and other equipment of acquired
companies to one of our facilities;

o migrate the operations of acquired companies onto our
technology platforms;

o integrate the customer accounts of acquired companies into
our customer service system;

o integrate the service offerings of acquired companies into
the Interliant brand; and

o identify resellers and referral partners of the services of
acquired companies and migrate them to our business partner
program.

We may not be able to successfully integrate acquired businesses with
existing operations without substantial costs, delays or other problems, if at
all. As we integrate acquired businesses:

o we may lose certain customers of acquired companies due to
difficulties during the integration process;

o we may not be able to bill customers of the acquired
companies accurately due to potential deficiencies in the
internal controls of the acquired companies, such as
inadequate back-office systems of the acquired companies and
potential difficulties in migrating records onto our own
systems;

o we may experience difficulty in collecting bills rendered by
acquired companies due to inaccurate record keeping of the
acquired companies;

o key employees of the acquired companies whom we wish to
retain may resign;

o management's attention and resources could be diverted from
our ongoing business concerns;

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. we may not be able to integrate newly acquired technologies
with our existing technologies; and

. we may not be able to train, retain and motivate executives
and employees of the acquired company.

The businesses we have acquired are in various stages of the integration
process. Our integration plan is constantly changing as a result of our business
activities as well as future acquisitions. Because we employ a strategy that
includes a high level of acquisition activity, at any time there are likely to
be one or more operating businesses that have not been integrated into our
business. In addition, our recent acquisitions of reSOURCE Partners, Inc. and
Softlink, Inc., respectively, represent in the aggregate our largest
acquisitions to date, and thus the integration risks set forth above will likely
be even more significant with respect to these two acquisitions.

A significant portion of our assets consists of intangible assets, the
recoverability of which is not certain and the amortization of which will
increase losses or reduce earnings in the future.

In connection with our acquisitions completed through December 31,1999,
$118.6 million of the aggregate purchase price has been allocated to intangible
assets such as covenants not to compete, customer lists, trade names, assembled
work force and goodwill. Annual amortization expense related to these intangible
assets in the current fiscal year will be approximately $31.3 million.
Amortization expense will increase as we acquire additional businesses. Our
business could suffer if changes in our industry or our inability to operate the
business successfully and produce positive cash flows from operations result in
an impairment in the value of our intangible assets and therefore necessitate a
write-off of all or part of these assets.

Our rapid growth and expansion has and may continue to significantly strain our
resources.

We are experiencing rapid growth, primarily due to acquisitions. This
rapid growth has placed and is likely to continue to place a significant strain
on our operating and financial resources. Our future performance will partly
depend on our ability to manage our growth effectively, which will require that
we further develop our operating and financial system capabilities and controls.
We have invested and intend to continue to invest significant amounts in
billing, accounts receivable, customer service and financial systems. Because we
employ a strategy that includes a high level of acquisition activity, at any
time there are likely to be one or more operating businesses that have not been
integrated into our core systems and continue to produce financial and other
information from their existing systems. As a result, our ability to record,
process, summarize and report financial data could be adversely affected.

We may need additional funds which, if available, could result in an increase in
our interest expense or stockholder dilution. If these funds are not available,
our business could be hurt.

To date, our cash flows from operations have been insufficient to fund
our operations and our acquisition and internal growth programs. We have funded
our operations principally from the proceeds of stock sales, sales of
convertible notes and from other external sources. We cannot predict when we
will be able to fund our operations entirely from internally generated cash
flow. We may never be able to do so. As a result, we may need to raise
additional funds to conduct our operations and fund our growth programs.

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<PAGE>

We may raise funds through public or private debt or equity financing.
If funds are raised through the issuance of equity securities, the percentage
ownership of our then current stockholders may be reduced and such equity
securities may have rights, preferences or privileges senior to those of the
holders of our common stock. If additional funds are raised through the issuance
of debt securities, such securities would have certain rights, preferences and
privileges senior to those of the holders of our outstanding securities and the
terms of such debt could impose restrictions on our operations.

If additional funds become necessary, additional financing may not be
available on terms favorable to us, or at all. If adequate funds are not
available on acceptable terms, we may not be able to continue to fund our
operations and growth or to continue our acquisition program. Our inability to
raise capital could adversely affect our business.

We have recently substantially increased our indebtedness due to our sale of
debt securities and we may not be able to pay our debt and other obligations.

In February 2000, as a result of our sale of our 7% convertible
subordinated notes, we incurred approximately $154.8 million of additional
indebtedness increasing our ratio of debt to equity (expressed as a percentage)
from approximately 2.7% to approximately 115.2% as of December 31, 1999, on a
pro forma basis giving effect to the sale of the notes. Our other indebtedness
is principally comprised of notes payable. We may incur substantial additional
indebtedness in the future. The level of our indebtedness, among other things,
could

o make it difficult for us to make payments on the notes;

o make it difficult for us to obtain any necessary future
financing for working capital, capital expenditures, debt
service requirements or other purposes;

o limit our flexibility in planning for, or reacting to
changes in, our business; and

o make us more vulnerable in the event of a downturn in our
business.

Our cash flow generated during the year-ended December 31, 1999, would
have been insufficient to pay the amount of interest payable on the notes, and
we cannot assure you that we will be able to pay interest and other amounts due
on the notes as and when they become due and payable. If our cash flow is
inadequate to meet our obligations, we could face substantial liquidity
problems. If we are unable to generate sufficient cash flow or otherwise obtain
funds necessary to make required payments on the notes or our other obligations,
we would be in default under the terms thereof, which would permit the holders
of the notes to accelerate the maturity of the notes and could also cause
defaults under future indebtedness we may incur. Any such default could have a
material adverse effect on our business, prospects, financial condition and
operating results.

We operate in the rapidly evolving Internet services industry, which presents
the following risks.

We depend on the growth and stability of the Internet infrastructure.

If the use of the Internet continues to grow rapidly, its
infrastructure may not be able to support the demands placed on it by such
growth and its

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performance or reliability may decline. In addition, Web sites have experienced
interruptions in their service as a result of outages and other delays occurring
throughout the Internet network infrastructure. If these outages or delays occur
frequently, use of the Internet as a commercial or business medium could, in the
future, grow more slowly or decline, which would adversely affect our business.

If we do not respond effectively and on a timely basis to rapid technological
change, our business could suffer.

The Internet industry is characterized by rapidly changing technology,
industry standards, customer needs and competition, as well as by frequent new
product and service introductions. Our future success will depend, in part, on
our ability to accomplish all of the following in a timely and cost-effective
manner, all while continuing to develop our business model and roll-out our
services:

o effectively use and integrate leading technologies;

o continue to develop our technical expertise;

o enhance our products and current networking services;

o develop new products and services that meet changing
customer needs;

o advertise and market our products and services; and

o influence and respond to emerging industry standards and
other changes.

We cannot assure you that we will successfully use or develop new
technologies, introduce new services or enhance our existing services on a
timely basis, or that new technologies or enhancements used or developed by us
will achieve market acceptance. Our pursuit of necessary technological advances
may require substantial time and expense.

We operate in an industry where it is difficult to attract and retain qualified
personnel.

We expect that we will need to hire additional personnel in all areas
of our business. The competition for personnel throughout our industry is
intense. At times, we have experienced difficulty in attracting qualified new
personnel. If we do not succeed in attracting new, qualified personnel or
retaining and motivating our current personnel, our business could suffer.

Disruption of our services due to accidental or intentional security breaches
may adversely impact our business.

A significant barrier to the growth of e-commerce and communications
over the Internet has been the need for secure transmission of confidential
information. Despite our design and implementation of a variety of network
security measures, unauthorized access, computer viruses, accidental or
intentional actions and other disruptions could occur. We may incur significant
costs to protect against the threat of security breaches or to alleviate
problems caused by such breaches. If someone were able to misappropriate our
users' personal or proprietary information or credit card information, we could
be subject to claims, litigation or other potential liabilities.

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We operate in an uncertain regulatory and legal environment which may make it
more difficult to defend ourselves against any claims brought against us.

We are not currently subject to direct regulation by the Federal
Communications Commission or any other governmental agency, other than
regulations applicable to business in general. While there are currently few
laws or regulations which specifically regulate Internet communications, laws
and regulations directly applicable to online commerce or Internet
communications are becoming more prevalent. There is much uncertainty regarding
the marketplace impact of these laws. In addition, various jurisdictions already
have enacted laws covering intellectual property, privacy, libel and taxation
that could affect our business by virtue of their impact on online commerce. In
the future, we may become subject to regulation by the FCC or another regulatory
agency. Further, the growth of the Internet, coupled with publicity regarding
Internet fraud, may lead to the enactment of more stringent consumer protection
laws. If we become subject to claims that we have violated any laws, even if we
successfully defend against these claims, our business could suffer. Moreover,
new laws that impose restrictions on our ability to follow current business
practices or increase our costs of doing business could hurt our business.

If states and countries in which we do not currently collect sales or other
taxes mandate that we do so, our business could suffer.

We collect sales or other taxes with respect to the sale of products or
services in states and countries where we believe we are required to do so. We
currently do not collect sales and other taxes in all states and countries in
which we have offices and may be required by law to do so. One or more
jurisdictions have sought to impose sales or other tax obligations on companies
that engage in online commerce within their jurisdictions. A successful
assertion by one or more jurisdictions that we should collect sales or other
taxes on our products and services, or remit payment of sales or other taxes for
prior periods, could have an adverse effect on our business.

We could face liability for information disseminated through our network.

It is possible that claims could be made against us in connection with
the nature and content of the materials disseminated through our networks.
Several private lawsuits are pending against other entities which seek to impose
liability upon online services companies and Internet service providers as a
result of the nature and content of materials disseminated over the Internet. If
any of these actions succeed, we might be required to respond by investing
substantial resources or discontinuing some of our product or service offerings.
The increased attention focused upon liability issues as a result of these
lawsuits and legislative proposals could impact the growth of Internet use.
Although we carry professional liability insurance, it may not be adequate to
compensate or may not cover us in the event we become liable for information
carried on or disseminated through our networks. Any costs not covered by
insurance incurred as a result of such liability or asserted liability could
adversely affect our business.

Our business operations present the following additional risks.

We intend to commit substantial funds to sales and marketing initiatives. Our
failure to develop brand recognition for the Interliant brand could hurt our
business.

Our sales and marketing expenses were $17.2 million and $2.6 million in
the years ended December 31, 1999 and 1998, respectively. A key component of our
strategy is to significantly increase our sales and marketing activities.

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<PAGE>

This will include the expansion of our sales force, development of reseller and
referral partner channels and increased marketing efforts. As a result, sales
and marketing expenses are likely to increase substantially in future periods.
Our business could be adversely affected if the Interliant brand is not well
received by our customers, our marketing efforts are not productive or we are
otherwise unsuccessful in increasing our brand awareness. We are currently
marketing and expect to continue to market many of our products and services
under the brand names of acquired companies. In most circumstances, we intend to
change the brand under which we offer these products and services to the
Interliant brand. If we are unsuccessful in these efforts, we may not achieve
our revenues objectives and the acquired operations could lose substantial
value.

We operate in an extremely competitive market and may not be able to compete
effectively.

Our current and prospective competitors are numerous. Many of our
competitors have substantially greater financial, technical and marketing
resources, larger customer bases, longer operating histories, greater name
recognition and more established relationships in the industry than we do. We
may not be able to compete effectively. See "Business--Competition."

We depend on the skills of key personnel.

We depend on the continued service of our key personnel. Our key
personnel are critical to our success, and many of them would be difficult to
replace. Many of them are not bound by employment agreements, and competitors in
our industry may attempt to recruit them. We currently have agreements to retain
the services of certain members of our management team. These agreements do not,
however, as a practical matter, guarantee our retention of these persons. In
addition, our Co-Chairmen, Mr. Fassler and Mr. Feld, are each currently active
in, and serve as directors and/or executive officers of, a number of businesses
other than Interliant. Although Mr. Feld spends a significant portion of his
time, and both Mr. Fassler and Mr. Feld are active in our management, they are
not contractually committed to spend any specific amount of time at Interliant.
The loss of the services of one or more of our key personnel could adversely
affect our business.

Our application hosting solutions depend on software applications we obtain from
third parties.

We obtain software products pursuant to agreements with vendors such as
Lotus and Microsoft and package them as part of our application hosting
solutions. The agreements are typically for terms ranging from one to three
years. We also license additional technologies that we use in our business from
other third parties. If these agreements were terminated or not renewed, we
might have to discontinue products or services that are central to our business
strategy or delay their introduction unless we could find, license and package
equivalent technology. Our business strategy also depends on obtaining
additional application software. We cannot be sure, however, that we will be
able to obtain the new and enhanced applications we may need to keep our
solutions competitive. If we cannot obtain these applications and as a result
must discontinue, delay or reduce the availability of our solutions or other
products and services, our business may be adversely affected. In addition, we
may become subject to infringement actions based upon the technologies licensed
from third parties. Any of these claims, with or without merit, could subject us
to costly litigation and divert the attention of our technical and management
personnel.

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Our agreements with application software vendors are not exclusive and may not
provide us with any competitive advantage.

None of our agreements for application software and other technology
are exclusive. Our competitors may also license and utilize the same technology
in competition with us. We cannot be sure that the vendors of technology used in
our products will continue to support this technology in its current form. Nor
can we be sure that we will be able to adapt our own products to changes in this
technology. In addition, we cannot be sure that potential financial or other
difficulties of third party vendors will not have an adverse affect on the
technologies incorporated in our products, or that, if these technologies become
unavailable, we will be able to find suitable alternatives.

We depend on our network infrastructure. If we do not have continued access to a
reliable network, our business will suffer.

Our success partly depends upon the capacity, scalability, reliability
and security of our network infrastructure, including the capacity leased from
our telecommunications network suppliers such as UUNET Technologies. We depend
on these companies to provide uninterrupted and "bug free" service. We would be
adversely affected if such services were not provided. In addition, we would be
adversely affected if:

o these companies greatly increased the prices of their
services; or

o the telecommunications capacity available to us was
insufficient for our business purposes and we were unable to
use alternative networks or pass along any increased costs
to our customers.

Our business and expansion models assume that we will be able to scale our
network infrastructure to support increasing numbers of customers and increased
traffic. However, the scalability of our network is unproven.

We must continue to develop and expand our network infrastructure to
accommodate:

o increases in the number of users we service;

o increases in and the amount of information they wish to
transport;

o increases in the number of products and services we offer;
and

o changing customer requirements.

Our expansion and adaptation of our telecommunications and hosting
facility infrastructure will require substantial financial, operational and
management resources. If we are required to expand our network significantly and
rapidly due to increased usage, additional stress will be placed upon our
network hardware, traffic management systems and hosting facilities. The ability
of our network to connect and manage a substantially larger number of customers
at high transmission speeds while achieving expected performance is unknown.

As our customers' bandwidth usage increases, we will need to make
additional investments in our infrastructure to maintain adequate data
transmission speeds, the availability of which may be limited and the cost of
which may be significant. Additional network capacity may not be available from
third-party suppliers as it is needed by us. As a result, our network may not be
able to achieve or maintain a sufficiently high capacity of data

37
<PAGE>

transmission, especially if customers' usage increases. Any failure on our part
to achieve or maintain high-capacity data transmission could significantly
reduce consumer demand for our services and adversely affect our business.

We could experience system failures and capacity constraints, which could affect
our ability to compete.

To succeed, we must be able to operate our network infrastructure on a
24x7 basis without interruption. Our operations depend upon our ability to
protect our network infrastructure, equipment and customer files against damage
from:

o human error;

o natural disasters;

o power loss or telecommunications failures; and

o sabotage or other intentional acts of vandalism.

However, even if we take precautions, the occurrence of a natural
disaster or other unanticipated problems at our data centers could result in
interruptions in the services we provide to our customers.

At this time, we do not have a formal disaster recovery plan. In
addition, our data centers are subject to various single points of failure. As a
result, a problem with one of our routers, switches or fiber paths or with
another aspect of our network could cause an interruption in the services we
provide to some of our customers. We have experienced interruptions in service
in the past. Any future interruptions could:

o require us to spend substantial amounts of money replacing
existing equipment or adding redundant facilities;

o damage our reputation for reliable service;

o cause existing end users, resellers and referral partners to
cancel their contracts;

o cause end users to seek damages for losses incurred; or

o make it more difficult for us to attract new end users,
resellers and referral partners.

Any of these occurrences could adversely affect our business.

We have entered into service level agreements with some of our
customers and we anticipate that we will offer service level agreements to a
larger group of customers in the future. In that case, we could incur
significant liability to our customers in connection with any system downtime
and those obligations may adversely affect our business.

Currency fluctuations and different standards, regulations and laws relating to
our international operations may adversely affect our business.

On a pro forma basis, giving effect to acquisitions completed through
December

38
<PAGE>

31, 1999, approximately 13% of our revenue for the year ended December 31, 1998
and 16% for the year ended December 31, 1999 were to customers located outside
the United States, primarily in Europe, Asia and South America. Our success may
depend in part on expanding our international presence. Because our sales
overseas are denominated in U.S. dollars, currency fluctuations may inhibit us
from marketing our services to potential foreign customers or collecting for
services rendered to current foreign customers.

In February, 2000 we entered into a shareholders agreement with @viso
Limited. This agreement contemplates the formation of a corporation through
which we would launch Web hosting, application hosting and related services in
continental Europe. We expect that this arrangement will significantly expand
our international operations and consequently, increase the related risks such
as managing operations across disparate geographic areas and differences in
privacy, censorship and liability standards and regulations.

We may be liable for defects or errors in the solutions we develop.

Many of the solutions we develop are critical to the operations of our
clients' businesses. Any defects or errors in these solutions could result in:

o delayed or lost client revenues;

o adverse customer reaction toward Interliant;

o negative publicity;

o additional expenditures to correct the problem; and

o claims against us.

Claims against us may not be adequately covered by insurance, may
result in significant losses and, even if defended successfully, may raise our
insurance costs.

Our newly public status presents the following risks

Our stock price may be affected by the availability of shares for sale. The
future sale of large amounts of our stock, or the perception that such sales
could occur, could negatively affect our stock price.

The market price of our common stock could drop as a result of a large
number of shares of our common stock in the market. As of March 2, 2000 there
were approximately 47.3 million shares of common stock outstanding,
substantially all of which are eligible for sale in the public market pursuant
to Rule 144 under the Securities Act of 1933, as amended. Holders of
approximately 36.0 million restricted shares have registration rights with
respect to such shares, which if exercised would permit the holders to sell
their shares freely in the public market. Also, in connection with the sale in
February 2000 of our 7% convertible subordinated notes, we are obligated to file
a registration statement to facilitate public resales of the notes and of the
shares of our common stock into which the notes are convertible. Additionally,
the filing of that registration statement would trigger piggyback registration
rights held by the stockholders described above, entitling most of them to cause
us to register their shares concurrently with the filing of the registration
statement relating to the notes. In addition, shares issuable upon exercise of
our outstanding options may be sold freely under our Form S-8 registration
statement.

Our existing principal stockholders, executive officers and directors control

39
<PAGE>

Interliant and could delay or prevent a change in corporate control that
stockholders may believe will improve management or could depress our stock
price because purchasers cannot acquire a controlling interest.

As of March 2, 2000, our directors, executive officers and their
affiliates beneficially owned, in the aggregate, shares representing
approximately 66.0% of our common stock. As a result, these persons, acting
together, will be able to control all matters submitted to our stockholders for
approval and to control our management and affairs. This control could have the
effect of delaying or preventing a change of control that stockholders may
believe would be beneficial to their interests. In addition, this control could
depress our stock price because purchasers will not be able to acquire a
controlling interest in Interliant.

ITEM 2. PROPERTIES

Our executive offices, which we lease, are located in Purchase, New
York. We also lease the facilities that house our primary data centers in
Atlanta, Georgia, Houston, Texas and Vienna, Virginia, as well as other
facilities in the Washington, D.C. and Boston metropolitan areas.

ITEM 3. LEGAL PROCEEDINGS

In the ordinary course of business, we may be involved in legal proceedings
from time to time. As of the date hereof, there are no material legal
proceedings pending against us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK

Market for Common Stock and Holders of Record

Our common stock commenced trading on the Nasdaq National Market under
the symbol "INIT" on July 8, 1999. The following table sets forth, for the
periods indicated, the intra-day high and low sales prices per share of common
stock on the Nasdaq National Market. Such prices reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.

40
<PAGE>

High Low
---- ---
1999
- ----

Third Quarter (from July 8, 1999)................ $23 23/64 $10 1/2
Fourth Quarter $35 3/8 $9 1/4

2000
- ----

First Quarter (through March 2).................. $55 7/16 $28 5/8

The last reported sale price of our common stock on March 2, 2000 was $41 11/16
as reported by Nasdaq National Market. As of March 2, 2000, there were
approximately 170 stockholders of record of our common stock

Dividends

We have never paid or declared cash dividends on our common stock. We
currently intend to retain all future earnings for our business and do not
anticipate paying cash dividends in the foreseeable future. Future dividends, if
any, will depend on, among other things: (1) our operating results, (2) capital
requirements and (3) restrictions in loan agreements.

USE OF PROCEEDS FROM REGISTERED SECURITIES

On July 13, 1999, we completed an initial public offering of our common
stock whereby we sold 8,050,000 shares of common stock, including 1,050,000
shares sold pursuant to the underwriters' over-allotment option. The offering
price was $10.00 per share for an aggregate price of $80.5 million, before
underwriters' discounts and commissions and offering costs payable by us. From
the effective date of the registration statement filed in connection with such
offering to November 1, 1999, we paid an aggregate of $5.6 million in
underwriting discounts and commissions, and approximately $2.0 million of
initial public offering expenses. After deducting the underwriting discounts and
commissions and the initial public offering expenses payable directly by us, net
proceeds from the initial public offering were approximately $72.5 million.

As of December 31, 1999, we used net proceeds of the IPO as follows:

o $12.8 million for repayment of debt issued or assumed in connection
with acquisitions;

o $8.8 million in connection with the acquisitions of additional
businesses;

o $8.1 million for capital expenditures, including data centers; and

o $17.2 million for working capital.

The balance of the net proceeds of the initial public offering will be
used for acquisitions, capital expenditures, including completing and equipping
our data centers, and working capital and general corporate purposes.

ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands except per share amounts)
The following selected consolidated financial data should be read in conjunction
with Interliant's Consolidated Financial Statements and Notes

41
<PAGE>

thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this report on Form 10-K. The
statement of operations for the period ended December 31, 1997, and the years
ended December 31, 1998 and 1999, and the balance sheet data as of December 31,
1997, 1998 and 1999, are derived from the consolidated financial statements of
Interliant that have been audited by Ernst & Young LLP, independent auditors,
whose report with respect thereto is included elsewhere in this report on Form
10-K. Results of operations for the period from inception to December 31, 1997
and for the years ended December 31, 1998 and 1999 are not necessarily
indicative of the results of operations for future periods. Interliant's
development and expansion activities, including acquisitions, during the periods
shown below may significantly affect the comparability of this data from one
period to another.

<TABLE>
<CAPTION>
Period from
Year Ended Year Ended December 8, 1997
December 31, December 31, (Inception) to
1999 1998 December 31, 1997
---- ---- -----------------
Statement of Operations Data:
<S> <C> <C> <C>
Revenues $ 47,114 $ 4,905 $ -
Costs and Expenses:
Cost of revenues 27,514 3,236 -
Sales and marketing 17,236 2,555 -
General and administrative 29,062 6,849 156
Depreciation 6,051 696 2
Amortization of intangibles 22,069 2,439 -
--------------- ----------------- -------------------
101,932 15,775 158
--------------- ----------------- -------------------

Operating loss (54,818) (10,870) (158)
Interest income (expense), net 886 138 -
Other income (expense), net - - -
--------------- ----------------- -------------------
Net loss $ (53,932) $ (10,732) $ (158)
=============== ================= ===================

Net loss per share - basic and diluted $ (1.50) $ (1.22) $ (0.05)
=============== ================= ===================
Weighted average shares outstanding -
basic and diluted 35,838 8,799 3,000
=============== ================= ===================

Other Data:
EBITDA (1) $ (26,698) $ (7,735) $ (156)

Statement of Cash Flows Data:
Net cash used for operating activities $ (24,152) $ (6,001) $ (59)
Net cash used for investing activities (46,459) (17,919) (29)
Net cash provided by financing activities 91,406 29,821 1,000
Net capital expenditures 12,084 4,322 29

Balance Sheet Data:
Cash, cash equivalents and short-term investments $ 31,220 $ 6,813 $ 912
Working capital 26,886 3,755 4,815
Total assets 162,875 26,197 4,953
Debt and capital lease obligations, less current portion 2,503 - -
Total stockholders' equity 137,575 21,693 4,842
</TABLE>

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

(1) EBITDA represents earnings before net interest expense, income taxes,
depreciation and amortization and other income (expense). EBITDA is presented
because it is a widely accepted financial indicator used by certain investors
and analysts to analyze and compare companies on the basis of operating
performance and because management believes that EBITDA is an additional

42
<PAGE>

meaningful measure of performance and liquidity. EBITDA is not intended to
present cash flows for the period, nor has it been presented as an alternative
to operating income (loss) as an indicator of operating performance and should
not be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles. The items
excluded from the calculation of EBITDA are significant components in
understanding and assessing our financial performance. Our computation of EBITDA
may not be comparable to the computation of similarly titled measures of other
companies. EBITDA does not represent funds available for discretionary uses.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

You should read the following description of our financial condition
and results of operations in conjunction with the Consolidated Financial
Statements and the Notes thereto included elsewhere in this Form 10-K. This
discussion contains forward-looking statements based upon current expectations
that involve risks and uncertainties. Any statements contained herein that are
not statements of historical fact are forward-looking statements. Our actual
results and the timing of certain events may differ significantly from the
results discussed in the forward-looking statements.

Overview

As an ASP, we provide:

o hosting infrastructure for our customers' network-based
applications, which allows our customers to store their databases,
applications or Web sites on equipment owned and maintained by us or
on our customers' equipment located in our data centers;

o Internet professional services for designing, implementing and
deploying these network-based applications; and

o operations support, systems and applications management and customer
care for our customers and their end-users.

We have employed a strategy of rapidly acquiring operating companies in
the application hosting, Web hosting and Internet professional services
businesses, building or acquiring data centers and integrating the acquired
hosting operations into those data centers. We acquired 21 operating businesses
during 1998 and 1999 for total consideration of approximately $118.6 million,
including transaction costs. The purchase consideration for the acquisitions was
in the form of cash, stock or a combination of cash and stock. We have accounted
for all acquisitions using the purchase method of accounting, which has resulted
in the inclusion of substantial intangible assets on our balance sheet. Of the
total consideration, we issued $2.4 million of notes

43
<PAGE>

payable and paid $10.2 million of assumed seller debt and have allocated
approximately $(9.8) million to tangible net liabilities and $118.1 million to
intangible assets, which comprise covenants not to compete, customer lists,
assembled work force, trade names and goodwill. In accordance with APB 16, an
allocation methodology was applied to each acquisition to determine the value to
be assigned to each type of intangible asset where appropriate. Amounts not
allocated to specific identifiable intangible assets have been recorded as
goodwill. Recoverability of our investment in intangible assets is dependent on
our ability to operate our businesses successfully and generate positive cash
flows from operations. Annual charges for amortization of intangible assets with
respect to acquisitions completed through December 31, 1999 will be
approximately $31.3 million, which will result in increased losses or reduced
net income. Additionally, during 1998 we issued stock valued at approximately
$2.6 million as compensation in connection with agreements entered into with
sellers of acquired operating businesses, all of which has been charged to
operations through December 31, 1999.

Since our inception in December 1997, we have experienced operating
losses and negative cash flows from operating activities for each quarterly and
annual period. As of December 31, 1999, we had an accumulated deficit of
approximately $64.8 million. Had the companies acquired through December 31,
1999 been included since January 1, 1998, our accumulated deficit would have
been approximately $112.6 million. We anticipate increased operating expenses as
we:

o expand our sales and marketing initiatives to continue to grow our
brands; o fund greater levels of product development;

o continue to complete and equip our data centers; and

o implement centralized billing, accounting and customer service
systems; and

o continue our acquisition program.

Although we have experienced revenue growth, primarily attributable to
acquisitions, we do not believe that this growth is necessarily indicative of
future operating results. Future acquisitions are expected to increase operating
expenses and operating losses and as a result, we expect to continue to incur
operating losses for the foreseeable future.

Results of Operations

We derive our revenues from application hosting, Web hosting and
Internet professional and other services. Application hosting revenues primarily
comprise monthly usage fees per number of end users, including bandwidth fees
and one-time setup fees. Web hosting revenues consist primarily of hosting fees
and setup fees, which cover costs incurred by us to establish customers' Web
sites. We provide virtual, dedicated and co-located hosting. We charge our Web
hosting customers a fixed amount for bandwidth availability and incremental fees
if those fixed amounts are exceeded. In addition, our virtual Web hosting
customers are also charged for disk space on a server, dedicated hosting
customers are charged for use of one or more dedicated servers and our
co-location customers are charged for the amount of data center space such
co-location customers' servers occupy. We charge flat rates for our enhanced
Internet services. Internet professional service charges are generally fee-based
on a time and materials basis.

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<PAGE>

Our contracts with our application hosting customers range in length
from month- to-month to three years. Our contracts with our Web hosting
customers typically range in length from month-to-month to one year. A large
proportion of our Web hosting customer contracts are cancelable by either party
with 30 days' notice. Revenues derived from hosting are recognized ratably over
the applicable contractual period. Payments received and billings in advance of
providing services are deferred until such services are provided. Revenues from
Internet professional services are recognized as the services are rendered.
Substantially all of our Internet professional services contracts call for
billings on a time and materials basis. The Staff of the Securities and Exchange
Commission has issued Staff Accounting Bulletin No. 101 on the topic of revenue
recognition which became effective January 1, 2000. Although we anticipate that
the implementation of Staff Accounting Bulleting No. 101 will change the way we
account for setup fees with respect to our Web hosting and application hosting
services, we believe this change will not have a material effect on our results
of operations for any period.

Cost of revenues consists primarily of salaries and related expenses
associated with Internet professional services and network operations personnel
as well as data communications expenses, including one-time fees for circuit
installation and variable recurring circuit payments to network providers.
Monthly circuit charges vary based upon circuit type, distance and usage, as
well as the term of the contract with the carrier.

Sales and marketing expense consists of personnel costs associated with
the direct sales force, internal telesales and product marketing employees, as
well as costs associated with marketing programs, product literature, external
telemarketing costs and corporate marketing activities, including public
relations.

General and administrative expense includes the cost of customer
service functions, finance and accounting, human resources, legal and executive
salaries, corporate overhead, acquisition integration costs and fees paid for
professional services.

<TABLE>
<CAPTION>
Years Ended December 31, 1999 and 1998
(in thousands) Year Ended December 31,
-------------------------------------------------------------------------
1998 % of 1999 % of 1999 % of
Historical Revenues Historical Revenues Pro Forma Revenues
---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 4,905 100% $ 47,114 100% $ 80,074 100%
Costs and expenses:
Cost of revenues 3,236 66% 27,514 58% 50,541 63%
Sales and marketing 2,555 52% 17,236 37% 20,418 25%
General and administrative 6,849 140% 29,062 62% 37,130 46%
Depreciation 696 14% 6,051 13% 6,994 9%
Amortization of intangibles 2,439 50% 22,069 47% 31,344 39%
----------- ----------- -----------
15,775 322% 101,932 216% 146,427 183%
Interest and other income, net 138 3% 886 2% 723 1%
----------- ----------- -----------
Net loss $ (10,732) -219% $ (53,932) -114% $ (65,630) -82%
=========== =========== ===========
</TABLE>

In the above table and the discussions below the unaudited pro forma statement
of operations data for the year ended December 31, 1999 assumes that the
acquisitions completed through December 31, 1999 had occurred on January 1,
1999.

Revenues

Revenues increased $42.2 million, from $4.9 million in 1998 to $47.1
million in 1999. The increase in revenues was due primarily to the 21
acquisitions consummated during 1998 and 1999. On a pro forma basis, giving
effect to acquisitions completed through December 31, 1999, revenues for the
year ended December 31, 1999 were $80.1 million.

For the year ended December 31, 1999, on a pro forma basis:

45
<PAGE>

o application hosting revenues comprised 23.9% of our revenues;

o Web hosting revenues comprised 22.4% of our revenues;

o Internet professional services revenues comprised 49.0% of our
revenues; and

o other services revenues comprised 4.7% of our revenues.

Cost of Revenues

Cost of revenues increased by $24.3 million, from $3.2 million in 1998
to $27.5 million in 1999. This increase was due primarily to the 21 acquisitions
consummated during 1998 and 1999, and increased costs to support current and
future revenue growth. In the future, cost of revenues may fluctuate due to
capacity utilization, the timing of investments in data centers, changes in the
mix of services, fluctuations in bandwidth costs and increased levels of
staffing to support anticipated revenue growth.

On a pro forma basis, cost of revenues for the year ended December 31,
1999 were $50.5 million.

For 1999, gross margin on a pro forma basis was 36.9% as compared to
41.6% on a historical basis. The lower pro forma gross margins are the result of
an increase in the proportion of revenue from Internet professional services to
total revenues related to our recent acquisitions of Internet professional
services businesses, which typically generate lower gross margins as compared
with our hosting services.

Sales and Marketing

Sales and marketing expense increased by $14.6 million, from $2.6
million in 1998 to $17.2 million in 1999. This increase was attributable to the
21 acquisitions consummated during 1998 and 1999. A key component of our revenue
growth strategy is to significantly increase our sales and marketing activities.
We expect that this will include the expansion of our sales force, development
of reseller and referral partner channels and increased marketing efforts to
grow recognition of our brands. As a result, sales and marketing expenses will
increase substantially in future periods to support anticipated revenue growth.

On a pro forma basis, sales and marketing expense for the year ended
December 31, 1999 was $20.4 million. Sales and marketing costs as a percentage
of revenue was 36.6% on a historical basis versus 25.5% on a pro forma basis due
primarily to higher proportion of Internet professional services revenues for
the pro forma period, which businesses have historically incurred lower
marketing costs as a percentage of revenues.

General and Administrative

General and administrative expense increased by $22.3 million, from
$6.8 million in 1998 to $29.1 million in 1999. This increase in general and
administrative expense was attributable to the 21 acquisitions consummated
during 1998 and 1999, and increased investments in infrastructure and levels of
staffing with respect to the billing, accounting, human resources and customer
service functions to support revenue growth. Substantial staffing and related
increases are expected to continue in future periods in order to support
anticipated revenue growth.

In connection with an employment agreement executed in January 2000,
which included the grant of stock options to our new Chief Executive Officer, we
will incur non-cash compensation charges,

46
<PAGE>

aggregating approximately $30.0 million over the four-year vesting period of
such stock options.

On a pro forma basis, general and administrative expense for the year
ended December 31, 1999 was $37.1 million.

Depreciation

Depreciation expense increased by $5.4 million, from $0.7 million in
1998 to $6.1 million in 1999. The increase in depreciation expense was
attributable to the 21 acquisitions consummated during 1998 and 1999 and our
investment in equipment, furniture and construction to complete and equip our
data centers in Atlanta, Georgia and Vienna, Virginia. On a pro forma basis,
depreciation expense for the year ended December 31, 1999 was $7.0 million.

Amortization

Amortization expense increased by $19.7 million, from $2.4 million in
1998 to $22.1 million in 1999. This increase in amortization expense was
attributable to the 21 acquisitions consummated during 1998 and 1999. We expect
amortization expense to increase in future periods as we continue to make
additional acquisitions as well as reflect amortization of intangibles
associated with acquisitions consummated to date.

On a pro forma basis, amortization expense for the year ended December
31, 1999 was $31.3 million.

Year Ended December 31, 1998 and the period December 8, 1997 (Inception) to
December 31, 1997

(in thousands)
1997 1998
Historical Historical
----------------------------------
Revenues $ - $ 4,905
Costs and expenses:
Cost of revenues 3,236
Sales and marketing 2,555
General and administrative 156 6,849
Depreciation 2 696
Amortization of intangibles 2,439
---------------- ---------------
158 15,775
Interest income 138
---------------- ---------------
Net loss $ (158) $ (10,732)
================ ===============

Revenues

Revenues increased by $4.9 million for the year ended December 31,
1998. This increase in revenues was primarily attributable to the 12
acquisitions consummated during 1998.

Cost of Revenues

Cost of revenues increased by $3.2 million for the year ended December
31, 1998. This increase in cost of revenues was attributable to the 12
acquisitions consummated during 1998. In the future, cost of revenues may
fluctuate due to capacity utilization, the timing of investments in data
centers, changes in the mix of services, fluctuations in bandwidth costs and
increased levels of staffing.

47
<PAGE>

Sales and Marketing

Sales and marketing expense increased by $2.6 million for the year
ended December 31, 1998. This increase in sales and marketing expense was
attributable to the 12 acquisitions consummated during 1998. A key component of
our strategy is to significantly increase our sales and marketing activities for
Web hosting products. This will include the expansion of our sales force,
development of reseller and referral partner channels and increased marketing
efforts to grow recognition of our brands. As a result, sales and marketing
expenses are expected to increase substantially in future periods.

General and Administrative

General and administrative expense increased by $6.6 million, from $0.2
million in 1997 to $6.8 million in 1998. This increase in general and
administrative expense was attributable to the 12 acquisitions consummated
during 1998 and levels of staffing with respect to the billing, accounting,
human resources and customer service functions to support revenue growth.

Depreciation

Depreciation expense increased by $0.7 million, to $0.7 million in
1998. This increase was due to the acquisition of approximately $5.7 million of
furniture, fixtures and equipment. This amount includes approximately $1.4
million acquired with operating businesses we acquired during 1998. Investments
included the construction of and acquisition of equipment for our Web hosting
facilities to ensure high levels of service to our customers and capacity for
future growth and of technology and infrastructure to implement centralized
billing, accounting and customer service systems to integrate the operations of
acquired companies.

Amortization

Amortization expense increased by approximately $2.4 million in 1998.
The amortization expense was attributable to intangible assets associated with
the 12 acquisitions consummated during 1998.

Liquidity and Capital Resources

We have financed our operations and acquisitions primarily from private
placements of equity and our initial public offering of common stock. We had
$31.2 million in cash, cash equivalents and short-term investments at December
31, 1999, and on a pro forma basis, after giving effect to the sales of common
stock and convertible notes and the acquisitions of two businesses referred to
below, we had approximately $187.5 million in cash and short-term investments.
Net cash used in operations for the year ended December 31, 1999 was $24.2
million. This reflects primarily the net loss for the period of $53.9 million
along with changes in operating assets and liabilities, offset by $6.1 million
of depreciation expense and $22.1 million of amortization of goodwill and other
intangible assets and $3.7 million of other non-cash items including provisions
for bad debts and non-cash compensation charges. Net cash used for investing
activities for the year ended December 31, 1999 was $46.5 million, of which
$12.1 million was for purchases of furniture, fixtures and equipment and $27.8
million was for acquisitions of businesses. Net cash from financing activities
for the year ended December 31, 1999 was $91.4 million, reflecting $102.0
million of net proceeds from the issuance of common stock and Series A preferred
stock and $2.6 million of proceeds from equipment financing transactions, less
repayment of acquisition-related and other debt of $13.1 million.

48
<PAGE>

In July 1999, we sold 8,050,000 shares of common stock, including
shares sold through the exercise of the underwriters' over-allotment option, in
an underwritten initial public offering for net proceeds of approximately $72.5
million, after deducting underwriters' discounts and commissions and offering
expenses paid by us. Upon the consummation of the initial public offering, all
of the 2,647,658 outstanding shares of our Series A Redeemable Convertible
Preferred Stock were converted into an equal number of shares of common stock.

In January and February 2000 we sold an aggregate of 787,881 shares of
common stock to three strategic partners for a total purchase price of $27.5
million. In connection with this sale and with related commercial agreements
entered into at the same time with these strategic partners, we issued warrants
to purchase 157,575 shares of common stock with a weighted average exercise
price of $34.90 per share, which expire on December 31, 2000.

In February 2000, we sold $154.8 million of 7% Convertible Subordinated
Notes, including $4.8 million sold upon exercise of the underwriters'
over-allotment option. The notes are convertible at the option of the holder, at
any time on or prior to maturity into common stock at a conversion price of
$53.10 per share, which is equal to a conversion rate of approximately 18.8324
shares per $1,000 principal amount of notes. Semi-annual interest payments of
$5.4 million commence in August 2000. The notes mature on February 16, 2005.
Upon the occurrence of certain events we may redeem the notes prior to maturity.

In February 2000, we completed two acquisitions (see Note 15 of Notes
to Consolidated Financial Statements). The total cash consideration for these
acquisitions amounted to approximately $20.7 million.

In addition to funding ongoing operations and capital expenditures, our
principal commitments consist of non-cancelable operating leases and contingent
payments of earnouts to certain sellers of operating companies acquired by us.
In connection with certain acquisitions, we paid $2.3 million during 1999, and
have accrued an additional $1.4 million as of December 31, 1999 for amounts
earned under contingent earnout arrangements. If all targets for earnouts
entered into through December 31, 1999 are achieved in full, total consideration
pursuant to these earnouts will be $7.3 million in cash in 2000. Certain
agreements provide for issuance of common stock in lieu of cash, at our option.

During 1998, we constructed a data center in Atlanta into which the
majority of the Web hosting businesses we acquired have been or are being
integrated. We believe that this facility has the capacity to service a larger
number of Web hosting customers than are currently serviced there. The cost of
constructing and equipping this facility was approximately $2.0 million. In
August 1999, we commenced the operations of our Vienna, Virginia data center,
which was designed to provide managed application hosting services. We expect
the total costs to construct and equip the Vienna, Virginia facility to be
approximately $3.2 million, of which $3.0 million had been incurred as of
December 31, 1999. We intend to continue investing to construct and equip data
centers as we acquire additional operating businesses and integrate them and as
sales and marketing efforts generate internal revenue growth, requiring
additional servers, routers and related equipment. For the year ended December
31, 1999, our capital expenditures totaled $12.1 million.

We believe that our existing cash and cash equivalents, together with
the net proceeds from the investments by strategic partners and the sale of the
notes described above will be adequate to meet operating needs through
approximately the third quarter of 2001, subject to the use of additional cash
for unspecified acquisitions, in which case the period would be shortened. The
foregoing is a forward-looking statement and is based on our current business

49
<PAGE>

plan and the assumptions on which it is based, including our ability to
successfully integrate acquisitions and achieve the expected benefits, such as
operational efficiencies and revenue improvements from cross-selling
opportunities. Our plans also assume that we will complete a given number of
acquisitions, at given valuations using as consideration a given mix of cash and
stock. If our plans change or our assumptions prove to be inaccurate, we may be
required to seek additional capital sooner than we currently anticipate. We may
also seek to raise additional capital to take advantage of favorable conditions
in the capital markets. It is likely that after the third quarter of 2001 we
will need additional funds to conduct our operations and continue our
acquisition and internal growth programs. We cannot be assured, however, that if
we need or seek additional capital that we will be successful in obtaining it.

Interest Rate Risk

We have limited exposure to financial market risks, including changes
in interest rates. At December 31, 1999, we had short-term investments,
including cash equivalents, of approximately $27.3 million. These short-term
investments consist of highly liquid investments in debt obligations of highly
rated entities with maturities of between one and 90 days, and highly rated
commercial paper with maturities of between one and 120 days. These investments
are subject to interest rate risk and will fall in value if market interest
rates increase. We expect to hold these investments until maturity and therefore
expect to realize the full value of these investments, even though changes in
interest rates may affect their market value prior to maturity. If interest
rates decline over time, this will result in a reduction of our interest income
as our cash is reinvested at lower rates.

Year 2000

In late 1999, we completed our remediation and testing of our systems for Year
2000 readiness. As a result of those planning and implementation efforts, we
experienced no significant disruptions in mission critical information
technology and non-information technology systems, and believe those systems
successfully responded to the Year 2000 date change. We are not aware of any
material problems resulting from Year 2000 issues, either with our products, our
internal systems, or the products and services of third parties. We expensed
approximately $0.7 million during 1999 in connection with remediating our
systems. During 2000, we expect to incur additional costs to remediate certain
non-critical systems. Such costs will be charged to expense as incurred and are
not expected to have a material impact on the results of operations. We will
continue to monitor our mission critical computer applications and those of our
suppliers and vendors throughout the Year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We did not have significant exposure to changing interest rates on
invested cash at March 2, 2000. We invest primarily in money market funds,
investment grade commercial paper and short-term notes. The interest rates on
these securities are primarily fixed, the maturities are relatively short and we
generally hold the securities until maturity.

We issued debt in the form of convertible subordinated notes in the
amount of $154,825,000 in February 2000, which bear interest at a fixed rate of
7.0%. We do not have significant exposure to changing interest rates related to
these notes because their interest rate is fixed.

50
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Certified Public Accountants

Consolidated Balance Sheets as of December 31, 1999 and 1998

Consolidated Statements of Operation for the Year ended December 31, 1999 and
1998 and the period December 8, 1997 (inception) to December 31, 1997

Consolidated Statements of Stockholders' Equity for the years Ended December 31,
1999 and 1998 and the period December 8, 1997 (inception) to December 31, 1997

Consolidated Statements of Cash Flow for the Year ended December 31, 1999 and
19998 and the period December 8, 1999 (inception) to December 31, 1997

Notes to Consolidated Financial Statements

51
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Interliant, Inc.

We have audited the accompanying consolidated balance sheets of Interliant, Inc.
(the "Company") as of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
two years in the period ended December 31, 1999 and for the period December 8,
1997 (inception) to December 31, 1997. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial statements
and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Interliant, Inc.
at December 31, 1999 and 1998, and the consolidated results of its operations
and its cash flows for each of the two years in the period ended December 31,
1999 and for the period December 8, 1997 (inception) to December 31, 1997, in
conformity with accounting principles generally accepted in the United States.

Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

/s/ Ernst &Young LLP

Boston, Massachusetts
January 31, 2000, except for Note 15, as to
which the date is March 2, 2000

52
<PAGE>

INTERLIANT, INC.

CONSOLIDATED BALANCE SHEETS

December 31,
-----------------------------------------------
1999 1998
--------------------- --------------------
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 27,608,039 $ 6,813,360
Restricted cash 1,011,772
Short-term investments 3,612,229
Accounts receivable, net of allowance of $1,378,000 and
$320,000 at December 31, 1999 and 1998, respectively 13,981,358 806,322
Prepaid and other current assets 3,469,763 639,662
--------------------- --------------------
Total current assets 49,683,161 8,259,344
--------------------- --------------------

Furniture, fixtures and equipment, net 18,199,010 5,103,123
Intangibles, net 93,636,201 12,612,228
Other assets 1,356,696 222,172
--------------------- --------------------
Total assets $ 162,875,068 $ 26,196,867
===================== ====================

Liabilities and stockholders' equity
Current liabilities:
Notes payable and current portion of long-term debt and
capital lease obligations $ 1,211,835
Accounts payable 8,359,040 $ 787,412
Accrued expenses 7,342,551 2,301,507
Deferred revenue 5,883,549 1,414,969
--------------------- --------------------
Total current liabilities 22,796,975 4,503,888
--------------------- --------------------

Long-term debt and capital lease obligations, less current portion 2,503,211

Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized; 0 shares
issued and outstanding
Common stock, $.01 par value; 200,000,000 and 100,000,000
shares authorized; 44,601,141, and 19,217,197 shares
issued and outstanding at December 31, 1999 and 1998, respectively 446,011 192,172
Additional paid-in capital 201,922,128 34,160,334
Deferred compensation (1,769,429)
Accumulated deficit (64,822,097) (10,890,098)
Accumulated other comprehensive income 28,840
--------------------- --------------------
Total stockholders' equity 137,574,882 21,692,979
--------------------- --------------------

Total liabilities and stockholders' equity $ 162,875,068 $ 26,196,867
===================== ====================

See accompanying notes to consolidated financial statements.
</TABLE>

53
<PAGE>

INTERLIANT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Period
Year Ended December 31, December 8, 1997
---------------------------------------- (inception) to
1999 1998 December 31, 1997
-------------------- ------------------ --------------------

<S> <C> <C>
Revenues $ 47,114,095 $ 4,905,027

Costs and expenses:
Cost of revenues 27,513,710 3,236,385
Sales and marketing 17,236,121 2,555,035
General and administrative (exclusive of non-cash
compensation shown below) 27,075,902 6,015,744 $ 155,898
Non-cash compensation 1,986,694 832,821
Depreciation 6,051,296 696,039 1,850
Amortization of intangibles 22,068,815 2,439,426
-------------------- ------------------ --------------------
101,932,538 15,775,450 157,748
-------------------- ------------------ --------------------

Operating loss (54,818,443) (10,870,423) (157,748)
Interest income, net of $468,408 of interest expense in 1999 886,444 138,073
-------------------- ------------------ --------------------
Net loss $ (53,931,999) $ (10,732,350) $ (157,748)
==================== ================== ====================

Net loss per share - basic and diluted $ (1.50) $ (1.22) $ (0.05)
==================== ================== ====================

Weighted average shares
outstanding - basic and diluted 35,837,523 8,799,432 3,000,000
==================== ================== ====================

See accompanying notes to consolidated financial statements.
</TABLE>

54
<PAGE>

<TABLE>
<CAPTION>
INTERLIANT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Comprehensive Common Stock Additional
------------------------
Income (Loss) Shares Par Value Paid-in Capital
------------- ------ --------- ---------------

<S> <C> <C> <C> <C>
Sales of common stock in private placements 3,000,000 $ 30,000 $ 4,970,000

Net loss $ (157,748)
-------------------------------------------------------------------

Total comprehensive income (loss) $ (157,748)
=================

Balance as of December 31, 1997 3,000,000 30,000 4,970,000

Sales of common stock in private placements 15,600,000 156,000 25,884,000

Deferred compensation 475,000 4,750 2,600,750

Amortization of deferred compensation

Issuance of common stock in connection
with acquisitions 142,197 1,422 705,584

Net loss (10,732,350)

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

Total comprehensive income (loss) $ (10,732,350)
=================

Balance as of December 31, 1998 19,217,197 192,172 34,160,334

Sales of common stock in private placements 6,600,000 66,000 10,934,000

Exercise of stock options and warrants 1,524,491 15,244 5,671,875

Common stock issued and stock options
granted in connection with acquisitions 6,561,795 65,618 65,735,891

Conversion of preferred stock 2,647,658 26,477 12,973,524

Initial public offering of
common stock, net of offering costs 8,050,000 80,500 72,446,504

Amortization of deferred compensation

Foreign currency translation adjustment 28,840

Net loss (53,931,999)
-------------------------------------------------------------------

Total comprehensive income (loss) $ (53,903,159)
=================

Balance as of December 31, 1999 44,601,141 $ 446,011 $201,922,128
==================================================

Accumulated Other Total
Deferred Accumulated Comprehensive Stockholders'
Compensation Deficit Income Equity
------------ ------- ------ ------

<S> <C>
Sales of common stock in private placements $ 5,000,000

Net loss $ (157,748) (157,748)
-------------------------------------------------------------------------

Total comprehensive income (loss)

Balance as of December 31, 1997 (157,748) 4,842,252

Sales of common stock in private placements 26,040,000

Deferred compensation (2,602,250) 3,250

Amortization of deferred compensation 832,821 832,821

Issuance of common stock in connection
with acquisitions 707,006

Net loss (10,732,350) (10,732,350)

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

Total comprehensive income (loss)

Balance as of December 31, 1998 (1,769,429) (10,890,098) 21,692,979

Sales of common stock in private placements 11,000,000

Exercise of stock options and warrants 5,687,119

Common stock issued and stock options
granted in connection with acquisitions 65,801,509

Conversion of preferred stock 13,000,001

Initial public offering of
common stock, net of offering costs 72,527,004

Amortization of deferred compensation 1,769,429 1,769,429

Foreign currency translation adjustment 28,840 28,840

Net loss (53,931,999) (53,931,999)
-------------------------------------------------------------------------

Total comprehensive income (loss)

Balance as of December 31, 1999 $ (64,822,097) $ 28,840 $137,574,882
=========================================================================

See accompanying notes to consolidated financial statements.
</TABLE>

55
<PAGE>

INTERLIANT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Period
Year Ended December 31, December 8, 1997
----------------------------------- (inception) to
1999 1998 December 31, 1997
------------- ------------------ ----------------
Operating activities
<S> <C> <C> <C>
Net loss $(53,931,999) $(10,732,350) $ (157,748)
Adjustments to reconcile net loss to net cash used in
operating activities:
Provision for uncollectible accounts 1,585,254 320,000
Depreciation and amortization 28,120,111 3,135,465 1,850
Non-cash compensation, including amortization
of deferred compensation 1,986,694 832,821
Other non-cash charges 129,957
Changes in operating assets and liabilities:
Restricted cash (1,011,772)
Accounts receivable (4,947,423) (980,391)
Prepaid and other current assets (1,873,117) (602,457) (14,000)
Other assets (90,527)
Accounts payable 3,478,876 639,607 84,389
Accrued expenses 1,111,999 1,140,135 26,507
Deferred revenue 1,289,453 246,502

------------- ------------------ ----------------
Net cash used in operating activities (24,152,494) (6,000,668) (59,002)
------------- ------------------ ----------------

Investing activities
Purchases of furniture, fixtures and equipment (12,084,072) (4,321,577) (28,913)
Payments issued in connection with non-compete agreements (2,000,000)
Investments in long-term assets (952,969)
Purchases of short-term investments (3,612,229)
Acquisitions of businesses, net of cash acquired (27,809,253) (13,597,558)

------------- ------------------ ----------------
Net cash used in investing activities (46,458,523) (17,919,135) (28,913)
------------- ------------------ ----------------

Financing activities
Proceeds from sales of common stock, net of offering costs of
$7.9 million and $0.2 million in 1999 and 1998, respectively 83,527,004 29,821,078 1,000,000
Proceeds from issuance of Series A redeemable convertible preferred stock 13,000,001
Proceeds from exercise of options and warrants 5,469,854
Proceeds from capital lease financing 2,550,303
Repayment of debt (13,141,466)

------------- ------------------ ----------------
Net cash provided by financing activities 91,405,696 29,821,078 1,000,000
------------- ------------------ ----------------

Net increase in cash and cash equivalents 20,794,679 5,901,275 912,085
Cash and cash equivalents at beginning of period 6,813,360 912,085
------------- ------------------ ----------------
Cash and cash equivalents at end of period $ 27,608,039 $ 6,813,360 $ 912,085
============= ================== ================

Supplemental Disclosures, including Noncash Investing and
Financing Activities
Cash paid for interest $ 468,408
Stock issued and options granted for acquisitions $ 65,801,509 $ 707,006
Stock issued for compensation agreements $ 2,602,250
Conversion of Series A redeemable convertible preferred stock into
into common stock $ 13,000,001
Debt assumed or issued in acquisitions $ 22,250,186
Stock subscription receivable $ 4,000,000

See accompanying notes to consolidated financial statements.

</TABLE>

56
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the
period from December 8, 1997 to December 31, 1997 and the years
ended December 31, 1998 and 1999

1. Business

Interliant, Inc. (the Company) is a leading Application
Service Provider (ASP), providing customers with a broad range of outsourced
e-business solutions. The Company's service offerings combine hosting
infrastructure with Internet professional service expertise, which enable the
rapid design, implementation, deployment and management of cost-effective
e-business solutions for customers.

The Company was organized under the laws of the State of
Delaware on December 8, 1997. Web Hosting Organization LLC (WEB), a Delaware
Limited Liability Company, is the majority and controlling shareholder of the
Company. WEB's investors comprise Charterhouse Equity Partners III, L.P. and
Chef Nominees Limited (collectively, CEP Members), and WHO Management, LLC
(WHO).

2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.

57
<PAGE>

Cash Equivalents

The Company considers all highly liquid investments purchased
with an original maturity (at date of purchase) of three months or less to be
the equivalent of cash. Cash equivalents, which consist primarily of money
market accounts and commercial paper, are carried at cost, which approximates
market value.

Short-term Investments

Short-term investments, which consist of commercial paper with
maturities ranging from three months to one year, are carried at cost, which
approximates market value.

Fair Value of Financial Instruments

Carrying amounts of financial instruments held by the Company,
which include cash equivalents, short-term investments, accounts receivable,
accounts payable and accrued expenses, approximate fair value due to their short
duration.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to
concentrations of credit risk are comprised principally of cash, cash
equivalents, short-term investments and accounts receivable. As of December 31,
1999, the Company's cash, cash equivalents and short-term investments are
deposited with various domestic and foreign financial institutions. With respect
to accounts receivable, the Company's customer base is dispersed across many
geographic areas. The Company monitors customer payment history, generally does
not require collateral and establishes reserves for uncollectible accounts as
warranted. In addition to individual customers, the Company also provides
services to resellers, who, in turn, provide services to their own customers.

Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent liabilities, at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Furniture, Fixtures and Equipment

Furniture, fixtures and equipment are stated at cost. Major
additions and betterments are capitalized, while replacements, maintenance and
repairs that do not improve or extend the life of the assets are charged to
expense. Depreciation and amortization has been provided using the straight-line
method over the estimated useful lives of the assets as follows:

Network software and equipment............. 3 years
Furniture, fixtures and office equipment... 3 to 7 years
Leasehold improvements..................... Remaining lease term or
useful life, whichever is
shorter

58
<PAGE>

Intangible Assets

Intangible assets consist primarily of customer lists, covenants not to
compete, assembled workforce, trade names and goodwill, all of which arose from
the acquisitions of 21 hosting and related Internet professional services
companies. Such assets are being amortized on a straight-line basis over periods
ranging from one to five years (see Note 4).

Impairment of Long-Lived Assets

The Company continually reviews amortization periods and the carrying
value of long-lived assets, including furniture, fixtures and equipment, and
intangible assets to determine whether there are any indications of reduction in
useful lives or impairment losses. With respect to intangible assets, certain
events that would cause the Company to conduct an impairment assessment include
significant losses of customers or acquired workforce, or if operating results
of acquired businesses continually failed to meet management's performance
expectations. If after conducting such assessment indications of impairment are
present in long-lived assets, the estimated future undiscounted cash flows
associated with the corresponding assets would be compared to its carrying
amount to determine if a change in useful life or a write-down to fair value is
necessary.

Revenue Recognition

The Company's revenues primarily are derived from Web hosting,
application hosting, and Internet professional services.

The Company sells its Web hosting services for contractual periods
ranging from one to twelve months. These contracts generally are cancelable by
either party without penalty. Revenues from these contracts are recognized
ratably over the contractual period as service is delivered. Incremental fees
for excess bandwidth usage and data storage are billed and recognized as
revenues in the period customers utilize such services. Payments received for
billings in advance of providing services are deferred until the period such
services are provided.

Non-refundable set-up fees charged to Web hosting customers are
separately priced from hosting services and are recognized at the time a new
customer account is created. Set-up costs consist primarily of labor by
technical support personnel to activate the new Web site and are incurred at the
time of set-up. No future set-up costs are incurred, and there is no obligation
of the Company to perform any future set-up services. Following expiration of
the initial contract period and upon renewal of the contract by the customer,
there are no additional set-up charges and the renewal prices for Web hosting
services are generally unchanged from the original contract period.

Application hosting revenues comprise monthly usage fees, including
communications charges, and customization fees, all of which are recorded as
revenue at the time the services are used by the customer.

The Staff of the Securities and Exchange Commission has issued Staff
Accounting Bulletin No. 101 on the topic of revenue recognition, which the
Company will adopt effective with the quarter beginning January 1, 2000. The
Company anticipates that such adoption will result in a change in the accounting
for set-up fees with respect to Web hosting and application hosting services.
While the Company has not yet determined the impact of the change, it is not
expected to have a material effect on the ongoing results of operations.

59
<PAGE>

Revenues from Internet professional services are recognized as the
services are rendered, provided that no significant obligations remain and
collection of the receivable is considered probable. Generally, contracts call
for billings on a time and materials basis; however, in instances when a fixed
fee contract is signed, revenue is recognized on a percentage-of-completion
basis. In connection with certain professional service arrangements, the Company
provides hardware and software to customers. Such products are purchased from
third party vendors as required. Revenue from the sale of products is generally
recorded over the period that the related professional services are performed.
Product revenues and cost of revenues were $3.4 million and $2.7 million for the
twelve months ended December 31, 1999, respectively.

Advertising Expenses

All advertising costs are expensed as incurred. Advertising expenses
for the year ended December 31, 1999 and 1998 were $6.0 million and $0.7
million, respectively.

Income Taxes

The Company accounts for income taxes using the liability method under
which deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.

Net Loss Per Share

Net loss per share is presented in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, Earnings Per Share. Basic
net loss per share is computed based on the weighted average number of shares of
common stock outstanding. Diluted loss per share does not differ from basic loss
per share since potential common shares to be issued upon exercise of stock
options are anti-dilutive for the periods presented. As of December 31, 1999,
the number of potentially dilutive shares of common stock were 2.5 million
shares, based on the number outstanding stock options as of that date.

Stock-Based Compensation

The Company accounts for its stock-based compensation plan utilizing
the provisions of Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25). The Company has adopted the disclosure
provisions only of Statement of Financial Accounting Standards No. 123,
Accounting For Stock-Based Compensation (SFAS 123).

Foreign Currency Translation

The financial statements of foreign subsidiaries have been translated
into U.S. dollars in accordance with FASB Statement No. 52, Foreign Currency
Translation. The functional currency of the Company's foreign operating units is
the local currency in the country that the entity operates. All balance sheet
accounts have been translated using the exchange rate in effect at the balance
sheet date. Statement of operations amounts have been translated using the
average exchange rate for the period. Adjustments resulting from such
translation have been reported separately as a component of other comprehensive
income in stockholders' equity.

Reclassifications

Certain 1998 amounts have been reclassified to conform to the 1999 presentation.

60
<PAGE>

3. Furniture, Fixtures and Equipment

Furniture, fixtures and equipment consist of the following:

December 31,
---------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Network software and equipment $ 18,693,426 $ 5,213,879
Furniture, fixtures and office equipment 2,081,599 303,742
Leasehold improvements 3,800,282 283,391
---------------- ---------------
24,575,307 5,801,012
Less accumulated depreciation and
amortization 6,376,297 697,889
---------------- ---------------
$ 18,199,010 $ 5,103,123
================ ===============
</TABLE>

Assets financed under capital leases were $3.9 million and $0 in 1999
and 1998, respectively. Depreciation expense, including amortization of
leasehold improvements, amounted to $6.1 million, $0.7 million and $1,850 for
the years ended 1999, 1998 and 1997, respectively.

4. Intangible Assets

The Company has allocated the purchase price of acquired companies to
identifiable tangible assets and liabilities and intangible assets based on the
nature and the terms of the various purchase agreements and evaluation of the
acquired businesses. Covenants not to compete are amortized over periods not to
exceed the term of the respective agreement. Values are assigned to covenants
not to compete in accordance with Accounting Principles Board Opinion No. 16
(APB 16), using the Company's estimate of fair value of the covenant. Amounts
not allocated to tangible assets and liabilities and identifiable intangible
assets have been recorded as goodwill.

Intangible assets consist of the following:

December 31,
-------------------------------------- Amortization
1999 1998 Period
------------------ ----------------- ---------------
<S> <C> <C> <C>
Covenants not to compete $ 19,275,302 $ 3,759,202 1-5 Years
Customer lists 22,605,369 3,295,369 3 Years
Assembled work force 6,877,031 1,127,031 3 Years
Trade names 6,773,983 573,982 3 Years
Goodwill 62,610,535 6,296,070 5 Years
------------------ -----------------
118,142,220 15,051,654
Less accumulated amortization 24,506,019 2,439,426
------------------ -----------------
$ 93,636,201 $12,612,228
================== =================
</TABLE>

Amortization expense amounted to $22.1 million and $2.4 million in 1999
and 1998, respectively.

5. Acquisitions

During 1999 and 1998, the Company acquired 21 businesses at an
aggregate cost of $118.6 million, excluding assumed liabilities. Each of the
acquisitions have been accounted for using the purchase method of accounting.
The operations of each of the acquired companies are included in the operating
results of the Company from their respective dates of acquisition.

The following is a summary of acquisitions:

61
<PAGE>

1999 Acquisitions
-----------------

In February 1999, the Company purchased the assets of Digiweb, Inc., a
Web hosting company. The purchase price consisted of cash of $5.0 million and
450,000 shares of the Company's common stock (Common Stock) valued at $6.67. The
agreement provides for contingent purchase consideration of $1.0 million, which
has been accrued and recorded as additional purchase price (goodwill) as of
December 31, 1999, due to the attainment of specified revenue and earnings
targets.

In February 1999, the Company purchased certain assets of Telephonetics
International, Inc., a provider of customized music and messages on hold
recording services to businesses utilizing on-hold telephone equipment. The
purchase price consisted of cash of $3.0 million and 140,000 shares of Common
Stock valued at $6.67 per share.

In February 1999, the Company purchased all of the outstanding stock of
Net Daemons Associates, Inc. (NDA), a provider of Web development and
Internetworking services. The purchase price consisted of cash of $0.5 million
and 425,000 shares of Common Stock valued at $6.67 per share. In addition, the
Company paid certain officers of NDA $2.4 million to induce them to enter into
non-compete agreements and paid approximately $0.4 million to cancel certain NDA
stock options. The agreement also provides for contingent purchase consideration
of $0.5 million in cash and 74,963 shares of Common Stock if specified gross
revenue and gross margin targets are achieved in the twelve-month period
following the acquisition. As of December 31, 1999, the Company paid $0.3
million in cash and issued 37,481 shares of Common Stock, valued at $10.91 per
share, in connection with the attainment of specified targets. The payment of
contingent consideration has been recorded as additional purchase price. The
shares of stock and cash to be paid for the remaining contingent purchase
consideration have been deposited with an escrow agent.

In March 1999, the Company purchased substantially all of the assets
and assumed specified liabilities of Interliant, Inc., a Texas corporation,
(hereinafter "Interliant Texas"), a provider of groupware hosting and
application outsourcing services. The purchase price consisted of $0.1 million
in cash and 4,091,642 shares of Common Stock valued at $6.67 per share, and
options to purchase up to 1,523,461 shares of Common Stock at $0.13 per share.
The difference between the fair value of the vested options at the date of grant
($6.67 per share) and the exercise price has been included in the purchase price
allocation. In addition, at closing the Company paid $7.9 million on an
outstanding note payable of Interliant Texas, and assumed a note payable in the
amount of $8.0 million, which was paid in full in July 1999 from a portion of
the proceeds from the Company's initial public offering of Common Stock (IPO)
(See Note 9).

In May 1999, the Company purchased certain assets and assumed specified
liabilities of Advanced Web Creations, Inc., a Web hosting company. The purchase
price consisted of cash of approximately $0.3 million, 225,000 shares of Common
Stock valued at $8.50 per share, and a promissory note in the amount of $2.4
million, which was paid in full in July 1999 from a portion of the proceeds from
the Company's IPO (See Note 9). The agreement also provides for contingent
purchase consideration of $0.4 million, which has been accrued and recorded as
additional purchase price (goodwill) as of December 31, 1999, due to the
attainment of specified revenue targets.

In August 1999, the Company purchased substantially all of the assets
of The Daily-e Corporation, a provider of business process re-engineering and
Web development services. The purchase price consisted of 70,000 shares of the
Common Stock, valued at $11.13 per share. The agreement also provides for
contingent purchase consideration of up to $3.9 million, payable in cash,

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<PAGE>

Common Stock, or any combination thereof at the Company's option, if specified
net revenue and earnings targets are achieved for the twelve-month period ending
July 31, 2000. The payment of contingent consideration, if any, will be recorded
as additional purchase price. In 1999, contingent consideration of $0.4 million
was earned and paid in the form of Common Stock (38,952 shares).

In September 1999, the Company, through its wholly-owned subsidiary,
Interliant International, Inc., a Delaware corporation, acquired all of the
outstanding stock of Sales Technology Limited, a United Kingdom-based
professional services firm that provides Customer Relationship Management (CRM)
implementation solutions and groupware application services. The total
consideration consisted of cash of $0.4 million, 235,410 shares of Common Stock
valued at $11.23 per share, and assumed debt of $0.3 million. In addition,
contingent consideration of up to $3.6 million is payable in Common Stock, the
issuance of unsecured notes, or any combination thereof at the Company's option,
to certain sellers if specified revenue and earnings targets are achieved during
specified periods. The payment of contingent consideration, if any, will be
recorded as additional purchase price.

In November, 1999, the Company purchased all of the outstanding stock
of Triumph Technologies, Inc. and Triumph Development, Inc., an affiliated
company (collectively, "Triumph"), a provider of comprehensive Internet
professional services and e-business security solutions. The purchase price
consisted of cash of $3.2 million, 650,995 shares of Common Stock valued at
$15.94 per share, assumption of $2.0 million of bank debt which was paid shortly
after closing, and options to purchase 90,824 shares of Common Stock at $1.63
per share. The difference between the fair value of the options at the date of
grant ($15.94 per share) and the exercise price has been included in the
purchase price allocation. The agreement also provides for contingent
consideration of up to $3.0 million in cash or shares of Common Stock, or any
combination thereof, if certain revenues and earnings targets are met for the
twelve month period from December 1, 1999 to November 30, 2000. The payment of
contingent consideration, if any, will be recorded as additional purchase price.

In December, 1999, the Company purchased all of the outstanding stock
of The Jacobson Group, Inc., an Internet professional services firm specializing
in custom application development primarily using the Lotus Notes/Domino
platform. The purchase price consisted of cash of $4.1 million and 159,832
shares of Common Stock valued at $24.50 per share. The agreement also provides
for contingent consideration up to $4.8 million if certain revenue and earnings
targets are met in the years ending December 31, 2000 and 2001. The payment of
contingent consideration, if any, will be recorded as additional purchase price.

1998 Acquisitions
-----------------

In February 1998, the Company purchased certain Web hosting assets of
Omnetrix, Inc., dba DirectNet, a Web hosting provider, for cash of approximately
$0.1 million.

In April 1998, the Company purchased the operating assets of Clever
Computers, Inc., a Web hosting company, for cash of approximately $2.5 million.
Pursuant to a three-year employment agreement, a shareholder of Clever received
150,000 shares of the Company's Common Stock, valued at $3.32 per share, which
vests and is being accounted for as compensation expense over the term of the
employment agreement.

In April 1998, the Company purchased certain Web hosting assets from
KnowledgeLink Interactive, Inc. for cash of approximately $0.6 million.

In May 1998, the Company purchased the operating assets of Tri Star Web

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<PAGE>

Creations, Inc., a Web hosting company, for cash of approximately $1.0 million
and 9,000 shares of Common Stock valued at $4.07 per share.

In June 1998, the Company purchased certain Web hosting assets of
HostAmerica, the Web hosting division of HomeCom Communications, Inc., for cash
of approximately $4.3 million.

In June 1998, the Company purchased the operating assets of All
Information Systems, Inc., a Web hosting company, for cash of approximately $0.2
million and 115,707 shares of Common Stock valued at $5.00 per share.

In July 1998, the Company purchased certain Web hosting assets of
Software Business Technologies, Inc. for 12,000 shares of Common Stock valued at
$5.00 per share.

In July 1998, the Company purchased certain Web hosting assets of
DevCom, the Web hosting division of Nextron, Inc., for cash of approximately
$0.6 million.

In July 1998, the Company purchased certain Web hosting assets of
BestWare, Inc., dba Maikon, for cash of approximately $0.4 million and 5,490
shares of Common Stock valued at $5.38 per share.

In August 1998, the Company purchased all of the outstanding stock of
B.N. Technology, Inc., dba ICOM, a Web hosting company, for cash of
approximately $2.0 million. The purchase agreement also provides for additional
payments of cash of up to $2.0 million to the shareholders of ICOM if certain
earnings targets are achieved. As of December 31, 1999, all of the earnings
targets had been achieved and $2.0 million has been paid. Pursuant to one-year
employment agreements, two shareholders of ICOM received a total of 300,000
shares of Common Stock valued at $6.47 per share, which are vested as of
December 31, 1999 and have been accounted for as compensation expense over the
terms of the agreements.

In Sepember 1998, the Company purchased certain Web hosting assets of
GEN International, Inc. (GEN) for cash of $0.5 million and substantially all the
assets of Global Entrepreneurs Network, Inc. (a wholly-owned subsidiary of GEN)
for $0.3 million. Pursuant to a consulting agreement with a shareholder of GEN,
the Company issued 25,000 shares of Common Stock valued at $6.66 per share,
which is fully vested as of December 31, 1999 and has been accounted for as
compensation expense over the term of the consulting agreement.

In December 1998, the Company purchased certain Web hosting assets of
Dialtone, Inc. a Web hosting company for cash of $0.4 million.

The allocation of purchase price for the acquisitions completed in 1999
as reflected in the December 31, 1999 consolidated balance sheet is preliminary
based on the Company's initial assessment of the fair value of assets acquired.
The allocations may be modified between components of intangible assets as the
Company finalizes the purchase accounting for such acquisitions.

The following unaudited condensed pro forma information presents the
unaudited results of operations of the Company as if the acquisitions completed
through December 31, 1999 had occurred on January 1, 1998:

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<PAGE>

Year Ended December 31,
-------------------------------------
1999 1998
------------------ -----------------
<S> <C> <C>
Revenues $ 80,074,000 $69,927,000
Net loss (65,630,000) (46,858,000)
Net loss per share - basic and diluted $ (1.74) $ (2.73)

</TABLE>

6. Accrued Expenses

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
December 31,
--------------------------------------
1999 1998
------------------ -----------------
<S> <C> <C>
Compensation and related costs $ 2,109,398 $ 226,641
Communications costs 376,343 121,000
Marketing and advertising 758,101
Amounts due to former owners under contingent
consideration arrangements (see Note 5) 1,400,000 1,000,000
Other 2,698,709 953,866
------------------ -----------------
$ 7,342,551 $ 2,301,507
================== =================
</TABLE>

7. Long-Term Debt and Capital Lease Obligations

At December 31, 1999 long-term debt consisted of the following:

<S> <C>
Obligations related to the sale/leaseback of data center
equipment, approximate interest rate of 15%, payable in monthly
installments over 36 months $ 2,350,102
Notes payable to former owners of acquired
companies 1,031,684
Capital lease obligations and other debt 333,260
------------------
3,715,046
Less amounts included in current liabilities 1,211,835
------------------
$ 2,503,211
==================
</TABLE>

Maturities of long-term debt are as follows:

2000 $ 1,211,835
2001 1,268,707
2002 976,499
2003 196,778
2004 61,227
------------------
$ 3,715,046
==================

8. Series A Redeemable Convertible Preferred Stock

In January 1999, the Company's Board of Directors and stockholders

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<PAGE>

approved an amendment to the Company's certificate of incorporation (Charter) to
authorize the issuance and sale of 2,647,658 shares of Preferred Stock, par
value $0.01 per share, all of which was designated as Series A Redeemable
Convertible Preferred Stock (Series A Preferred). In January 1999, pursuant to a
Securities Purchase Agreement (the Purchase Agreement), the Company sold to
SOFTBANK Technology Ventures IV L.P. and one of its affiliates (the SOFTBANK
Investors), 2,647,658 shares of its Series A Preferred at a price of $4.91 per
Series A Preferred share and issued warrants to purchase 749,625 shares of
Common Stock at $6.67 per share, for cash of $13.0 million. The warrants were
exercised in April 1999 for total proceeds of $5.0 million.

9. Stockholders' Equity

Preferred Stock

In May 1999, the Company's stockholders approved an amendment to the
Company's Charter to authorize the issuance of 1,000,000 shares of undesignated
preferred stock with a par value of $0.01 per share.

Common Stock

In May 1999, the Company's stockholders approved an amendment to the
Company's Charter to increase the number of authorized shares of Common Stock to
200,000,000.

Pursuant to a Stock Subscription Agreement dated December 8, 1997
between the Company and WEB, WEB purchased 6,600,000 shares of Common Stock
during 1999, and 18,600,000 shares during the period December 8, 1997
(inception) to December 31, 1998, all at $1.67 per share.

In July 1999, the Company sold 8,050,000 shares of Common Stock,
including shares sold through the exercise of the underwriters' over-allotment
option, in an underwritten IPO for net proceeds of approximately $72.5 million,
after deducting underwriters' discounts and commissions and offering costs paid
directly by the Company. Upon the consummation of the IPO, all of the 2,647,658
outstanding shares of Series A Preferred were converted into an equal number of
share of Common Stock (See Note 8).

During 1999, 6,561,795 shares of Common Stock were issued in connection
with acquistions (See Note 5).

Stock Option Plan

In February 1998, the Company adopted its 1998 Stock Option Plan (the
Plan), which is administered by the Board of Directors (the Committee). Under
the terms of the Plan, the Committee may grant stock options to officers,
employees and consultants of the Company. The Plan permits the grant of
incentive stock options (ISOs) and nonqualified stock options (NSOs). In
December 1999, the Board of Directors amended the Plan to include directors of
the Company among the class of persons eligible to receive grants. As of
December 31, 1999, the Company has reserved 3.8 million shares of Common Stock
for issuance under the Plan. The Plan provides that stock options may not be
granted at less than fair market value of the Common Stock on the date of the
grant and may not expire more than ten years from the date of the grant. Options
granted under the Plan generally will become exercisable over a four-year period
in equal annual installments unless the Committee specifies a different vesting
schedule. In the event of a change in control of the Company, each option
becomes immediately vested and exercisable, provided that no

66
<PAGE>

written provision has been made, in connection with any such event, for (1) the
continuation of the stock option plan and/or the assumption of all outstanding
options by a successor corporation or (2) the substitution for such options of
new options covering the stock of a successor corporation. The Plan has a term
of ten years, subject to earlier termination or amendment by the Committee, and
all options under the Plan prior to its termination remain outstanding until
they have been exercised or terminated.

The following table sets forth the Plan activity for the years ended
December 31, 1999 and 1998:

<TABLE>
<CAPTION>
1999 1998
---------------------------- ---------------------------
Number of Price Number of Price
Shares Range Shares Range
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Options outstanding, beginning of year 440,500 $1.67 - $6.67
Options granted 2,998,815 $0.13 - $29.50 440,500 $1.67 - $6.67
Options exercised (768,867) $0.13 - $6.67
Options terminated (135,850) $1.67 - $14.00
------------- ------------
Options outstanding, end of year 2,534,598 $0.13 - $29.50 440,500 $1.67 - $6.67
============= ============

</TABLE>

The weighted average exercise price of options granted was $5.61 and
$4.11 in 1999 and 1998, respectively. In connection with certain acquisitions,
the Company granted options to purchase 1,523,461 shares of Common Stock at
$0.13 per share in substitution for Interliant Texas vested options, and options
to purchase 90,824 shares of Common Stock at prices ranging from $1.63 to $3.79
per share in substitution for Triumph vested options. At December 31, 1999 and
1998, 1,030,385 and 0 options, respectively were vested.

Stock-Based Compensation

As discussed in Note 2, the Company applies APB 25 and related
interpretations in accounting for its stock option plan. During 1999, options to
purchase 40,250 shares of Common Stock were given accelerated vesting in
connection with termination arrangements, and as a result, the Company charged
approximately $0.3 million to compensation expense. During 1998, no compensation
expense was recognized relating to option grants in 1998.

As required under FAS 123, the following pro forma net loss and net
loss per share presentations reflect the amortization of the option grant fair
value as expense. For purposes of this disclosure, the estimated fair value of
the options is amortized to expense over the options' vesting periods. The
Company's pro forma information follows for the years ended December 31, 1999
and 1998:

Year Ended December 31,
-----------------------------------
1999 1998
----------------- ---------------
<S> <C> <C>
Pro forma net loss $(54,574,000) $ (9,756,000)
Pro forma net loss per share - basic and diluted $ (1.52) $ (1.11)
</TABLE>

The weighted average grant date value was $10.90 and $0.83 for stock
options issued in 1999 and 1998, respectively, and the weighted-average
remaining contractual life for options outstanding as of December 31, 1999 is
9.2 years. Significant assumptions used in determining this value include a risk
free interest rate of 6.0%, expected life of the options of four years, and a
dividend rate of zero.

The effects on pro forma disclosures of applying SFAS 123 are not
likely

67
<PAGE>

to be representative of the effects on pro forma disclosures in future years as
the period presented includes only two years of option grants under the Plan.

10. Income Taxes

As of December 31, 1999, the Company has federal and state net
operating loss carryforwards of approximately $40.8 million. The net operating
loss carryforwards will expire at various dates beginning in the years 2003
through 2019 if not utilized.

Significant components of the Company's deferred tax assets and
liabilities for federal and state income taxes consist of the following at
December 31, 1999:

<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
------------------ ---------------
Deferred tax assets:
<S> <C> <C>
Net operating loss carryforwards $ 16,270,000 $ 3,063,000
Depreciation 49,000 (14,000)
Other, net (principally related to
amortization of intangible assets) 8,000,000 813,000
------------------ ---------------
Total deferred tax assets, net 24,319,000 3,862,000
Valuation allowance (24,319,000) (3,862,000)
------------------ ---------------
Net deferred tax asset $ - $ -
================== ===============

</TABLE>

The Company believes that, based on a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realization of
the deferred tax assets such that a full valuation allowance has been recorded.
The Company will continue to assess the realization of the deferred tax assets
based on actual and forecasted operating results. The valuation allowance
increased by $20.5 million from 1998 to 1999.

11. Leases

The Company leases its data centers and certain office space under
noncancelable operating leases, which expire at various dates through April
2010. Some of the leases contain renewal options. Total rent expense for all
operating leases was approximately $3.4 million, $0.4 million and $7,000 for the
years ended December 31, 1999, 1998 and 1997, respectively. In connection with
certain of the leases, the Company has given the landlords standby letters of
credit in the amount of approximately $0.8 million in lieu of security deposits.

Future minimum lease commitments for noncancelable operating leases are
as follows at December 31, 1999:

2000 $ 3,932,000
2001 3,768,000
2002 3,275,000
2003 2,883,000
2004 2,731,000
Thereafter 8,242,000
------------------
$ 24,831,000
==================

12. Related-Party Transactions

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<PAGE>

In connection with the acquisitions of certain Web hosting assets of
various entities (see Note 5), the Company paid transaction fees of
approximately $361,000 and $337,000 for the years ended December 31, 1999 and
1998, respectively, to Charterhouse Group International, Inc., a related party
of WEB. These fees are included in the respective purchase price allocations as
capitalized transaction costs.

The Company received consulting services from Sage Equities, Inc. and
Intensity Ventures, Inc., whose principals are the co-chairmen of the Company
and members of WHO, for the purpose of identifying and executing potential
acquisitions as well as providing strategic management oversight. In 1999, the
principal of Sage Equities, Inc. was compensated as an employee of the Company.
For the year ended December 31, 1998, and for the period December 8, 1997
(inception) to December 31, 1997, the Company incurred costs of $120,000, and
$25,000, respectively, for Sage Equities, Inc. For the years ended December 31,
1999 and 1998, and for the period December 8, 1997 (inception) to December 31,
1997, the Company incurred costs of $338,000 (of which $141,000 were expenses),
$232,000 (of which $112,000 were expenses), and $17,000, respectively, for
Intensity Ventures.

13. Employee Benefit Plan

In 1998, the Company instituted a 401k Plan for all employees who have
attained age 19 and have been employed by the Company or by an acquired business
for one month. Participating employees may make contributions to the plan up to
15% of their eligible compensation contributed to the 401k Plan. The Plan
provides that the Company may make discretionary contributions to the Plan on
behalf of participating employees. In 1999 the Company initiated a matching
contribution policy wherein it agreed to match the employee's contributions 100%
up to 5% of the participating employee's compensation. The total amount
contributed by the Company during 1999 was $0.6 million, which was charged to
expense.

14. Segment Reporting

Pursuant to FAS 131, the Company has determined that it currently has
three reportable segments: Web hosting, application hosting, and Internet
Professional Services. For the year ended December 31, 1998, the Company
operated only in the Web hosting segment. The results of operations for the year
ended December 31, 1999 for each of the segments is shown below.

<TABLE>
<CAPTION>
Internet
Web Application Professional
Hosting Hosting Services Other Total
------- ------- -------- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues $ 16,892,000 $ 15,639,000 $ 11,493,000 $ 3,090,095 $ 47,114,095
Operating income (loss) (17,302,000) (6,173,000) 755,000 (32,098,443) (54,818,443)

Segment assets $ 7,716,000 $ 11,223,000 $ 11,704,000 $ 132,232,068 $ 162,875,068
</TABLE>

The Company's management generally reviews the results of operations of
each segment exclusive of depreciation and amortization (aggregating $28.1
million) and interest related to each segment. Accordingly, such expenses are
excluded from the segment operating loss and are shown under the Other caption.
In addition, all intangible assets and corporate expenses of the Company are
included in the Other caption.

The Company believes that the reportable segments may change in future
periods as management continues to broaden its outsourced e-business solutions.

69
<PAGE>

For the years ended December 31, 1999 and 1998, approximately 16% and
19%, respectively, of revenues were from sources outside the United States,
primarily from Europe, Latin America and Asia.

15. Subsequent Events

In January and February 2000, the Company sold 787,881 shares of Common
Stock in private placements for total proceeds of $27.5 million. In connection
with the sales, the Company issued warrants to purchase 157,575 shares of Common
Stock at an average exercise price of $34.90 per share which approximated the
market price at the date of issuance. The warrants expire December 31, 2000.

In January 2000, the Company entered into a four-year employment
agreement with a new Chief Executive Officer. In connection with this agreement,
the Company issued this employee options to purchase 1,500,000 shares of Common
Stock, at an average exercise price of $18.00 per share. Such options were not
issued pursuant to the Plan. The exercise price of the options were below the
fair value of the Common Stock as of the measurement date, and as a result, the
Company will recognize approximately $30.0 million as compensation expense over
the four-year vesting period of the options.

In February 2000, the Company sold $154.8 million of 7% Convertible
Subordinated Notes, including $4.8 million sold upon exercise of the
underwriters' over-allotment option. The notes are convertible at the option of
the holder, at any time on or prior to maturity into Common Stock at a
conversion price of $53.10 per share, which is equal to a conversion rate of
18.8324 shares per $1,000 principal amount of notes. Interest is payable
semi-annually, beginning August 2000. The notes mature on February 16, 2005.
Upon the occurrence of certain events the Company may redeem the notes prior to
maturity.

In February 2000, the Company and @viso Limited (@viso), a company
incorporated under the laws of England and Wales and owned 50% by Softbank
Holdings, Inc. and 50% by Vivendi S.A., agreed to form a corporation, Interliant
Europe B.V., to be owned 51% by the Company, and 49% by @viso. Through
Interliant Europe, the Company plans to launch Web hosting, application hosting
and related services in continental Europe. @viso has loaned the Company the
amount required to purchase its equity interest in Interliant Europe
(approximately $7.7 million). The Company has also agreed to license some of its
technology and intellectual property to and enter into a service agreement with
Interliant Europe.

The note underlying the @viso loan agreement bears interest at 8% per
annum, and is repayable in full at the earlier of a sale of Interliant Europe's
common stock in an initial public offering or February 2005. The Company intends
to consolidate the operations of Interliant Europe with the results of
operations of the Company with appropriate adjustments for the minority
interest's share of the income or loss of Interliant Europe.

In February 2000, the Company acquired all of the outstanding stock of
Soft Link, Inc., a provider of Enterprise Resource Planning (ERP) solutions
based on PeopleSoft software. The purchase price consisted of $18.2 million in
cash, subject to adjustment based on the net worth of Soft Link, Inc. as of the
closing date, and 254,879 shares of Common Stock valued at approximately $37.00
per share. The agreement provides for contingent consideration, not to exceed
$10.0 million, if specified revenues and earnings targets are met for the
calendar year 2000. The contingent consideration is payable 50% in cash, and the
remaining 50% in cash or Common Stock at the Company's option. The payment of
contingent consideration, if any, will be recorded as additional purchase price.

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<PAGE>

In February 2000, the Company purchased substantially all of the assets
and assumed certain liabilities of reSOURCE PARTNER, Inc., a provider of hosting
services for outsourced human resources and finance solutions primarily using
PeopleSoft software. The purchase price consisted of $2.5 million in cash,
subject to adjustment based on the determination of closing net equity, and the
issuance of 1,041,179 shares of Common Stock valued at approximately $37.00 per
share.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

Information with respect to directors is included in Interliant's Proxy
Statement to be filed pursuant to Regulation 14A (the "Proxy Statement") under
the caption "Election of Directors," and such information is incorporated herein
by reference. Set forth in Part I, Item I are the names and ages (as of March 2,
2000), the positions and offices held by, and a brief account of the business
experience during the past five years of each executive officer.

Each director holds office for a one-year term or until a successor has
been duly elected and qualifies, or until his or her earlier death, resignation
or removal.

ITEM 11. EXECUTIVE COMPENSATION

The section entitled "Executive Compensation" and the information set
forth under the caption "Election of Directors-Director Compensation" included
in the Proxy Statement are incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The common stock information is the section entitled "Principal
Shareholders" of the Proxy Statement is incorporated herein by reference.

ITEM 13. RELATED PARTY TRANSACTIONS

The section entitled "Related Party Transactions" of the Proxy
Statement is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

Item 14(a)

The following documents or the portions thereof indicated are filed as
a part of this Report in Item 8:

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<PAGE>

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Certified Public Accountants

Consolidated Balance Sheets as of December 31, 1999 and 1998

Consolidated Statements of Operation for the Year ended December 31,
1999 and 1998 and the period December 8, 1997 (inception) to December
31, 1997

Consolidated Statements of Stockholder's Equity for the years Ended
December 31, 1999 and 1998 and the period December 8, 1997 (inception)
to December 31, 1997

Consolidated Statements of Cash Flow for the Year ended December 31,
1999 and 19998 and the period December 8, 1999 (inception) to December
31, 1997

Notes to Consolidated Financial Statements

Schedule II Valuation and qualifying accounts

Item 14(b)Reports on Form 8-K

The Company filed a Current Report on Form 8-KA, dated November 22, 1999, which
contained the financial statements of the acquired company Sales Technology
Limited.

Item 14(c) EXHIBITS

The following is a list of exhibits filed as part of this Annual Report
on Form 10-K.

2.1 -- Asset Purchase Agreement among Sage Networks Acquisition Corp., Sage
Networks, Inc., Interliant, Inc. and the shareholders of Interliant, Inc., dated
March 8, 1999.*

2.2 -- Agreement to Deliver Shares between Interliant, Inc., Sage Networks
Acquisition Corp. and Sage Networks, Inc., dated as of March 10, 1999.*

2.3 Agreement and Plan of Merger by and among Net Daemons, Inc., the
Shareholders Party hereto and Sage Networks, Inc. and Sage NDA Acquisition
Corp., dated as of February 17, 1999.*

2.4 -- Asset Purchase Agreement between DigiWeb, Inc., a Delaware corporation,
Yi Wen Chung, Diane X. Chen and DigiWeb, Inc., a Maryland corporation, dated
February 4, 1999.*

2.5 -- Asset Purchase Agreement between Telephonetics International, Inc., Alan
Kvares and Telephonetics, Inc., dated February 4, 1999.*

2.6 -- Asset Purchase Agreement between Sage Networks Acquisition Corp., Thomas
Heimann and GEN International Inc., dated September 16, 1998.*

72
<PAGE>

2.7 -- Asset Purchase Agreement between Global Entrepreneurs Network, Inc. and
Sage Networks Acquisition Corp., dated as of September 16, 1998.*

2.8 -- Stock Purchase Agreement among B.N. Technology, Inc., Bernd Neumann,
Annedore Sommer and Sage Networks, Inc., dated August 31, 1998.*

2.9 -- Asset Purchase Agreement between Sage Networks, Inc. and HomeCom
Communications, Inc. dated June 10, 1998.*

2.10 -- Asset Purchase Agreement between Sage Networks Acquisition Corp., Bonnie
Shimel, William Nicholson and James Kucharski, Alan Shimel and Tri-Star Web
Creations, Inc., dated May 1, 1998.*

2.11 -- Asset Purchase Agreement between Sage Networks Acquisition Corp., Steven
C. Dabbs and Clever Computers, Inc., dated April 7, 1998.*

2.12 -- Share Purchase Agreement and certain related documents pertaining to the
acquisition of the entire issued share capital of Sales Technology Limited,
between Brett Raynes and others, and Interliant, Inc., and Interliant
International, Inc., dated September 14, 1999.**

2.13 -- Stock Purchase Agreement pertaining to the acquisition of all of the
outstanding shares of Soft Link Inc., between Gretchen Artig-Swomley and Dale
Swomley, and Interliant, Inc., and its wholly owned subsidiary Soft Link Holding
Corp., dated February 29, 2000.***

2.14 -- Asset Purchase Agreement dated February 29, 2000 pertaining to the
purchase of assets and assumption of certain liabilities of reSOURCE PARTNER,
Inc. by reSOURCE PARTNER Acquisition Corp., a wholly owned subsidiary of
Interliant, Inc.***

3.1 -- Form of Amended and Restated Certificate of Incorporation of the
Registrant.*

3.2 -- Form of Amended and Restated By-Laws of the Registrant.*

4.1 -- Specimen Certificate for common stock of the Registrant.*

4.2 -- Investors Agreement, dated as of January 28, 1999, by and among Sage
Networks, Inc., SOFTBANK Technology Ventures IV, L.P. and SOFTBANK Technology
Advisors Funds, L.P.*

4.3 -- Securities Purchase Agreement between Sage Networks, Inc. and SOFTBANK
Technology Ventures IV, L.P. and SOFTBANK Technology Advisors Funds, L.P. dated
January 28, 1999.*

4.4 -- Registration Rights Agreement, dated as of December 8, 1997, by and
between Sage Networks, Inc. and Web Hosting Organization LLC.*

4.5 -- Shareholders Agreement by and among Sage Networks, Inc. and each of the
Stockholders of Sage Networks, Inc., dated as of March 10, 1999.*

4.6 -- Letter Agreement, dated November 26, 1997, between Leonard J. Fassler,
Bradley A. Feld, Chef Nominees Limited and Charterhouse Equity Partners III L.P.
(Agreement has now been terminated.)*

10.1 -- Professional Services Agreement by and between Sage Networks, Inc. and
Portal Software, Inc., dated as of July 31, 1998.*

10.2 -- Software License and Support Agreement by and between Sage Networks,
Inc. and Portal Software, Inc., dated as of July 31, 1998.*

10.3 -- The Vantive Corporation Software License and Support Agreement by and
between Interliant Networks, Inc. and The Vantive Corporation, dated as of
September 29, 1998.*

10.4 -- Addendum to The Vantive Corporation Software License and Support
Agreement by and between Sage Networks, Inc. and The Vantive Corporation, dated
as of September 29, 1998.*

73
<PAGE>

10.5 -- Master Discounted Internet Services Agreement by and between UUNET
Technologies, Inc. and Sage Networks, Inc., dated February 17, 1999.*

10.6 -- Joint Development Agreement between Lotus Development Corporation and
Interliant, Inc., dated as of April 27, 1998.*

10.7 -- Sage Networks, Inc. 1998 Stock Option Plan.*

10.8 -- Form of ISO Award Agreement.*

10.9 -- Form of Incentive Stock Option Award Agreement between Sage Networks,
Inc. and the individual Optionee.*

10.10 -- Form of Nonqualified Stock Option Award Agreement between Sage
Networks, Inc. and the individual Optionee.*

10.11 -- Employment Agreement by and between Sage Networks, Inc. and Leonard J.
Fassler, dated January 1, 1999.*

10.12 -- Consulting Agreement by and between Sage Networks, Inc. and Intensity
Ventures, Inc., dated January 1, 1999.*

10.13 -- Employment Agreement by and between Sage Networks, Inc. and Stephen W.
Maggs, dated January 1, 1999.*

10.14 -- Employment Agreement by and between Sage Networks, Inc. and Rajat
Bhargava, dated January 1, 1999.*

10.15 -- Employment Agreement between Sage Networks, Inc. and James M. Lidestri,
dated March 3, 1999.*

10.16 -- Deed of Lease by and between Westwood Center, LLC and Sage Networks,
Inc., dated February 11, 1999.*

10.17 -- Sublease Agreement by and between Southern Company Services, Inc. and
Sage Networks, Inc., dated May 29, 1998.*

10.18 -- First Amendment to Sublease Agreement by and between Southern Company
Services, Inc. and Sage Networks, Inc., dated December 15, 1998.*

10.19 -- Sublease Agreement by and between Leuko Site, Inc. and Sage Networks,
Inc., dated November 17, 1998.*

10.20 -- Agreement for Terminal Facilities Collocation Space by and between
Comstor Corporation and Sage Networks, Inc., dated as of July 2, 1998.*

10.21 -- Standard Lease Agreement, dated June 11, 1995, between LaSalle Partners
Management Limited (as agent for Fannin Street Limited Partnership) and Wolf
Communications Company.*

10.22 -- First Amendment to Standard Lease, dated January 18, 1996, between
LaSalle Partners Management Limited (as agent for Fannin Street Limited
Partnership) and Wolf Communications Company.*

10.23 -- Second Amendment to Standard Lease, dated August 8, 1996, between
LaSalle Partners Management Limited (as agent for Fannin Street Limited
Partnership) and Wolf Communications Company.*

74
<PAGE>

10.24 -- First Amendment to Lease Agreement, between Westwood Center, L.L.C. and
Interliant, Inc., dated June 28, 1999.*

10.25 -- Master Lease Agreement between Leasing Technologies International, Inc.
and Interliant, Inc., dated June 9, 1999.*

10.26 -- Agreement of Lease between Purchase Corporate Park Associates and
Courtaulds United States Inc., dated August 23, 1991.*

10.27 -- Sublease, by and between Akzo Nobel Courtalds United States, Inc. and
Interliant, Inc., dated as of May 11, 1999.*

10.28 -- Agreement of Lease, between Purchase Corporate Park Associates, L.P.
and Interliant, Inc., dated as of June 16, 1999 (Interliant I).*

10.29 -- Agreement of Lease, between Purchase Corporate Park Associates, L.P.
and Interliant, Inc., dated as of June 16, 1999 (Interliant II).*

10.30 -- Agreement of Lease, between Purchase Corporate Park Associates, L.P.
and Interliant, Inc., dated as of June 16, 1999 (Interliant III).*

10.31 -- Employment Agreement by and between Sage Networks, Inc. and Jennifer A.
Lawton, dated February 17, 1999.+

10.32 -- Second Amendment to Sublease Agreement, dated as of October 31, 1999,
by and between Interliant, Inc. and Southern Company Services, Inc.+

10.33 -- Employment Agreement by and between Interliant, Inc. and William A.
Wilson, dated November 5, 1999.+

10.34 -- Employment Agreement by and between Interliant, Inc. and Kristian
Nelson, dated as of January 1, 2000.+

10.35 -- Employment Agreement by and between Interliant, Inc. and Herbert R.
Hribar, dated January 14, 2000.+

10.36 -- Second Amendment to Lease Agreement, dated as of February 3, 2000,
between Westwood Center L.L.C. and Interliant, Inc.+

10.37 -- Third Amendment to Sublease Agreement, dated as of February 10, 2000,
by and between EOP-Perimeter Center, L.L.C. and Interliant, Inc.+

21.1 -- List of Subsidiaries.+

23.1 -- Consent of Ernst & Young LLP with respect to the financial statements of
Interliant, Inc. (formerly known as Sage Networks, Inc.).+

27.1 -- Financial Data Schedule.+

---------------------
* Previously filed as an exhibit to the Company's Registration Statement on Form
S-1, Commission File No. 333-74403, and incorporated by reference herein.

** Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated September 14, 1999, and incorporated by reference herein.

*** Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated February 16, 2000, and incorporated by reference herein.

+ Filed herewith

75
<PAGE>

ITEM 15. SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

INTERLIANT, INC.

By: /s/ Herbert R. Hribar
-------------------------------
Name: Herbert R. Hribar
Title: Chief Executive Officer

Dated: March 23, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities indicated and
on the dates indicated:

Signature Title Date
--------- ----- ----
<S> /s/ Leonard J. Fassler <C>
-----------------------------------------
Leonard J. Fassler Co-Chairman of the Board March 23, 2000

/s/ Bradley A. Feld
-----------------------------------------
Bradley A. Feld Co-Chairman of the Board March 23, 2000

/s/ Herbert R. Hribar
-----------------------------------------
Herbert R. Hribar Chief Executive Officer, Director March 23, 2000
(Principal Executive Officer)

-----------------------------------------
James M. Lidestri President March 23, 2000

/s/ William A. Wilson
----------------------------------------
William A. Wilson Chief Financial Officer and Treasurer March 23, 2000
(Principal Financial and Accounting
Officer)
/s/ Thomas C. Dircks
-----------------------------------------
Thomas C. Dircks Director March 23, 2000

/s/ Jay M. Gates
-----------------------------------------
Jay M. Gates Director March 23, 2000

/s/ Merril M. Halpern
-----------------------------------------
Merril M. Halpern Director March 23, 2000

</TABLE>

76
<PAGE>

Signature Title Date
--------- ----- ----
<S> <C>
/s/ John P. Landry
-----------------------------------------
John P. Landry Director March 23, 2000

/s/ Charles R. Lax
-----------------------------------------
Charles R. Lax Director March 23, 2000

/s/ Stephen W. Maggs
-----------------------------------------
Stephen W. Maggs Director March 23, 2000

/s/ Patricia A.M. Riley
-----------------------------------------
Patricia A.M. Riley Director March 23, 2000

</TABLE>

77
<PAGE>

Interliant,Inc. and Consolidated Subsidiaries
Schedule II Valuation and Qualifying Accounts

Classification Balance at Additions Deductions Balance at
------------------------------------- ------------------ End of
Beginning of Charged to Charged to Period
Period Expense Other accounts
- -----------------------------------------------------------------------------------------------------------------------------------

Year ended December 31, 1999
<S> <C> <C> <C> <C> <C> <C>
Allowance for uncollectible accounts $ 320,000 $ 1,585,254 $ 507,078 1 $ 1,034,332 $1,378,000

Year ended December 31, 1998
Allowance for uncollectible accounts $ 320,000 $ 320,000

1-includes allowances of acquired companies
</TABLE>

<PAGE>

Exhibit 10.31

EMPLOYMENT AGREEMENT
--------------------

This Employment Agreement made as of this 17th day of February, 1999,
between SAGE NETWORKS, INC., having a place of business at 215 First Street,
Cambridge, MA 02142 (the "Employer"), and JENNIFER LAWTON, residing at 95
Newland Road, Arlington, MA 02474 (the "Employee").

WHEREAS, an Agreement and Plan of Merger (the "Merger Agreement")
dated of even date herewith was entered into among the Employer, Employee and
certain other parties;

WHEREAS, in connection with the transactions contemplated by the
Merger Agreement, the parties desire the Employee to serve in certain capacities
with the Employer.

NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties agree as follows:

1. Definitions.

Capitalized terms not otherwise defined herein shall have the meaning
ascribed to them in the Merger Agreement. As used herein, the following terms
have the following meanings:

"Agreement" shall mean this Agreement and any amendments hereto.
---------

"Agreement Term" shall have the meaning ascribed to it in Section
--------------
2(a).

"Base Salary" shall mean the Employee's annual salary as determined
-----------
pursuant to Section 5(a) hereof.

"Board" shall mean the Board of Directors of the Employer.
-----

"Cause" shall have the meaning ascribed to it in Section 9.
-----

"Employment Year" shall mean each consecutive 12-month period during
---------------
the Agreement Term, the first of which shall commence on the date
hereof.

"Intellectual Property" shall have the meaning ascribed to it in
---------------------
Section 4(d).

"Restricted Period" shall have the meaning ascribed to it in Section
-----------------
4(a).
<PAGE>

2. Agreement Term.

(a) The Employer will employ the Employee and the Employee will work
for the Employer for a term of three (3) years commencing on the date hereof,
unless sooner terminated as provided in Section 2(b) or in accordance with
Section 9, or in the event of death or disability of the Employee as provided in
Section 2(c) (the "Agreement Term").

(b) This Agreement may be terminated by the Employer for Cause or by
the Employee for Cause (in each case, as defined in Section 9) prior to the end
of the Agreement Term on such date as shall be specified in a notice given by
the Employer to the Employee or the Employee to the Employer, as appropriate.

(c) In the event of the death or disability of the Employee during the
Agreement Term, this Agreement shall terminate as of the date of such death or
as of the date of determination that such disability has occurred and the
Employee's estate or the Employee, as the case may be, shall be entitled to
receive (i) any and all accrued and unpaid portions of the Base Salary to the
date of death or disability, (ii) all of the benefits to which the Employee
would be entitled pursuant to Sections 7 and 8 hereof to the date of death or
disability, and (iii) in the case of the death of the Employee, such other
payments and benefits as shall be provided to the estates and beneficiaries of
deceased Employees under the then existing policies of the Employer. As used
herein, a "disability" shall have occurred if the Employee is entitled to
payments with respect to such disability under the Employer's long-term
disability insurance as then in effect, or if no such coverage is in effect, if
as a result of physical or mental incapacity, the Employee shall have been
incapable of performing the Employee's duties hereunder for a period in excess
of 26 consecutive calendar weeks or an aggregate of 30 weeks in any 12 month
period, in any such case, as determined by the Board (or a committee or officer
of the Employer designated by the Board) in its sole discretion. If the Employee
disagrees with such determination, the Board (or such designated committee or
officer) and the Employee shall select a mutually satisfactory physician to
resolve the disagreement and the resolution of such physician shall be binding
on both the Employer and the Employee.

3. Duties.

The Employee shall exercise such powers and perform such duties and
services for the Employer as the Employer may, from time to time, reasonably
require, devote her entire time, energy and attention to the business of the
Employer and shall not engage in any other business activity; provided, however,
that the Employee may pursue other business activities consisting primarily of
service on advisory boards of other developing companies so long as the time
spent on such activities does not exceed an average of 24 hours per month. The
Employee shall be based in Massachusetts but will be required to travel to the
extent required for the proper performance of the Employee's duties. The
Employee shall be the Senior Vice President Technology of the Employer and shall
report to the chief executive officer of the Employer.

2
<PAGE>

4. Non-Competition; Nonsolicitation; Confidentiality; Intellectual Property
Matters.

(a) Except as otherwise provided in Section 9(b), during the Agreement
Term and for a period of two (2) years following the later of (x) the third
anniversary of this Agreement or (y) the date of termination of this Agreement
("Restricted Period"), the Employee will not engage in any capacity in a
business substantially similar to or in competition with the business of the
Employer that is located or does business in any state in the United States
except as an officer, director, shareholder or employee of the Employer or any
affiliate thereof.

(b) During the Restricted Period, the Employee will not, unless acting
with the express written consent of Employer, directly or indirectly, solicit or
interfere with, or endeavor to entice away:

(i) any person who has rendered services as a subcontractor,
consultant or employee or otherwise for the Employer or any of
its affiliates with respect to the business of the Employer or
any of its affiliates during the 12 month period immediately
preceding the date of termination or expiration of this
Agreement; or

(ii) with respect to any business substantially similar to the
business in which the Employer or any of its affiliates is or has
been engaged after the date of this Agreement, any person or
entity who was a customer or client of the Employer or any of its
affiliates at any point during the 12 months preceding the
termination or expiration of this Agreement or any person or
entity who requested or received a proposal from the Employer or
any of its affiliates within the 12 months preceding the
termination or expiration of this Agreement.

(c) During the Agreement Term and at all times thereafter the Employee
agrees to hold in confidence all matters and things related to the business of
the Employer and each of its direct and indirect subsidiaries or affiliates of a
confidential or secret nature (including, without limitation, all private or
proprietary information) which the Employee may acquire, learn, develop or
create during the Agreement Term and will not, without the written consent of
Employer, except in the performance of the Employee's duties as an employee of
the Employer, use, publish or disclose any such matter or thing except to the
extent that (i) such information is otherwise publicly available, (ii)
disclosure is required by applicable law or court order or (iii) such
information is otherwise lawfully acquired by the Employee.

(d) The Employee hereby assigns, and agrees to assign, to the Employer
all of the Employee's right, title and interest in and to all inventions,
discoveries, improvements, ideas, computer or other apparatus programs and
related documentation, and other works of authorship, whether or not patentable,
copyrightable or subject to other forms of protection, that are made, created,
developed, written or conceived by the Employee during the Agreement Term (and
any written or oral extension thereof), whether during or outside of regular
work hours, either solely or jointly with another, in whole or in part, either:
(i) in the course of the Employee's

3
<PAGE>

employment by the Employer or its affiliates, (ii) relating to the actual or
anticipated business or research or development of the Employer or (iii) with
the use of the Employer's time, material, private or proprietary information, or
facilities (herein each designated "Intellectual Property"). The Employee agrees
to execute (without charge to the Employer) a specific assignment of title to
Employer and, at the request and cost of the Employer, to do anything else
reasonably necessary to enable the Employer to secure a patent, copyright or
other form of protection for said Intellectual Property anywhere in the world.
The Employee acknowledges and agrees that the copyrights in Intellectual
Property created within the scope of the Employee's employment belong to the
Employer by operation of law.

(e) The Employee agrees to execute upon request by the Employer from
time to time during the Agreement Term, any nondisclosure, intellectual property
or confidentiality agreements which the Employer may require its employees
generally to execute, consistent with, but not more extensive than, the
foregoing.

(f) In consideration of the covenants and agreements of the Employee
contained in this Section 4, the Employer shall pay by wire transfer to the
Employee upon the execution and delivery of this Agreement by the parties hereto
the sum of $1,279,135 (the "Non-Compete Payment"). If the Employer has received
indemnity payments from the Employee in accordance with Section 5.01 of the
Merger Agreement (the "Indemnity Payments"), the aggregate amount of damages
payable to the Employer in connection with any breach by the Employee of this
Section 4 together with the Indemnity Payments shall not exceed the limitation
on the Employee's obligations under Section 5.01(f) of the Merger Agreement (the
"Limit").

5. Compensation.

(a) As compensation for the Employee's services to be rendered to the
Employer and in consideration for the covenants and agreements of the Employee
contained herein, the Employer shall pay to the Employee an annual Base Salary
of $150,000.

(b) The Base Salary shall be payable in substantially equal
installments and in substantially the same manner that salaries are paid by the
Employer to other employees in comparable positions with the Employer. The Board
(or a committee or officer of the Employer designated by the Board) shall make
an annual review of the Base Salary and may, but shall not be obligated to, in
its sole discretion, make increases thereto.

(c) The Employer shall pay to the Employee a signing bonus (the
"Signing Bonus"). The Signing Bonus shall be equal to $150,000 and shall be
payable in three installments. The first installment shall be equal to $52,000
and shall be payable upon execution and delivery of this Agreement by the
parties hereto. The second installment shall be equal to $75,000 and shall be
payable on the first anniversary of the date of this Agreement. The third
installment shall be equal to $52,000 and shall be payable on the third
anniversary of the date of this Agreement. An installment shall be forfeited if
this Agreement has been terminated on or before the date that such installment
is payable.

6. Vacation; Service Credit.

4
<PAGE>

The Employee shall be entitled to vacation periods annually during the
Employee's employment under this Agreement consistent with the Employer's
vacation policy for employees generally. The Employer shall give the Employee
service credit for all service with Net Daemons Associates, Inc. prior to the
date hereof, for vacation and all other employee benefits provided by the
Employer to the extent permitted by the Employer's employee benefit plans.

7. Reimbursement for Expenses.

The Employer shall reimburse the Employee for all reasonable and
necessary expenses and other disbursements actually incurred by the Employee for
and on behalf of the Employer in the performance of the Employee's duties upon
submission of adequate documentation of such expenses.

8. Benefits; Bonus; Incentive Compensation.

The Employee shall be entitled to participate in any health, medical
and dental, insurance or similar plan or program of the Employer established or
in effect for the benefit of its employees generally (collectively, "Insurance
Benefits"). The Employee shall be eligible to participate in the Employer's
bonus and incentive compensation programs, if any, at a level that is comparable
with the level of participation by other employees generally of the Employer in
comparable positions. All bonus and incentive compensation provided by the
Employer shall be at the Employer's sole discretion.

9. Termination By Employer for Cause.

(a) Termination of this Agreement for "Cause" by the Employer shall
mean termination due to the occurrence of any of the following events:

(i) if the Employee is convicted of any crime (whether or not
involving the Employer) which constitutes a felony or involves
moral turpitude, fraud or misrepresentation;

(ii) if the Employee exhibits dishonest conduct in connection
with the Employee's employment, which is fraud, theft or
misappropriation or embezzlement of Employer's funds, which
termination shall be effective on the tenth (10th) day after
written notice from Employer is delivered to the Employee;

(iii) if the Employee shall have breached any of the Employee's
material obligations under this Agreement or the Merger
Agreement, including, without limitation, the Employee's
agreement not to compete as provided in Section 4 of this
Agreement or in the Merger Agreement (other than an inadvertent
breach as to which the Employee shall have discontinued the
activity causing the breach within two (2) days following
delivery of notice thereof to the Employee); or

5
<PAGE>

(iv) if the Employee has habitually failed to follow the
reasonable directives of the Employer for the performance of the
Employee's duties or responsibilities hereunder, including,
without limitation, the Employee's duties and responsibilities
under Section 3 hereof, after due notice to the Employee, and a
reasonable opportunity to be heard by the Chairman or Co-
Chairman of the Employer within one month after the giving of
such notice and to correct such failure.

(b) Termination of this Agreement for "Cause" by the Employee shall
mean termination due to the breach by the Employer of the Employer's material
obligations under this Agreement or the Merger Agreement (other than an
inadvertent breach as to which the Employer shall have discontinued the activity
causing the breach within two (2) days following delivery of notice thereof to
the Employer).

10. Certain Remedies.

(a) If the Employer terminates this Agreement for Cause as defined in
Section 9(a) above, all of the Employee's rights under this Agreement shall
thereupon terminate and Employee shall be entitled only to all accrued and
unpaid portions of the Base Salary and Signing Bonus through the date of such
termination, and to all vested benefits under any employee benefit plans
maintained by the Employer, whether funded or unfunded, accrued through the date
of such termination. Notwithstanding the foregoing, such termination shall be
without prejudice to any right the Employee may have to continue to participate,
on a post-employment basis, in any retirement plan of the Employer now existing
or established hereafter for the benefit of its employees in general or any
health plan of the Employer, to the extent the Employee is eligible under the
general provisions thereof or as required by applicable law, including, without
limitation, COBRA.

(b) If the Employee terminates this Agreement for Cause as defined in
Section 9(b) above and the breach by the Employer resulting in such termination
relates to a failure by the Employer to make payments to the Employee under this
Agreement or the Merger Agreement, all of the Employee obligations under Section
4 of this Agreement shall terminate. Notwithstanding the foregoing, such
termination shall be without prejudice to any right the Employee may have to
continue to participate, on a post-employment basis, in any retirement plan of
the Employer now existing or established hereafter for the benefit of its
employees in general or any health plan of the Employer, to the extent the
Employee is eligible under the general provisions thereof or as required by
applicable law, including, without limitation, COBRA.

11. Notice.

Any notice required or permitted to be given hereunder shall be in
writing and shall be deemed to have been duly given if delivered or mailed by
registered mail, postage prepaid: if to the Employee at the Employee's address
set forth on the first page hereof, or at such other address as the Employee
shall designate by notice to the Employer, and if to the Employer at 215 First
Street, Cambridge, MA 02142, with a copy to Bruce S. Klein, General

6
<PAGE>

Counsel, Sage Networks, Inc., 11 Martine Avenue, 12th Floor, White Plains, NY
10606, or at such other address as it shall designate by notice to the Employee.

12. Successors and Assigns.

13. Governing Law; Jurisdiction.

This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts without regard to
its conflict of law rules. The Employer and the Employee submit and consent to
the jurisdiction of the state courts of the Commonwealth of Massachusetts or the
State of New York in the Counties of New York and/or Westchester and the federal
courts located therein with respect to any legal actions between them relating
to this Agreement.

14. Only Contract Relating to Employment; Amendments.

This Agreement supersedes any prior contracts relating to employment
between the Employee and the Employer and constitutes the full and complete
agreement between the Employee and the Employer in such respect and no
statement, representation, warranty or covenant has been made by either party
with respect thereto except as expressly set forth herein. This Agreement cannot
be changed, modified or amended and no provision or requirement hereof may be
waived without the consent in writing of the Employee and the Employer.

15. Headings.

The headings in this Agreement are for convenience of reference only
and shall not control or affect the meaning or construction of this Agreement.

16. Severability.

The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect. If any provision
contained in this Agreement is found to be unenforceable by reason of the
extent, duration or scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, scope or
other provision so that in its reduced form any such restriction shall
thereafter be enforceable to the maximum extent permitted by law. It is the
intent of the parties hereto that the covenants contained in this Agreement
shall be enforced to the fullest extent permissible under the laws and public
policies of each jurisdiction in which enforcement is sought (the Employee
hereby acknowledging that said restrictions are reasonably necessary for the
protection of the Employer).

7
<PAGE>

17. Counterparts.

This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.

IN WITNESS WHEREOF, the Employer and the Employee have caused this
Agreement to be executed as of the date first above written.

SAGE NETWORKS, INC.

By: /s/ Leonard J. Fassler
--------------------------------------
Leonard J. Fassler, President

EMPLOYEE:

/s/ Jennifer Lawton
------------------------------------------
Jennifer Lawton

<PAGE>

Exhibit 10.32

SECOND AMENDMENT TO SUBLEASE AGREEMENT

THIS SECOND AMENDMENT TO SUBLEASE AGREEMENT ("Second Amendment") is made and
entered into as of October 31, 1999, by and between INTERLIANT, INC. (F/K/A SAGE
NETWORKS, INC.) ("Sublessee"), and SOUTHERN COMPANY SERVICES, INC.
("Sublessor").

W I T N E S S E T H:
--------------------

WHEREAS, Sublessor and Sublessee entered into that certain Sublease Agreement
dated May 29, 1998 (the "Original Sublease"), for space known as Suite G-300
located in that certain building known as 64A Perimeter Center (the "Building");
and

WHEREAS, Sublessee and Sublessor have previously modified the Original
Sublease by virtue of the First Amendment to Sublease Agreement dated December
9, 1998 (the Original Sublease as so amended, the "Sublease"); and

WHEREAS, Sublessee and Sublessor desire to enter into this Second Amendment
for the purpose of evidencing their mutual understanding and agreement as set
forth below.

NOW, THEREFORE, for and in consideration of the premises hereto, the keeping
and performance of the covenants and agreements hereinafter contained, and for
Ten Dollars ($10.00) and other good and valuable consideration in hand paid by
each party hereto to the other, the receipt and sufficiency of which are hereby
acknowledged, Sublessee and Sublessor hereby agree as follows:

1. Terms used herein and denoted by their initial capitalization shall have
the meanings set forth in the Sublease unless specifically indicated herein to
the contrary.

2. Sublessor and Sublessee hereby acknowledge and agree that for all purposes
under the Sublease as modified by this Second Amendment, the Data Center
Expansion Premises is as shown on the drawing attached hereto as Schedule "1"
------------
and by reference made a part hereof, and the Temporary Office Space is as shown
on the drawing attached hereto as Schedule "2" and by reference made a part
------------
hereof. Sublessor and Sublessee hereby acknowledge and agree that pursuant to
the provisions of the First Amendment, the Data Center Expansion Premises and
the Temporary Office Space have been measured and that the actual rentable
square footages are as follows: the Data Center Expansion Premises contains
10,218 rentable square feet; and the Temporary Office Space contains 13,468
rentable square feet. Furthermore, Sublessor and Sublessee hereby agree that:
(i) the Data Center Expansion Premises Commencement Date shall be January 1,
2000; (ii) the term of the sublease of the Temporary Office Space is hereby
extended and shall terminate and end on March 15, 2000, unless sooner terminated
as provided in the Sublease as modified by this Second Amendment; (iii)
Sublessee's notice to extend the term of the Temporary Office Space dated
September 14, 1999 is hereby withdrawn and deemed null and void; and (iv) the
term of the sublease of the Sublease Premises (as defined in the Original
Sublease) is hereby extended and shall terminate and end on February 28, 2006,
unless sooner terminated as provided in the Sublease as modified by this Second
Amendment. As a result, (a) all references in the First Amendment to the square
footage of the Data Center Expansion Premises are hereby changed to 10,218
square feet; (b) all references in the First
<PAGE>

Amendment to the square footage of the Temporary Office Space are hereby changed
to 13,468 square feet; (c) all references in the First Amendment to the square
footage of the Sublease Premises after the addition of the Data Center Expansion
Premises are hereby changed to 17,458 square feet; (d) Exhibit "B" to the First
-----------
Amendment is hereby deleted in its entirety, and Exhibit "B" attached hereto and
----------
made a part hereof by reference is inserted in lieu thereof; (e) all references
in the First Amendment to the Data Center Expansion Premises Commencement Date
are hereby changed to January 1, 2000; and (f) all references in the First
Amendment to the term of the sublease of the Temporary Office Space are hereby
changed to provide that the term of the sublease of the Temporary Office Space
shall terminate and end on March 15, 2000, unless sooner terminated as provided
in the Sublease as modified by this Second Amendment.

3. Sublessor does hereby sublease and rent to Sublessee, and Sublessee hereby
subleases and rents from Sublessor an additional 5,361 rentable square feet (the
"Second Amendment Data Center Premises") located on floor G2 of the Building as
shown on the drawing attached hereto as Exhibit "A" and by reference made a part
-----------
hereof, for a term commencing on January 1, 2000 (the "SADCP Commencement
Date"), and ending (unless sooner terminated as provided in the Sublease as
modified by this Second Amendment) on February 28, 2006. From and after the
SADCP Commencement Date, except as expressly otherwise provided in this Second
Amendment, the Second Amendment Data Center Premises shall be subject to all the
terms and conditions of the Sublease as hereby modified as if the Second
Amendment Data Center Premises were part of the Sublease Premises. Sublessee
shall receive no concessions or allowances on account of subleasing the Second
Amendment Data Center Premises other than a Tenant Improvement Allowance equal
to $0.05 per rentable square foot per month from the SADCP Commencement Date to
the end of the Term (i.e., February 28, 2006). Such Tenant Improvement Allowance
will be payable to Sublessee by Sublessor within 15 days of the SADCP being made
available to Sublessee for Sublessee to commence its improvement work.

4. (a) Base Rent for the Second Amendment Data Center Premises shall
commence on the SADCP Commencement Date, and shall be paid in lawful money of
the United States of America, without notice, demand, counterclaim, setoff,
recoupment, deduction or defense and without abatement (except as expressly set
forth in the Sublease as modified by this Second Amendment), suspension,
deferment, diminution or reduction.

(b) In accordance with Exhibit "B" hereto, Base Rent for the Second
----------
Amendment Data Center Premises shall be payable in advance, in equal monthly
installments, on or before the first day of each month during the term, at the
following rates:

$141,315.96 per annum for the period from the SADCP Commencement Date through
June 30, 2000;

$145,551.15 per annum for the period from July 1, 2000, through June 30, 2001;

$149,893.56 per annum for the period from July 1, 2001, through June 30, 2002;

$154,396.80 per annum for the period from July 1, 2002, through June 30, 2003;

$159,007.26 per annum for the period from July 1, 2003, through June 30, 2004;

2
<PAGE>

$163,778.55 per annum for the period from July 1, 2004, through June 30, 2005;

$168,710.67 per annum for the period from July 1, 2005, through February 28,
2006.

(c) Sublessee shall install, at Sublessee's sole cost, meters to
separately meter the electricity distributed to and consumed in the Sublease
Premises (including without limitation the Data Center Expansion Premises and
the Second Amendment Data Center Premises, but excluding the Temporary Office
Space). Base Rent for the Sublease Premises (including without limitation the
Data Center Expansion Premises and the Second Amendment Data Center Premises,
but excluding the Temporary Office Space) is exclusive of electricity. Sublessee
shall pay for all electricity distributed to and consumed in the Sublease
Premises (including without limitation the Data Center Expansion Premises and
the Second Amendment Data Center Premises, but excluding the Temporary Office
Space) as additional rent, with Sublessor having the same remedies for
nonpayment thereof as for nonpayment of rent. Within ten (10) days after
delivery of a bill by Sublessor to Sublessee for electricity distributed to and
consumed in the Sublease Premises (including without limitation the Data Center
Expansion Premises and the Second Amendment Data Center Premises, but excluding
the Temporary Office Space), Sublessee shall pay such bill. Base Rent for the
Data Center Expansion Premises and the Second Amendment Data Center Premises
includes, and there shall be no separate charge to Sublessee for, Sublessor's
costs and expenses for the maintenance set forth on Exhibit "C" attached hereto
----------
and by reference made a part hereof. During the term of this Sublease,
--------------------------------
Sublessor, at its sole cost and expense, shall provide, or cause a third party
contractor to provide through a maintenance agreement or otherwise, all such
maintenance to the systems and equipment in or servicing the Sublease Premises
as described on Exhibit "C" hereto.
-------------------

5. Sublessor hereby represents and warrants that to the best of the knowledge
of the persons executing this Second Amendment on behalf of Sublessor the Second
Amendment Data Center Premises as used by Sublessor and as currently configured
and constructed complies, as of the date hereof, in all material respects with
federal, state and local laws, codes, rules and regulations applicable thereto;
provided, however, that Sublessee acknowledges and agrees (i) that any
construction (including without limitation any alterations) in or to the Second
Amendment Data Center Premises or any change in the configuration of the Second
Amendment Data Center Premises may result in the Second Amendment Data Center
Premises (including without limitation, the portion in or to which such
construction occurs or the portion reconfigured, as well as portions of the
Second Amendment Data Center Premises other than the portion in or to which such
----- ----
construction occurs or the portion reconfigured) failing to comply, in whole or
in part, with such laws, codes, rules and regulations, and (ii) that such
representation and warranty does not apply to, and shall not be deemed to extend
to, the use of the Second Amendment Data Center Premises by Sublessee or anyone
claiming by, through or under Sublessee. Except as expressly set forth in the
sentence immediately preceding this sentence, Sublessee hereby accepts the
Second Amendment Data Center Premises "as-is", "where is". Pursuant to
Paragraph 16 of the Sublease, but subject to and conditioned upon compliance by
Sublessee with the terms and conditions of the Sublease as modified by this
Second Amendment, Sublessor has consented to Sublessee installing the demising
wall identified on Schedule "3" attached hereto and by reference made a part
------------
hereof (the "Demising Wall"). Prior to the commencement of construction of the
Demising Wall, and at all times during such construction, the general liability
and property damage insurance contemplated by Paragraph 15(a) of the

3
<PAGE>

Sublease shall be in "builder's risk" form if there would otherwise be an
exclusion of coverage under such policy as a result of such construction. Prior
to commencement of construction, Sublessee shall submit to Sublessor for
approval the detailed plans and specifications for the Demising Wall, which
approval Sublessor agrees not to unreasonably withhold (provided, however, that
Sublessee acknowledges and agrees that approval of the Prime Landlord under the
Master Sublease is also required). No such approval shall in any way waive or be
deemed to waive the obligations of Sublessee under the Sublease as hereby
amended and shall not be deemed to imply any warranty, representation or
approval by Sublessor or Prime Landlord that the Demising Wall, if so
constructed, will be structurally sound, will comply with all building codes or
other governmental laws or regulations or legal requirements, will be fit for
any particular purpose or will have a market value of any particular magnitude,
or that Sublessor or Prime Landlord have reviewed Sublessee's plans from the
standpoint of engineering or structural design, quality of materials, or safety,
whether structural, fire, security or otherwise. The Demising Wall shall be
constructed at the sole cost and expense of Sublessee; provided, however, that
upon the last to occur of (a) completion of the Demising Wall in accordance with
the approved plans, (b) delivery to Sublessor of a final contractor's affidavit
and such lien waivers as Sublessor shall require, and (c) delivery to Sublessor
of a certificate of Sublessee certifying and setting forth in reasonable detail
the hard costs incurred by Sublessee in constructing the Demising Wall
(including without limitation copies of paid invoices), Sublessee shall be
entitled to a credit against the rent immediately thereafter next coming due
under the Sublease as modified by this Second Amendment in an amount equal to
the lesser of (i) the hard costs of construction as set forth in such
certification, or (ii) $9,052.05. The Demising Wall shall be constructed by
Sublessee in a good and workmanlike manner and in compliance with all applicable
governmental codes, laws, ordinances, orders and regulations. If Sublessor
permits Sublessee to enter the Data Center Expansion Premises or the Second
Amendment Data Center Premises prior to January 1, 2000, for the construction of
the Demising Wall, all the terms and provisions of the Sublease as amended by
this Second Amendment shall apply thereto (other than the payment of Base Rent).
Sublessee shall not create or permit to be created or to remain, and, shall
promptly discharge, at its sole cost and expense, any lien, encumbrance or
charge upon the Premises or the Building, or any part thereof or upon the rights
of Sublessee under the Sublease as amended by this Second Amendment by reason of
any labor, service or material furnished or claimed to have been furnished to or
for the benefit of Sublessee or by reason of any construction, repairs or
demolition by or at the direction of Sublessee.

6. In addition to the parking passes under Paragraph 8 of the First
Amendment, Sublessee shall be entitled to two parking passes per 1,000 rentable
square feet of space in the Second Amendment Data Center Premises, and Sublessee
shall use no more than said amount of parking passes.

7. The letter of credit identified in Paragraph 7 of the Original Sublease
and increased pursuant to Paragraph 9 of the First Amendment shall be replaced
simultaneously with the execution of this Second Amendment with a letter of
credit in the amount of $180,000.00, and the amounts set forth in subparts (b)
and (c) respectively of Paragraph 7 of the Sublease as modified hereby shall be
$180,000.00 and $154,999.00, respectively, with all other stipulations of
Paragraph 7 of the Sublease as modified hereby remaining in effect.

8. CB RICHARD ELLIS, INC. ("CBRE") HAS ACTED AS AGENT FOR SUBLESSOR IN THIS
TRANSACTION. THE WESLEY COMPANY ("TWC") HAS ACTED

4
<PAGE>

AS AGENT FOR SUBLESSEE IN THIS TRANSACTION. CBRE AND TWC SHALL EACH BE PAID A
COMMISSION BY SUBLESSOR PURSUANT TO A SEPARATE AGREEMENT. Sublessor shall
indemnify and hold Sublessee harmless from and against all loss, cost, damage or
expense, including but not limited to attorney's fees and court costs, incurred
by Sublessee as a result of Sublessor's breach of the foregoing covenant to pay
CBRE and TWC their respective commissions due in connection with this
transaction. Sublessor and Sublessee hereby indemnify one another, and hold each
other harmless, from and against all loss, cost, damage or expense, including
but not limited to attorney's fees and court costs, incurred by the indemnified
party as a result of any claims for brokerage fees or commission due which are
made by reason of the indemnifying party having dealt with any broker (other
than CBRE or TWC). Sublessee shall cause any agent or broker representing
Sublessee to execute a lien waiver to and for the benefit of Sublessor and Prime
Landlord, upon receipt by such agent or broker of any commission due hereunder,
waiving any and all lien rights with respect to the Building or Property such
agent or broker has or might have under Georgia law.

9. This Second Amendment shall be governed by and construed in accordance
with the laws of the State of Georgia, and shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors,
representatives and assigns, but always subject, in case of Sublessee, to the
limitations on assignment and sublease set forth in the Sublease. In the event
of any inconsistency or conflict between the terms of this Second Amendment and
the Sublease, the terms hereof shall control. Time is of the essence of all
terms of this Second Amendment.

10. Paragraph 3 of the First Amendment is hereby deleted in its entirety
and the following substituted in lieu thereof: Data Center Expansion Premises
------------------------------
Term. The term for the Data Center Expansion Premises (as part of the Sublease
- ----
Premises) shall commence on January 1, 2000 (the "Data Center Expansion Premises
Commencement Date") and end on February 28, 2006 (unless sooner terminated as
provided in the Sublease as modified by this Second Amendment).

5
<PAGE>

11. Sublessee hereby represents and warrants that Sage Networks, Inc. has
changed its name to Interliant, Inc. Effective immediately, Sublessee's address
for notices is:

Interliant, Inc.
Attn: Tammy Herrington
Suite 100
64 Perimeter Center East
Atlanta, Georgia 30346

with a copy to:

Bruce S. Klein, Esq.
Senior Vice-President
General Counsel
Interliant, Inc.
Two Manhattanville Road
Purchase, NY 10577

12. Except as hereinabove provided, all other terms and conditions of the
Sublease shall remain unchanged in full force and effect, and as expressly
modified by this Second Amendment the Sublease is hereby ratified and confirmed
by Sublessor and Sublessee. Sublessee and Sublessor hereby each acknowledge and
agree that, as of the date hereof, the Sublease as modified by this Second
Amendment is subject to no offsets, claims, counterclaims or defenses of any
nature whatsoever and no Events of Default on the part of Sublessor or Sublessee
have occurred under the Sublease as amended by this Second Amendment.

13. This Second Amendment may not be changed, modified, discharged or
terminated orally or in any manner other than by an agreement in writing signed
by Sublessor and Sublessee or their respective heirs, representatives,
successors and permitted assigns.

14. The person executing this Second Amendment on behalf of Sublessee does
hereby personally represent and warrant that Sublessee is a validly existing
corporation and is fully authorized and qualified to do business in the State of
Georgia, that the corporation has full right and authority to enter into this
Second Amendment, and the undersigned, who is signing on behalf of the
corporation, is a duly authorized officer of the corporation and is authorized
to sign on behalf of the corporation.

IN WITNESS WHEREOF, the parties have set their hands and affixed their seals
to this Second Amendment to be effective as of the day and year first above
written.

Sublessee: Sublessor:
- --------- ---------
INTERLIANT, INC. (F/K/A SAGE SOUTHERN COMPANY SERVICES, INC.
NETWORKS, INC.)
By: /s/Kristian Nelson By:
--------------------------------- ----------------------------------
Title: Sr. Vice President, Operations Title: V.P. Procurement and Materials
------------------------------ ------------------------------

6
<PAGE>

Exhibit 10.32
Schedule "1"

Data Center Expansion Premises
<PAGE>

Exhibit 10.32
Schedule "2"

Temporary Office Space
<PAGE>

Exhibit 10.32
Schedule "3"

Demising Wall
<PAGE>

Exhibit 10.32
Exhibit "A"

Second Amendment Data Center Premises
<PAGE>

Exhibit 10.32
Exhibit "B"

Schedule of Rent Due

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Rent for Rate Sublease Data Center Second Total Data Monthly Temporary
Square Expansion Amendment Center Data Center Office
Feet Premises Data Center Space Monthly Center
Square Feet Premises Rent Space Rate
Square Feet
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
July 98 $25.59 7,240 0 0 7,240 $15,439.30
- ------------------------------------------------------------------------------------------------------------------------------------
Aug 98 $25.59 7,240 0 0 7,240 $15,439.30
- ------------------------------------------------------------------------------------------------------------------------------------
Sep 98 $25.59 7,240 0 0 7,240 $15,439.30
- ------------------------------------------------------------------------------------------------------------------------------------
Oct 98 $25.59 7,240 0 0 7,240 $15,439.30
- ------------------------------------------------------------------------------------------------------------------------------------
Nov 98 $25.59 7,240 0 0 7,240 $15,439.30
- ------------------------------------------------------------------------------------------------------------------------------------
Dec 98 $25.59 7,240 0 0 7,240 $15,439.30 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
Jan 99 $25.59 7,240 0 0 7,240 $15,439.30 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
Feb 99 $25.59 7,240 0 0 7,240 $15,439.30 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
Mar 99 $25.59 7,240 0 0 7,240 $15,439.30 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
Apr 99 $25.59 7,240 0 0 7,240 $15,439.30 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
May 99 $25.59 7,240 0 0 7,240 $15,439.30 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
Jun 99 $25.59 7,240 0 0 7,240 $15,439.30 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
Jul 99 $26.36 7,240 0 0 7,240 $15,902.48 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
Aug 99 $26.36 7,240 0 0 7,240 $15,902.48 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
Sep 99 $26.36 7,240 0 0 7,240 $15,902.48 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
Oct 99 $26.36 7,240 0 0 7,240 $15,902.48 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
Nov 99 $26.36 7,240 0 0 7,240 $15,902.48 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
Dec 99 $26.36 7,240 0 0 7,240 $15,902.48 $19.00
- ------------------------------------------------------------------------------------------------------------------------------------
Jan 2000 - $26.36 7,240 10,218 5,361 22,819 $50,125.74 $19.00
Feb 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Mar 2000 $26.36 7,240 10,218 5,361 22,819 $50,125.74 $19.00
- -----------------------------------------------------------------------------------------------------------------------------------
Apr 2000 - $26.36 7,240 10,218 5,361 22,819 $50,125.74
Jun 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Jul 2000 - $27.15 7,240 10,218 5,361 22,819 $51,627.99
Jun 2001
- -----------------------------------------------------------------------------------------------------------------------------------
Jul 2001 - $27.96 7,240 10,218 5,361 22,819 $53,168.27
Jun 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Jul 2002 - $28.80 7,240 10,218 5,361 22,819 $54,765.60
Jun 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Jul 2003 - $29.66 7,240 10,218 5,361 22,819 $56,400.96
Jun 2004
- -----------------------------------------------------------------------------------------------------------------------------------
Jul 2004 - $30.55 7,240 10,218 5,361 22,819 $58,093.37
Jun 2005
- -----------------------------------------------------------------------------------------------------------------------------------
Jul 2005 - $31.47 7,240 10,218 5,361 22,819 $59,842.83
Feb 2006
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Rent for Temporary Temporary Total Monthly
Office Office Space Rent
Space Monthly (exclusive
Square Feet Rent of Expense
Rent)
- --------------------------------------------------------------
<S> <C> <C> <C>
July 98 $15,439.30
- --------------------------------------------------------------
Aug 98 $15,439.30
- --------------------------------------------------------------
Sep 98 $15,439.30
- --------------------------------------------------------------
Oct 98 $15,439.30
- --------------------------------------------------------------
Nov 98 $15,439.30
- --------------------------------------------------------------
Dec 98 13,468 $10,662.17 $26,101.47
- --------------------------------------------------------------
Jan 99 13,468 $21,324.33 $36,763.63
- --------------------------------------------------------------
Feb 99 13,468 $21,324.33 $36,763.63
- --------------------------------------------------------------
Mar 99 13,468 $21,324.33 $36,763.63
- --------------------------------------------------------------
Apr 99 13,468 $21,324.33 $36,763.63
- --------------------------------------------------------------
May 99 13,468 $21,324.33 $36,763.63
- --------------------------------------------------------------
Jun 99 13,468 $21,324.33 $36,763.63
- --------------------------------------------------------------
Jul 99 13,468 $21,324.33 $37,226.81
- --------------------------------------------------------------
Aug 99 13,468 $21,324.33 $37,226.81
- --------------------------------------------------------------
Sep 99 13,468 $21,324.33 $37,226.81
- --------------------------------------------------------------
Oct 99 13,468 $21,324.33 $37,226.81
- --------------------------------------------------------------
Nov 99 13,468 $21,324.33 $37,226.81
- --------------------------------------------------------------
Dec 99 13,468 $21,324.33 $37,226.81
- --------------------------------------------------------------
Jan 2000 - 13,468 $21,324.33 $71,450.07
Feb 2000
- --------------------------------------------------------------
Mar 2000 13,468 $10,662.17 $60,787.91
- --------------------------------------------------------------
Apr 2000 - $50,125.74
Jun 2000
- --------------------------------------------------------------
Jul 2000 - $51,627.99
Jun 2001
- --------------------------------------------------------------
Jul 2001 - $53,168.27
Jun 2002
- --------------------------------------------------------------
Jul 2002 - $54,765.60
Jun 2003
- --------------------------------------------------------------
Jul 2003 - $56,400.96
Jun 2004
- --------------------------------------------------------------
Jul 2004 - $58,093.37
Jun 2005
- --------------------------------------------------------------
Jul 2005 - $59,842.83
Feb 2006
- --------------------------------------------------------------
</TABLE>
<PAGE>

Exhibit 10.32

Exhibit "C"

Data Center Maintenance

1. Halon System

Electrical and mechanical inspection and testing, including wiring; detectors;
alarms, discharges, pull stations, abort and supervisory circuits; agent storage
containers; protected area - dampers, bottom door seals, weather-stripping,
caulking and foam sealant; battery standby and charger; wiring in the initiator
or system discharge circuits; and the control unit.

2. HVAC (Heating, Ventilation and Air Conditioning) Equipment

Maintenance of 3 BAC cooling towers, 3 centrifugal chillers, 29 air handlers, 2
Indeeco water heaters, 1 duplex air compressor, 4 peerless water pumps, 1
emergency water pump, 1 Barber Coleman panel and 1 sand filter.

3. UPS System

Maintenance of C&D wet cell batteries (currently 3 strings of 184 batteries per
string), 3 UPS modules and 1 UPS master unit.

4. Generators and Switchgear Panel

Maintenance of 3 generators and the switchgear panel.

<PAGE>

EXHIBIT 10.33

EMPLOYMENT AGREEMENT
--------------------

This Agreement made and entered into as of the 5th day of November , 1999,
by and between INTERLIANT, Inc. (formerly Sage Networks, Inc.), a Delaware
corporation, having a place of business at Two Manhattanville Road, Purchase, NY
10577 ("Employer"), and, William A. Wilson, having an address at 31 Millwood
Road (mailing address: P.O. Box 1425), Wolfeboro, NH 03894-1425 ("Employee").

WITNESSETH:
-----------

WHEREAS, Employer is engaged in the Internet hosting and related services
business; and

WHEREAS, Employer desires to employ Employee as Chief Financial Officer of
Employer, and Employee desires to be so employed by Employer, all pursuant to
the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein contained, it is agreed as follows:

1. EMPLOYMENT: DUTIES
-------------------

(a) Employer hereby agrees to employ Employee, and Employee hereby
agrees to accept employment during the term hereof as Chief Financial Officer of
Employer, and shall perform such services as are customarily performed by
persons holding such office and shall be subject at all times to the direction
of the designee of the Board of Directors of Employer. Nothing herein contained
shall be construed as, including, but not limited to (i) preventing Employee
from investing his personal assets in any business, provided such business
venture or business does not compete with Employer or conflict with Employee's
duties and obligations as an officer and director of the Employer, or (ii)
preventing Employee from purchasing securities in any corporation whose
securities are regularly publicly traded, if such purchases shall not result in
his owning beneficially at any time 5% or more of the equity securities of any
corporation engaged in a business which is competitive to that of Employer.

2. TERM
----

Employee's employment hereunder shall be for a term commencing
November 5, 1999 and ending on November 5, 2001. The Agreement shall be
automatically extended from month to month thereafter unless either party gives
not less than thirty (30) days written notice to the other that such party
elects to have the Agreement terminated effective at the end of the initial or
then current renewal term.
<PAGE>

3. COMPENSATION
------------

(a) As compensation for the performance of his duties on behalf of
Employer, Employer shall pay Employee a salary at the rate of Two Hundred
Thousand Dollars ($200,000.00) per annum, or at a rate as adjusted from time to
time to reflect changes in Employee's compensation, payable in installments in
accordance with the usual practice of the Employer.

(b) Employer shall reimburse Employee for the expenses incurred by
Employee in connection with his duties hereunder upon presentation by Employee
of the details of vouchers for such expenses in accordance with customary
Employer practice.

(c) Employee shall be entitled to participate in all retirement, life
insurance, medical insurance, disability insurance, vacation, savings and other
employee benefit plans generally available to the senior officers of the
Company, so long as such benefits comply with applicable law (including without
limitation the Internal Revenue Code of 1986, as amended, and ERISA).

4. NON-COMPETITION
---------------

(a) During the term of this Agreement and for a period of twenty-four
(24) months from the date of termination of his employment hereunder for
whatever reason, Employee agrees that he will not solicit any customers who are
presently or may hereafter become customers of Employer unless such solicitation
is entirely unrelated to Employer's business, or compete in any way with
Employer alone or together with others in which Employer is engaged in business
at the time of termination of employment.

(b) Subsequent to the expiration or termination of this Agreement,
Employee will not interfere with or disrupt or attempt to disrupt Employer's
business relationship with its customers or suppliers or solicit the employees
or Employer.

(c) During the term of this Agreement and for a period of twenty-four
(24) months from the date of termination of his employment hereunder for
whatever reason, Employee will not disclose or use or enable anyone else to use
any information or data which may be obtained by him or available to him during
the term of employment.

(d) In the event that Employee breaches any provisions of this
paragraph or there is a threatened breach, then, in addition to any other rights
which Employer may have, Employer shall be entitled to injunctive relief to
enforce the restrictions contained herein. In the event that an actual
proceeding is brought in equity to enforce the provisions of this paragraph,
Employee shall not urge as a defense that there is an adequate remedy at law nor
shall Employer be prevented from seeking any other remedies which may be
available.

2
<PAGE>

(e) The existence of any claim or cause of action by Employee against
Employer, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by Employer of the foregoing restrictive
covenants but shall be litigated separately.

5. TERMINATION
-----------

(a) Anything to the contrary notwithstanding, this Agreement shall
terminate 30 days after the Employee's (i) death or (ii) disability for a period
of not less than twenty-six consecutive weeks; provided, however, that the
provisions of Section 6 hereof shall remain in full force and effect through the
end of the term hereof.

(b) Employee's employment hereunder may also be terminated by the
Employer before the expiration of the term hereof only for cause as herein
defined. "Cause" shall mean only one or both of the following occurrences:

(i) The Employee's conviction of a felony by a court of competent
jurisdiction (which conviction, through lapse of time or otherwise, is
not subject to appeal); or

(ii) The Employee's commission of an act of fraud or embezzlement
upon the Employer.

6. SEVERANCE
---------

In the event of termination of employment of Employee by Employer
before the expiration of the term hereof, except when such termination is in
accordance with the provisions of paragraph 5(a) or 5(b) hereof, Employer will
provide Employee with severance pay in an amount equal to two times Employee's
annual compensation, which shall be payable in a lump sum, discounted based on
the prime rate of Chase Bank then in effect, which lump sum shall be payable
within 30 days of the date of termination. Employer shall also continue to
provide to Employee the retirement benefits, life insurance, medical insurance
and disability insurance pursuant to Section 3(d) through the end of the term
hereof.

In the event of termination of employment of Employee before the
expiration of the term hereof pursuant to the provisions of paragraph 5(a)
hereof, Employer will: (i) provide Employee (or Employee's estate) with
severance pay in an amount equal to two years' annual compensation, which shall
be payable in a lump sum, discounted based on the prime rate of Chase Bank then
in effect, which lump sum shall be payable within 30 days of the date of
termination; (ii) continue to provide to Employee the retirement benefits, life
insurance, medical insurance and disability insurance

3
<PAGE>

pursuant to Section 3(d) through the end of the term hereof; and (iii) continue
to provide Employee's spouse and minor children with medical benefits pursuant
to Section 3(d) through the end of the term hereof.

7. NOTICES
-------

All notices hereunder shall be in writing and shall be delivered in
person or given by registered or certified mail, postage prepaid, and sent to
the parties at the respective addresses above set forth. Either party may
designate any other address to which notice shall be given, by giving notice to
the other of such change of address in the manner herein provided.

8. SEVERABILITY OF PROVISIONS
--------------------------

If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, the remaining conditions and provisions or portions thereof
shall nevertheless remain in full force and effect and enforceable to the extent
they are valid, legal and enforceable, and no provision shall be deemed
dependent upon any other covenant or provision unless so expressed herein.

9. GOVERNING LAW
-------------

This Agreement shall be construed and governed by the laws of the
State of New York.

10. NON-WAIVER
----------

The failure of either party to insist upon the strict performance of
any term or condition in this Agreement shall not be considered a waiver or
relinquishment of future compliance therewith.

11. ENTIRE AGREEMENT; MODIFICATION
------------------------------

This Agreement contains the entire agreement between the parties
relating to the subject matter hereof. No modification of this Agreement shall
be valid unless it is made in writing and signed by the parties hereto.

12. NON-ASSIGNMENT; SUCCESSORS
--------------------------

4
<PAGE>

Neither party hereto may assign his or its rights or delegate his or
its duties under this Agreement without the prior written consent of the other
party; provided, however, that (i) this Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Employer upon any sale of
all or substantially all of the Employer's assets, or upon any merger,
consolidation or reorganization of the Employer with or into any other
corporation, all as though such successors and assigns of the Employer and their
respective successors and assigns were the Employer; and (ii) this Agreement
shall insure to the benefit of and be binding upon the heirs, assigns or
designees of the Employee to the extent of any payments due to them hereunder.
As used in this Agreement, the term "Employer" shall be deemed to refer to any
such successor or assign of the Employer referred to in the preceding sentence.

13. COUNTERPARTS
------------

This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.

INTERLIANT, INC.,
Employer

By: /s/ James M. Lidestri
---------------------
James M. Lidestri
President

/s/ William A. Wilson
---------------------
William A. Wilson

<PAGE>
EXHIBIT 10.34

EMPLOYMENT AGREEMENT
--------------------

This Agreement made and entered into as of the 1st day of January
2000, by and between INTERLIANT, INC., a Delaware corporation, having a place of
business at Two Manhattanville Road, Purchase, NY 10577 ("Employer"), and,
KRISTIAN NELSON having an address at 19702 Emerald Leaf, Houston, TX 77094
("Employee").

WITNESSETH:
-----------

WHEREAS, Employer is engaged in the IT consulting, Internet Web and
application hosting, and related services business;

WHEREAS, Employer desires to employ Employee as a Senior Vice
President, Operations of Employer, and Employee desires to be so employed by
Employer, all pursuant to the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties agree as follows:

1. Definitions.

As used herein, the following terms have the following meanings:

"Agreement" shall mean this Agreement and any amendments hereto.
---------

"Agreement Term" shall have the meaning ascribed to it in Section
--------------
2(a).

"Base Salary" shall mean the Employee's annual salary as determined
-----------
pursuant to Section 5(a) hereof.

"Board" shall mean the Board of Directors of the Employer.
-----

"Cause" shall have the meaning ascribed to it in Section 9.
-----

"Employment Year" shall mean each consecutive twelve (12) month period
---------------
during the Agreement Term, the first of which shall commence on the
date hereof.

"Intellectual Property" shall have the meaning ascribed to it in
---------------------
Section 4(d).

2. Agreement Term.

(a) The Employer will employ the Employee and the Employee will work
for the
<PAGE>

Employer for a term of seventeen (17) months commencing as of January 1, 2000
and ending on May 31, 2001, unless sooner terminated as provided in Section 2(b)
or in accordance with Section 9, or in the event of death or disability of the
Employee as provided in Section 2(c) (the "Agreement Term").

(b) This Agreement may be terminated by the Employer for Cause prior
to the end of the Agreement Term on such date as shall be specified in a notice
given by the Employer to the Employee

(c) In the event of the death or disability of the Employee during the
Agreement Term, this Agreement shall terminate as of the date of such death or
as of the date of determination that such disability has occurred and the
Employee's estate or the Employee, as the case may be, shall be entitled to
receive (i) any and all accrued and unpaid portions of the Base Salary to the
date of death or disability, (ii) all of the benefits to which the Employee
would be entitled pursuant to Sections 7 and 8 hereof to the date of death or
disability, and (iii) in the case of the death of the Employee, such other
payments and benefits as shall be provided to the estates and beneficiaries of
deceased Employees under the then existing policies of the Employer. As used
herein, a "disability" shall have occurred if, as a result of physical or mental
incapacity, the Employee shall have been incapable of performing Employee's
duties hereunder for a period in excess of twenty six (26) consecutive calendar
weeks or an aggregate of thirty (30) weeks in any twelve (12) month period, as
determined by the Board (or a committee or officer of the Employer designated by
the Board) in its sole discretion. If the Employee disagrees with such
determination, the Board (or such designated committee or officer) and the
Employee shall select a mutually satisfactory physician to resolve the
disagreement and the resolution of such physician shall be binding on both the
Employer and the Employee.

(d) Notwithstanding anything to the contrary contained herein,
Employer shall notify Employee no later than January 1st of the year within
which the Agreement Term is to expire of its intentions to renew this Agreement
for an additional year beyond May 31st of that year.

3. Duties.

The Employee shall exercise such powers and perform such duties and
services for the Employer as the Employer may, from time to time, reasonably
require, devote his entire time, energy and attention to the business of the
Employer and its subsidiaries, and shall not engage in any other business
activity. The Employee shall report to Co-Chairman, Bradley Feld or the Chief
Executive Officer of Employer, or their respective successors. Employee shall
have the title Senior Vice President, Operations of Employer. Employer
acknowledges that Employee's religious beliefs prohibit him from working or
traveling from sundown Friday nights to sundown Saturday nights and accordingly
Employer shall not require Employee to work or travel during that time.

4. Non-Competition; Nonsolicitation; Confidentiality; Intellectual
Property Matters.

2
<PAGE>

(a) During the Agreement Term and for a period of one (1) year after
the Agreement Term ("Restricted Period"), the Employee will not engage in any
capacity in the Web or application hosting business, the Web consulting or
development business or in a business substantially similar to or in competition
with the business of the Employer that is located or does business in any state
in the United States or anywhere throughout the world except as an officer,
director, shareholder or employee of Employer or any affiliate thereof.

(b) During the Restricted Period and for one (1) year thereafter, the
Employee will not, unless acting with the express written consent of Employer,
directly or indirectly, solicit or interfere with, or endeavor to entice away:

(i) any person who has rendered services as a subcontractor,
consultant or employee or otherwise for the Company with respect
to the Business or the Employer or any of their respective
affiliates during the twelve (12) month period immediately
preceding the date of termination or expiration of this
Agreement; or

(ii) with respect to any business substantially similar to the
business in which the Employer or any of its affiliates is or has
been engaged on or after the date of this Agreement, any person
or entity who was a customer or client of the Employer, the
Company or any of their respective affiliates at any point during
the twelve (12) months preceding the termination or expiration of
this Agreement or any person or entity who requested or received
a proposal from the Employer, the Company or any of their
respective affiliates within the twelve (12) months preceding the
termination or expiration of this Agreement.

(c) During the Agreement Term and at all times thereafter the Employee
agrees to hold in confidence all matters and things related to the business of
Employer and each of its direct and indirect subsidiaries or affiliates of a
confidential or secret nature (including, without limitation, all private or
proprietary information) which the Employee may acquire, learn, develop or
create during the Agreement Term and will not, without the written consent of
Employer, except in the performance of the Employee's duties as an employee of
the Employer, use, publish or disclose any such matter or thing except to the
extent that (i) such information is otherwise publicly available or (ii)
disclosure is required by applicable law or court order.

(d) Employee hereby assigns, and agrees to assign, to Employer all of
Employee's right, title and interest in and to all inventions, discoveries,
improvements, ideas, computer or other apparatus programs and related
documentation, and other works of authorship, whether or not patentable,
copyrightable or subject to other forms of protection, that are made, created,
developed, written or conceived by the Employee during the Agreement Term (and
any written or oral extension thereof), whether during or outside of regular
work hours, either solely or jointly with another, in whole or in part, either:
(i) in the course of his Employment by Employer or its affiliates, (ii) relating
to the actual or anticipated business or research or

3
<PAGE>

development of Employer or (iii) with the use of Employer's time, material,
private or proprietary information, or facilities (herein each designated
"Intellectual Property"). Employee agrees to execute (without charge to
Employer) a specific assignment of title to Employer and to do anything else
reasonably necessary to enable Employer to secure a patent, copyright or other
form of protection for Intellectual Property anywhere in the world. Employee
acknowledges and agrees that the Intellectual Property created within the scope
of Employee's employment are, to the extent copyrightable, works made fore hire,
as that term is defined in 17 USC 101, and that all right, title and interest in
the Intellectual Property rests in the Employer.

(e) Employee agrees to execute upon request by Employer from time to
time during the Agreement Term, any nondisclosure, intellectual property or
confidentiality agreements which Employer may require its employees generally to
execute, consistent with the foregoing.

5. Compensation.

(a) As compensation for services to be rendered to the Employer and in
consideration for the covenants and agreements of the Employee contained herein,
the Employer shall pay to the Employee an annual Base Salary of $200,000
commencing January 1, 2000. At the discretion of the Co-Chairman or Chief
Executive Officer of Employer which is subject to the approval of the
Compensation Committee of the Board, Employee may receive annual or other
increases in the Base Salary during the Agreement Term.

(b) The Base Salary shall be payable in substantially equal
installments and in substantially the same manner that salaries are paid by
Employer to other employees in comparable positions with the Employer.

(c) The Employee shall be eligible for an objective based bonus at the
discretion of the Co-Chairman or Chief Executive Officer of Employer, subject to
the approval of the Compensation Committee of the Board.

6. Vacation.

The Employee shall be entitled to vacation periods annually during the
Employee's employment under this Agreement consistent with the Employer's
vacation policy for employees generally.

7. Reimbursement for Expenses.

8. Benefits.

The Employee shall be entitled to participate in any health, medical
and dental,

4
<PAGE>

insurance or similar plan or program of the Employer established or in effect
for the benefit of its employees generally.

9. Termination By Employer for Cause.

Termination of this Agreement for "Cause" by the Employer shall mean
termination due to the occurrence of any of the following events:

(a) if the Employee is convicted of any crime (whether or not
involving the Employer) which constitutes a felony or
involves moral turpitude, fraud or misrepresentation;

(b) if the Employee exhibits dishonest conduct in connection
with Employee's employment, which is fraud, theft or
misappropriation or embezzlement of Employer's funds, which
Termination shall be effective on the tenth (10th) day after
written notice from Employer is delivered to Employee;

(c) if the Employee shall have breached any of Employee's
material obligations under this Agreement, including,
without limitation, Employee's agreement not to compete as
provided in Section 4 of this Agreement (other than an
inadvertent breach as to which Employee shall have
discontinued the activity causing the breach within two (2)
days following delivery of notice thereof to Employee); or

(d) if the Employee has habitually failed to follow the
reasonable directives of the Employer for the performance of
Employee's duties or responsibilities hereunder, including,
without limitation, Employee's duties and responsibilities
under Section 3 hereof, after due notice to the Employee,
and a reasonable opportunity to be heard by a Co-Chairman or
the Chief Executive Officer of the Employer within one (1)
month after the giving of such notice and to correct such
failure.

10. Certain Remedies.

In the event the Employer terminates this Agreement for Cause, all of
the Employee's rights under this Agreement shall thereupon terminate and
Employee shall be entitled only to all accrued and unpaid portions of the Base
Salary through the date of such termination, and to all vested benefits under
any employee benefit plans maintained by the Employer, whether funded or
unfunded, accrued through the date of such termination. In the event the
Employer terminates this Agreement other than for Cause, Employee shall be
entitled to receive, in addition to all vested benefits described in the
preceding sentence, a severance payment equal to the greater of (i) the balance
of the Base Salary due under this Agreement had Employer not so terminated the
Agreement or (ii) an amount equal to twelve months of Employee's then current
Base Salary. Notwithstanding the foregoing, any such termination shall be
without prejudice to any right the Employee may have to continue to participate,
on a post-

5
<PAGE>

employment basis, in any retirement plan of Employer now existing or established
hereafter for the benefit of its employees in general or any health plan of
Employer, to the extent Employee is eligible under the general provisions
thereof or as required by applicable law, including, without limitation, COBRA.

11. Notice.

Any notice required or permitted to be given hereunder shall be in
writing and shall be deemed to have been duly given if delivered or mailed by
registered mail, postage prepaid: if to the Employee at Employee's address set
forth on the first page hereof, or at such other address as Employee shall
designate by written notice to the Employer, and if to the Employer at Two
Manhattanville Road, Purchase, New York 10577, Attention: General Counsel, or at
such other address as Employer shall designate by notice to the Employee.

12. Successors and Assigns.

This Agreement is personal in its nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except that Employer may
assign this Agreement to any affiliate or successor entity resulting from a
merger, consolidation, sale of stock of Employer or sale of substantially all of
the assets of Employer.

13. Governing Law; Jurisdiction.

This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York without regard to its conflict
of law rules. Employer and Employee submit and consent to the exclusive
jurisdiction of the state and federal courts located in the State of New York,
Counties of New York or Westchester with respect to any legal actions between
them relating to this Agreement.

14. Only Contract Relating to Employment; Amendments.

6
<PAGE>

15. Headings.

The headings in this Agreement are for convenience of reference only
and shall not control or affect the meaning or construction of this Agreement.

16. Severability.

17. Counterparts.

This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.

IN WITNESS WHEREOF, the Employer and the Employee have caused this
Agreement to be executed as of the date first above written.

INTERLIANT, INC.

By: /s/ Bradley A. Feld
----------------------------------------
Bradley A. Feld, Co-Chairman

Employee:

By: /s/ Kristian Nelson
---------------------------------------
Kristian Nelson

<PAGE>

EXHIBIT 10.35

January 14, 2000

Mr. Herbert Hribar
13403 Running Pump Court
Herndon, VA 20171

Dear Mr. Hribar:

Interliant, Inc., a Delaware corporation (the "Company"), hereby
agrees to employ you and you hereby agree to accept such employment under the
following terms and conditions:

1. Term of Employment.
------------------

(a) Except for earlier termination as provided in Section 8 below,
your employment under this Agreement shall be for an initial term commencing on
or before February 15, 2000 (the "Effective Date") and terminating on the third
anniversary of the Effective Date (the "Initial Term"),

(b) After the Initial Term, this Agreement shall be automatically
renewed for successive renewal terms of one year each, unless prior to the end
of any such renewal term either party shall have given to the other party at
least 90 days' prior written notice of its intention not to renew this
Agreement.

2. Compensation.
------------

(a) You shall be compensated for all services rendered by you under
this Agreement at the rate of $350,000 per annum (such salary, as it may from
time to time be increased, is hereinafter referred to as the "Base Salary"),
payable in semi-monthly installments. Prior to each anniversary of the
Effective Date, the Board of Directors shall review your performance, the
earnings of the Company during the prior year and the Company's economic
prospects for the coming year and shall consider in its discretion whether to
increase the Base Salary payable to you hereunder.

(b) With respect to each year during the term of this Agreement, you
shall be eligible to receive an incentive bonus of up to $350,000
<PAGE>

based upon your meeting the performance milestones set forth on Exhibit 2(b)
------------
annexed hereto.

(c) On the Effective Date, the Company will make an interest free loan
to you in the amount of $250,000. Such loan must be repaid on the first
anniversary of the Effective Date; provided, however, that any sums received by
-------- -------
you prior to such date pursuant to Section 2(b) above must be applied to prepay
such loan. On the Effective Date, you shall execute and deliver to the Company
a promissory note in the form attached hereto as Exhibit 2(c).
------------

(d) The Company shall grant to you, on the Effective Date, options to
purchase an aggregate of one million five hundred thousand (1,500,000) shares of
the Company's common stock (the "Options") in three Tranches as follows:

Tranche No. 1: 500,000 shares with an exercise price of $12.00 per share.
Tranche No. 2: 500,000 shares with an exercise price of $18.00 per share.
Tranche No. 3: 500,000 shares with an exercise price of $24.00 per share.

The Options shall be exercisable in installments in accordance with the
following vesting schedule:

<TABLE>
<CAPTION>
CumulativeDate Vested Percentage Balance Vested
- -------------- ----------------- --------------
<S> <C> <C>
First Anniversary of Effective Date 25% of each Tranche 25% of each Tranche

Second Anniversary of Effective Date 25% of each Tranche 50% of each Tranche

Third Anniversary of Effective Date 25% of each Tranche 75% of each Tranche

Fourth Anniversary of Effective Date 25% of each Tranche 100% of each Tranche
</TABLE>

(e) Upon a Change of Control (as such term is defined in the Plan) (i)
all Options will fully vest and (ii) you shall be paid by the Company an amount
equal to one year's worth of Base Salary in effect as of the date of the Change
of Control.

3. Duties.
------

(a) You shall serve as the Chief Executive Officer of the Company,
subject to the direction and control of the Board of Directors of the Company.
You shall also be a member of the Board of Directors of the Company. Your
principal office shall be located in the vicinity of Purchase, New York.

2
<PAGE>

(b) You shall devote your full business time, energies and attention
to the business and affairs of the Company and its subsidiaries.
Notwithstanding the foregoing, you shall be entitled to serve as a member of the
Board of Directors of one unrelated company so long as such company does not
compete with the Company.

(c) You shall, except as otherwise provided herein, be subject to the
Company's rules, practices and policies applicable to the Company's senior
executive employees.

4. Benefits. You shall be entitled to such benefits, if any, as are
--------
generally provided by the Company to its senior executive employees including,
without limitation, personal leave, sick leave, and holiday leave to the extent
such leaves are provided to all senior executive employees. You also shall have
the benefit of any life and medical insurance plans, pensions and other similar
plans as the Company may have or may establish from time to time for its senior
executive employees. The foregoing, however, shall not be construed to require
the Company to establish any such plans or to prevent the Company from modifying
or terminating any such plans, and no such action or failure thereof shall
affect this Agreement. In addition, you shall be entitled to 21 work days' paid
vacation per year and the Company, as a Company expense, shall allow you to use
the Company's leased suite or apartment in the vicinity of Purchase, New York.
The Company shall also reimburse you for expenses associated with relocating
personal effects from Denver to Washington, D.C. and in an amount not to exceed
$5,000 for up to four months early termination of your apartment in Denver.

5. Expenses. The Company will reimburse you for reasonable expenses,
--------
including travel expenses, incurred by you in connection with the business of
the Company upon the presentation by you of appropriate substantiation for such
expenses including incremental expenses associated with travel to and from
Washington, D.C.

6. Confidentiality, Non-Interference and Proprietary Information.
-------------------------------------------------------------

(a) Confidentiality. In the course of your employment by the Company
---------------
hereunder, you will have access to confidential or proprietary data or
information of the Company and its operations. You will not at any time divulge
or communicate to any person nor shall you direct any Company employee to
divulge or communicate to any person (other than to a person bound by
confidentiality obligations similar to those contained herein and other than as
necessary in performing your duties hereunder) or use to the detriment of the
Company or for the benefit of any other person, any of such data or

3
<PAGE>

information. The provisions of this Section 6(a) shall survive your employment
hereunder, whether by the normal expiration thereof or otherwise. The term
"confidential or proprietary data or information" as used in this Agreement
shall mean information not generally available to the public including, without
limitation, personnel information, financial information, customer lists,
supplier lists, trade secrets, information regarding operations, systems,
services, knowhow, computer and any other processed or collated data, computer
programs, pricing, marketing and advertising data.

(b) Non-Interference. You agree that you will not at any time after
----------------
the termination of your employment by the Company, for your own account or for
the account of any other person, tortiously interfere with the Company's
relationship with any of its suppliers, strategic partners, customers or
employees.

(c) Proprietary Information and Disclosure. You agree that you will
--------------------------------------
at all times promptly disclose to the Company (which, for the purposes of this
Section 6, shall include the Company and any subsidiaries and affiliates of the
Company), in such form and manner as the Company may reasonably require, any
inventions, improvements or procedural or methodological innovations, programs
methods, forms, systems, services, designs, marketing ideas, products or
processes (whether or not capable of being trade-marked, copyrighted or
patented) conceived or developed or created by you during or in connection with
your employment hereunder and which relate to the business of the Company and
any subsidiaries or affiliates ("Intellectual Property"). You agree that all
such Intellectual Property shall be works made for hire under U.S. copyright law
and shall be the sole property of the Company. You further agree that you will
execute such instruments and perform such acts as may reasonably be requested by
the Company to transfer to and perfect in the Company all legally protectible
rights in such Intellectual Property.

(d) Return of Property. All written materials, records and documents
------------------
made by you or coming into your possession during your employment concerning any
products, processes or equipment, manufactured, used, developed, investigated or
considered by the Company or otherwise concerning the business or affairs of the
Company, shall be the sole property of the Company, and upon termination of your
employment, or upon request of the Company during your employment, you shall
promptly deliver same to the Company. In addition, upon termination of your
employment, or upon request of the Company during your employment, you will
deliver to the Company all other Company property in your possession or under
your control, including, but not limited to, financial statements, marketing and
sales data, patent applications, drawings and other documents, and all Company
credit cards and automobiles.

4
<PAGE>

7. Equitable Relief. With respect to the covenants contained in
----------------
Section 6 of this Agreement, you agree that any remedy at law for any breach of
said covenants may be inadequate and that the Company shall be entitled to
specific performance or any other mode of injunctive and/or other equitable
relief to enforce its rights hereunder or any other relief a court might award.

8. Earlier Termination. Your employment hereunder shall terminate
-------------------
prior to the expiration of the Initial Term (or any renewal term, in the event
of renewal) on the following terms and conditions:

(a) This Agreement shall terminate automatically on the date of
your death. Upon any termination pursuant to this Section 8(a), the Company's
sole obligation shall be to pay your estate one year's worth of Base Salary in
effect as of the date of your death. Such amounts shall be paid to your estate
as and when such amounts would have been due had your employment continued.

(b) This Agreement shall be terminated if you are unable to
perform your duties hereunder for 90 days (whether or not continuous) during any
period of 360 consecutive days by reason of physical or mental disability. The
disability shall be deemed to have occurred on the 90th day of your absence or
lack of adequate performance. Upon any termination pursuant to this Section
8(b), the Company's sole obligation shall be to pay you one year's worth of Base
Salary in effect as of the date of termination of your employment hereunder.
Such amounts shall be paid to you as and when such amounts would have been due
had your employment continued.

(c) This Agreement shall terminate immediately upon the Company's
sending you written notice terminating your employment hereunder for "Just
Cause," which shall mean your gross dereliction of duty or any legal or moral
actions that would prevent you from carrying out your duties as anticipated by
the Board of Directors of the Company; provided, however, that the Company shall
be required to deliver to you thirty days' prior written notice of its intention
to terminate this Agreement pursuant to this Section 8(c) whereupon you shall
have a period of 90 days to cure the acts or omissions giving rise to "Just
Cause."

(d) This Agreement shall terminate immediately upon the Company's
sending you written notice terminating your employment hereunder (without Just
Cause therefor having been given by you) for any reason or for no reason. Upon
any termination pursuant to this Section 8(d), the Company's sole obligation to
you shall be to pay you one year's worth of Base Salary in effect as of the date
of termination of your employment hereunder. Such amounts shall be paid to you
as and when such amounts would have been due

5
<PAGE>

had your employment continued. Upon a termination of this Agreement pursuant to
this Section 8(d) you shall automatically be credited with one additional year
of employment for purposes of the Option vesting schedule set forth in Section
2(d) above.

(e) Except as specifically set forth in Section 9(d) above, upon
termination of this Agreement, the Company's obligations hereunder shall cease.

9. Representation and Warranty. You represent and warrant to the
---------------------------
Company that the execution, delivery and performance of this Agreement by you
will not conflict with or result in a violation of any agreement to which you
are a party or any law, regulation or court order applicable to you.

10. Entire Agreement; Modification. This Agreement constitutes the
------------------------------
full and complete understanding of the parties with respect to your employment
arrangements. No representations, inducements, promises, agreements or
understandings, oral or otherwise, have been made by either party to this
Agreement, or anyone acting on behalf of either party, which are not set forth
herein, and any others are specifically waived. This Agreement may not be
modified or amended except by an instrument in writing signed by the party
against which enforcement thereof may be sought.

11. Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.

12. Waiver of Breach. The waiver of either party of a breach of any
----------------
provision of this Agreement, which waiver must be in writing to be effective,
shall not operate as or be construed as a waiver of any subsequent breach,

13. Notices. All notices hereunder shall be in writing and shall be
-------
sent by express mail or by certified or registered mail, postage prepaid, return
receipt requested, if to you, to your residence as listed in the Company's
records, and if to the Company, to its address set forth at the head of this
Agreement, attention of Chairman with a copy to the Company's General Counsel at
the same address.

14. Assignability; Binding Effect. This Agreement shall not be
-----------------------------
assignable by you without the written consent of the Board of Directors of the
Company. This Agreement shall be binding upon and inure to the benefit of

6
<PAGE>

you, your legal representatives, heirs and distributees, and shall be binding
upon and inure to the benefit of the Company, its successors and assigns.

15. Governing Law. All questions pertaining to the validity,
-------------
construction, execution and performance of this Agreement shall be construed and
governed in accordance with the laws of the State of New York, without regard to
the conflicts or choice of law provisions thereof.

16. Headings. The headings of this Agreement are intended solely for
--------
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.

17. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

18. Disputes. In the event of any dispute under this Agreement, the
--------
non-prevailing party shall pay all legal fees and expenses of the prevailing
party.

19. Review of this Agreement. You acknowledge that you have (a)
------------------------
carefully read this Agreement, (b) had an opportunity to consult with
independent counsel with respect to this Agreement and (c) entered into this
Agreement of your own free will.

If this letter correctly sets forth our understanding, please sign the
duplicate original in the space provided below and return it to the Company,
whereupon this shall constitute the employment agreement between you and the
Company effective and for the term as stated herein.

INTERLIANT, INC.

/s/ Leonard J. Fassler
By: ________________________
Leonard J. Fassler,
Co-chairman

Agreed as of the date
first above written:

/s/ Herbert Hribar
___________________________
Herbert Hribar

7
<PAGE>

EXHIBIT 2(b)
------------

Targeted Incentive Bonus
------------------------

A. For the period beginning on the Effective Date and ending on the
first anniversary of the Effective Date you shall be entitled to receive the
following incentive bonus.

(i) Upon completion by you and approval by the Board of Directors
of the Company of the year 2000 business plan (which should be
completed and approved by March 31, 2000) you will be entitled to
receive $175,000.

(ii) Upon achievement of key measures of the annual business plan
(revenue and EBITDA), you will be entitled to receive an additional
$175,000.

8
<PAGE>

EXHIBIT 2(c)
------------

PROMISSORY NOTE
---------------

$250,000 February 1, 2000

FOR VALUE RECEIVED, the undersigned, Herbert Hribar ("Payor"), hereby
promises to pay to the order of Interliant, Inc. ("Payee") the sum of Two
Hundred Fifty Thousand Dollars ($250,000) in lawful currency of the United
States of America on February 1, 2001; provided, however, that any sums received
by Payor pursuant to Section 2(b) of the Employment Agreement dated January 14,
2000 between Payor and Payee must be applied by Payor to prepay this Note. This
Note shall not bear interest.

This Note shall be deemed to have been made under and shall be
governed by the laws of the State of New York in all respects, including matters
of construction, validity and performance, and none of its terms or provisions
may be waived, altered, modified or amended except as Payor or Payee may consent
thereto in writing.

IN WITNESS WHEREOF, Payor has executed and delivered this Note to
Payee as of the date first above written.

/s/ Herbert Hribar
----------------------------------
By: Herbert Hribar

<PAGE>

EXHIBIT 10.36

SECOND AMENDMENT TO LEASE AGREEMENT

THIS SECOND AMENDMENT TO LEASE AGREEMENT (this "Second Amendment") is dated
----------------
as of February 3, 2000, between WESTWOOD CENTER, L.L.C., a Delaware limited
liability company ("Landlord"), and INTERLIANT, INC., (formerly known as Sage
--------
Networks, Inc.), a Delaware corporation ("Tenant").
------

WITNESSETH

WHEREAS, Landlord entered into a Deed of Lease with Tenant dated as of
February 12, 1999 (the "Original Lease"), whereby Tenant leased from Landlord
--------------
certain commercial office premises consisting of 13,171 rentable square feet
(the "Original Premises") located on a portion of the first (1st) floor of the
-----------------
building consisting of 97,081 rentable square feet and located at 8619 Westwood
Center Drive, Vienna, Virginia (the "Building");
--------

WHEREAS, Landlord entered into a First Amendment to Lease Agreement with
Tenant dated as of June 28, 1999 (the "First Amendment"), whereby Tenant leased
---------------
from Landlord the remaining square footage on the first (1st) floor of the
Building (the "First Expansion Space") for a total of 22,270 rentable square
---------------------
feet (collectively, with the First Expansion Space, the "Initial Premises") (the
----------------
Original Lease, as amended by the First Amendment, is hereinafter referred to as
the "Lease").
-----

WHEREAS, Tenant desires to lease from Landlord and Landlord desires to
lease to Tenant the entire fourth (4th) floor of the Building (the "Second
------
Expansion Space"), on the same terms and conditions as contained in the Lease,
- ---------------
as amended and modified hereby.

NOW, THEREFORE, in consideration of the premises and agreements herein
contained, the parties hereto agree as follows:

1. Defined Terms. All capitalized terms used and not otherwise defined
-------------
herein shall have the meanings ascribed to them in the Lease and all exhibits
attached thereto.

2. Effective Date. This Second Amendment shall constitute a present and
--------------
binding agreement between the parties hereto which shall be effective as of the
date hereof.

3. Second Expansion Space. "Second Expansion Space" with respect to this
----------------------
Second Amendment shall mean that portion of the Building on the fourth (4th)
floor of the Building consisting of approximately 25,493 rentable square feet
which is demised hereunder by Landlord to Tenant and which is described and
depicted on Exhibit A attached hereto and made a part hereof. The parties agree
---------
that within ninety (90) days after the date hereof, the rentable square footage
of the Second Expansion Space is subject to final field verification by Tenant,
at Tenant's sole cost and expense, in accordance with the standards established
by the Building Owners and Managers Association ("BOMA"), and that the rentals
----
based thereon will be adjusted, if necessary, accordingly and retroactively to
the Second Expansion Space Commencement Date.
<PAGE>

4. Second Expansion Space Commencement Date. The Second Expansion Space
----------------------------------------
Commencement Date hereunder shall be May 1, 2000.

5. Premises. From and after the Second Expansion Space Commencement Date,
--------
"Premises" shall mean, in addition to the Initial Premises, as presently
included within the meaning of Premises under the Lease, the Second Expansion
Space. The definition of Premises as set forth in this Section 5, which as of
the Second Expansion Space Commencement Date shall consist of 47,763 rentable
square feet (subject to the provisions of Section 3 of this Second Amendment),
shall be applicable for all purposes of the Lease, including, but not limited
to, the calculation of Tenant's Share and the calculation of Base and Additional
Rent.

6. Tenant's Share. Commencing upon the Second Expansion Space
--------------
Commencement Date, "Tenant's Share" shall mean 49.2% (47,763/97,081) which shall
be adjusted, if necessary, in accordance with the verification procedures
outlined in Paragraph 3 hereof.

7. Construction of Tenant Improvements. "Tenant's Work" hereunder shall
-----------------------------------
mean the construction of the Tenant Improvements within the Second Expansion
Space in accordance with the Approved Plans as defined in Exhibit C to the
Lease. The Improvement Allowance as set forth in such Exhibit C is hereby
increased to an aggregate $477,630.00, calculated at $10.00 per rentable square
foot of the Premises. Provided that Tenant maintains all insurance required
under the Lease for the Second Expansion Space, access to the Second Expansion
Space shall be given to Tenant upon the execution of this Agreement for
purposes of Tenant's performance of Tenant's Work (but not for Tenant's
occupancy thereof). Tenant hereby acknowledges that $254,930.00 of the
aggregate $477,630.00 of the Improvement Allowance shall be applicable to
Tenant's Work within the Second Expansion Space and Tenant further acknowledges
that Tenant has previously expended the balance of the Improvement Allowance in
the amount of $222,700.00 for Tenant's Work within the Initial Premises.

8. Term. The term of the Lease applicable to the Second Expansion Space
----
shall commence on May 1, 2000, and expire one hundred twenty (120) months
thereafter. The Term of the Lease as set forth in Section 1.3 of the Lease is
hereby amended and modified to be coterminous with the term of the Lease
applicable to the Second Expansion Space; it being the intent of the parties
hereto that the Term of the Lease for the Premises shall expire on April 30,
2010.

9. Base Rent. The annual Base Rent for the Second Expansion Space (which
---------
shall be paid in monthly installments as a portion of the "Monthly Base Rent"
under and pursuant to the Lease) for the initial Lease Year of the Term shall be
Twenty Five and 50/100 Dollars ($25.50) per square foot of the Second Expansion
Space. Pursuant to the provisions of Section 1.5 of the Lease, Base Rent is
"net" of electrical service for the Premises, excluding parking areas and Common
Areas, which will be contracted for and paid directly by Tenant. As of May 1,
2001, and each subsequent annual anniversary of the Second Expansion Space
Commencement Date thereafter, the Base Rent for the Second Expansion Space shall
be increased to an amount equal to one hundred three percent (103%) of the Base
Rent for the Second Expansion Space for the immediately preceding Lease Year.
The foregoing shall not affect the scheduled escalation of Base Rent for the
initial Premises as originally set forth in the

2
<PAGE>

Lease, which shall remain as originally contemplated therein (it being the
intent hereof that the Base Rent applicable to the Second Expansion Space shall
be adjusted as of May 1 of each year, the Base Rent applicable to the Original
Premises shall be adjusted as of July 1 of each year and the Base Rent
applicable to the First Expansion Space shall be adjusted as of September 1 of
each year).

10. Operating Costs and Real Estate Taxes. The Operating Costs Base Year
-------------------------------------
(as defined in Section 9.2 of the Lease) and the Real Estate Tax Base Year (as
defined in Section 10.3 of the Lease) with respect to the Second Expansion Space
shall be the calendar year 2000.

11. Assignment; Subleasing. Tenant shall have the right to freely assign
----------------------
the Lease or sublet all or any portion of the Premises without the consent of
Landlord; provided, however, Tenant shall remain liable for all obligations
under the Lease and hereunder and shall provide thirty (30) days' prior written
notice to Landlord of such assignment or sublease. Notwithstanding the
provisions of this Section 11, all other provisions of Section 21 of the Lease
shall remain in full force and effect.

12. Renewal Term. Tenant's rights under Section 51 of the Lease shall
------------
include Tenant's option to extend the Lease Term as to the Second Expansion
Space for one (1) extension period of sixty (60) months, provided Tenant
complies with all the requirements set forth in Section 51 of the Lease,
including, but not limited to, written notice to Landlord. Tenant may exercise
the renewal option set forth in Section 51 of the Lease and herein with respect
to any combination of the following: (i) the Original Premises, (ii) the First
Expansion Space, and/or (iii) the Second Expansion Space.

13. Parking. From and after the Second Expansion Space Commencement Date
-------
and for the balance of the Term of the Lease, Tenant shall have the right to use
172 parking spaces located on a surface lot surrounding the Building and in a
two-story parking deck located at the side of the Building, including thirty
(30) parking spaces designated for Tenant's exclusive use, the location of such
reserved spots to be determined by the mutual agreement of Tenant and Landlord.
Landlord shall have no obligation or responsibility whatsoever for enforcing the
exclusive use of such parking spaces in favor of Tenant.

14. Signage. Tenant shall not place any sign on the Premises without
-------
Landlord's prior written consent; provided, however, Tenant shall have the right
to install its corporate name and/or logo on the exterior of the Building at
Tenant's sole cost and expense, in a location mutually agreed to by Landlord and
Tenant, which location is presently anticipated to be on the fourth (4th) floor
corner on the exterior of the Building. The form and design of such signage
shall be reviewed and approved by Landlord, whose approval shall not be
unreasonably withheld or delayed, and shall satisfy all applicable laws and
regulations.

15. Financial Information. Upon execution of this Second Amendment but in
---------------------
no event later than sixty (60) days thereafter, Tenant shall provide to Landlord
(i) the most current financial statements for the previous two (2) years,
including an income statement, balance sheet, sources and uses of cash and
financial, such statements to be either audited or certified as true and
accurate by the Chief Financial Officer of Tenant, and (ii) a summary of all
outstanding

3
<PAGE>

installment debt, lines of credit and contingent liabilities in form consistent
with the requirements of Section 36 of the Lease.

16. Cleaning Services. Landlord shall provide, as an additional service
-----------------
under Section 8.1 of the Original Lease, cleaning Services for the Second
Expansion Space commensurate with a Class-A office building, five (5) nights per
week, exclusive of holidays, the cost of which shall be deemed an Operating Cost
under the Original Lease.

17. Building Security and Access. From and after the Second Expansion
----------------------------
Space Commencement Date, Section 42 of the Original Lease is hereby amended to
increase the number of key cards provided to Tenant by Landlord from 100 to 220.
Tenant shall have the right of access to the Premises 24 hours per day, 365 days
per year.

18. Notices. Section 1.7 of the Original Lease is hereby modified to
-------
reflect that notices to Tenant shall be sent to the following:

Interliant, Inc.
8619 Westwood Center Drive, Suite 400
Tysons Corner, Virginia
Attention: David Link

With a copy to: Interliant, Inc.
Two Manhattanville Road
Purchase, New York 10577
Attention: General Counsel

With a copy to: Interliant, Inc.
1301 Fannin, #700
Houston, Texas 77002
Attention: Finance

19. Roof Space. Tenant shall have the right, pursuant to Section 41 of
----------
the Original Lease, of access to and non-exclusive use of up to 625 square feet
of the roof of the Building as depicted on Exhibit B attached hereto for the
---------
installation of various communication equipment; provided, however, that such
use by Tenant shall not interfere with the use and enjoyment of the Building of
any other tenant in the Building.

20. Generator Pads. (a) Tenant shall have the right of access to and non-
--------------
exclusive use of a space to be located opposite the current generator pad along
the existing tree line, for the placement of a new generator and diesel tank to
service the Second Expansion Space; provided, however, that such use by Tenant
shall not interfere with the use and enjoyment of the Building of any other
tenant in the Building.

(b) Tenant shall install the pad for the new diesel fuel tank, which pad
shall measure approximately 25 feet by 11 feet, and the pad for the new
generator, which pad shall measure approximately 34 feet by 12 feet. Tenant
shall erect a brick enclosure surrounding the new

4
<PAGE>

generator pad and diesel tank, which enclosure shall comply with all applicable
laws, ordinances and regulations and shall fully screen the new generator and
diesel tank from view. Both the installation of the pads and the erection of the
brick enclosures shall be pursuant to plans approved by Landlord prior to the
commencement of any work, which approval shall not be unreasonably withheld,
done in a good and workmanlike manner and remain free of all liens for work
performed.

(c) Tenant agrees to dismantle the current wood structure surrounding the
current generator pad and Landlord agrees to erect a brick enclosure surrounding
such pad, the design of which shall be mutually agreed upon by the parties
hereto. Such brick enclosure shall segregate Tenant's generator pad from the
pads of any other tenant and shall be subject to all applicable laws, ordinances
and regulations.

21. Electrical Room. (a) Tenant shall have the right of access to and
---------------
non-exclusive use of the electrical room as depicted on Exhibit C attached
---------
hereto located on the fourth floor of the Building; provided, however, that such
use by Tenant shall not interfere with the use and enjoyment of any other tenant
in the Building.

(b) Landlord shall seal, in accordance with the reasonable standards of
Tenant, the interior access door to the electrical room located on the first
floor of the Building.

(c) Landlord shall install, in accordance with the reasonable standards of
Tenant, a concrete pad in front of, and a door threshold on, the exterior access
door to the electrical room located on the first floor of the Building.

22. Complete Agreement; No Other Modification. The Lease, as amended by
-----------------------------------------
this Second Amendment, contains the entire agreement of the parties hereto and
no representations, inducements, promises, or agreements, oral or otherwise,
between the parties not embodied herein, shall be of any force or effect. This
Second Amendment may not be amended, modified, or canceled except by written
agreement executed by both parties. Except as otherwise expressly set forth
herein, the terms and provisions of the Lease are and shall remain in full force
and effect and the parties by their execution hereof hereby ratify, affirm and
approve the Lease, as amended by the Second Amendment.

23. Authority. Each party represents and warrants that all consents or
---------
approvals required of third parties (including, but not limited to, its Board of
Directors) for the execution, delivery and performance of this Second Amendment
have been obtained and each party has the right and authority to enter into and
perform its covenants contained herein. Upon request by either party, the other
party shall provide evidence of such party's authority to execute and deliver
this Amendment.

24. Counterparts. This Second Amendment may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall comprise one and the same instrument.

5
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
on the date and year first above written.

LANDLORD:

WITNESS: WESTWOOD CENTER, L.L.C.

/s/ Jeffrey Witek By: /s/ J. Martin McCoy
- --------------------------- -----------------------------
Name:
---------------------------
Title:
--------------------------

TENANT:

WITNESS: INTERLIANT, INC.

By:
- --------------------------- -----------------------------
Name:
---------------------------
Title:
--------------------------

<PAGE>

Exhibit 10.37

THIRD AMENDMENT TO SUBLEASE AGREEMENT

THIS THIRD AMENDMENT TO SUBLEASE AGREEMENT (the "Amendment") is made and
entered into as of February 10, 2000, by and between EOP-PERIMETER CENTER,
L.L.C., a Delaware limited liability company ("Sublessor"), and INTERLIANT, INC.
(f/k/a SAGE NETWORKS, INC.), a Delaware corporation ("Sublessee").

RECITALS

A. Sublessor (as successor in interest to Southern Company Services, Inc.) and
Sublessee are parties to that certain sublease agreement dated May 29, 1998
(the "Original Sublease") for certain space in the building known as 64
Perimeter Center East (formerly known as Building 64A) located at 64
Perimeter Center East, Atlanta, Georgia (the "Building"). The Original
Sublease has been amended by that certain First Amendment to Sublease
Agreement dated December 9, 1998 (the "First Amendment") and that certain
Second Amendment to Sublease Agreement dated October 31, 1999 (the "Second
Amendment") (the Original Sublease, the First Amendment and the Second
Amendment are referred to herein collectively as the "Sublease").

B. The premises demised under the Sublease are located in the Building and
consist of (i) Suite G-300 (the "Original Sublease Premises"), (ii) the
"Data Center Expansion Premises" (as defined in the Sublease) on Floor G2
of the Building, (iii) the "Temporary Office Space" (as defined in the
Sublease) on the first floor of the Building, and (iv) the "Second
Amendment Data Center Premises" (as defined in the Sublease) on Floor G2 of
the Building (the Original Sublease Premises, the Data Center Expansion
Premises, the Temporary Office Space and the Second Amendment Data Center
Premises are collectively referred to herein as the "Premises").

C. Sublessor and Sublessee are currently negotiating the terms of a new lease
(the "New Lease") for approximately 20,929 square feet (the "New Space")
located on the 8th floor of the building located at 66 Perimeter Center
East, Atlanta, Georgia, commonly known as 66 Perimeter Center East.

D. Pursuant to the Sublease, the term for the Temporary Office Space is
scheduled to expire on March 15, 2000 (the "Temporary Office Space Prior
Termination Date"), and the parties desire to extend the term of the
Sublease, but only as it pertains to the Temporary Office Space, all on the
terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Sublessor and Sublessee agree as
follows:

I. Extension. The term of the Temporary Office Space is hereby extended for a
---------
period commencing on the day immediately following the Temporary Office
Space Prior Termination Date and ending on May 15, 2000 (the "Temporary
Office Space Extended Termination Date"), unless sooner terminated in
accordance with the terms of the Sublease. That portion of the term
commencing on the day immediately following the Temporary Office Space
Prior Termination Date ("Temporary Office Space Extension Date") and ending
on the Temporary Office Space Extended Termination Date shall be referred
to herein as the "Temporary Office Space Extended Term."

II. Monthly Base Rent. Commencing on the Temporary Office Space Extension Date
-----------------
and throughout the remainder of the Temporary Office Space Extended Term,
Sublessee shall pay Sublessor the sum of $23,569.00 per month (i.e. $21.00
per rentable square foot in the Temporary Office Space) as Base Rent for
the Temporary Office Space, plus applicable State sales and use taxes, with
each installment payable on or before the first day of each month during
the period beginning on the Temporary Office Space Extension Date and
ending on the Temporary Office Space Extended Termination Date, prorated
for any partial month within the Temporary Office Space Extended Term. All
such Base Rent shall be payable by Sublessee in accordance with the terms
of the Sublease.

III. Condition of Temporary Office Space. Sublessee is in possession of the
-----------------------------------
Temporary Office Space and accepts the same "as is" without any agreements,
representations, understandings or obligations on the part of Sublessor to
perform any alterations, repairs or improvements.
<PAGE>

Exhibit 10.37

IV. Contingencies. This Amendment is expressly contingent on each of the
-------------
following occurring on or before February 11, 2000 (the "Contingency
Date"):

A. Sublessee executes and delivers the New Lease to Sublessor in form and
substance satisfactory to Sublessor; and

B. Sublessee delivers to Sublessor the Security Deposit (as defined in
the New Lease) and all prepaid rental due under the New Lease, all
strictly in accordance with the terms thereof.

In the event the foregoing are not satisfied on or before the Contingency
Date, this Amendment shall be terminated and of no force or effect, and any
occupancy by Sublessee of the Temporary Office Space after the Prior
Temporary Office Space Termination Date shall constitute a holdover subject
to the provisions of Section 26 of the Sublease, and Sublessor shall be
entitled to exercise any and all remedies available to it as a consequence
of Sublessee's holdover.

V. No Renewals. The extension rights set forth in Section 6 of the First
-----------
Amendment have expired or otherwise been satisfied and they no longer
exist. Sublessee has no rights to renew the term with respect to the
Temporary Office Space beyond the date set forth in this Amendment.

VI. Miscellaneous.
-------------

A. This Amendment sets forth the entire agreement between the parties
with respect to the matters set forth herein. There have been no
additional oral or written representations or agreements. Under no
circumstances shall Sublessee be entitled to any Rent abatement,
improvement allowance, leasehold improvements, or other work to the
Premises, or any similar economic incentives that may have been
provided Sublessee in connection with entering into the Sublease,
unless specifically set forth in this Amendment.

B. Except as herein modified or amended, the provisions, conditions and
terms of the Sublease shall remain unchanged and in full force and
effect.

C. In the case of any inconsistency between the provisions of the
Sublease and this Amendment, the provisions of this Amendment shall
govern and control.

D. Submission of this Amendment by Sublessor is not an offer to enter
into this Amendment but rather is a solicitation for such an offer by
Sublessee. Sublessor shall not be bound by this Amendment until
Sublessor has executed and delivered the same to Sublessee.

E. The capitalized terms used in this Amendment shall have the same
definitions as set forth in the Sublease to the extent that such
capitalized terms are defined therein and not redefined in this
Amendment.

F. Sublessee hereby represents to Sublessor that Sublessee has dealt with
no broker in connection with this Amendment, other than The Wesley
Company. Sublessee agrees to indemnify and hold Sublessor, its
members, principals, beneficiaries, partners, officers, directors,
employees, mortgagee(s) and agents, and the respective principals and
members of any such agents (collectively, the "Sublessor Related
Parties") harmless from all claims of any brokers claiming to have
represented Sublessee in connection with this Amendment, other than
The Wesley Company. Sublessor hereby represents to Sublessee that
Sublessor has dealt with no broker in connection with this Amendment,
other than The Wesley Company. Sublessor agrees to indemnify and hold
Sublessee, its members, principals, beneficiaries, partners, officers,
directors, employees, and agents, and the respective principals and
members of any such agents (collectively, the "Sublessee Related
Parties") harmless from all claims of any brokers claiming to have
represented Sublessor in connection with this Amendment, other than
The Wesley Company.
<PAGE>

Exhibit 10.37

IN WITNESS WHEREOF, Sublessor and Sublessee have duly executed this
Amendment as of the day and year first above written.

SUBLESSOR:

EOP-PERIMETER CENTER, L.L.C., a Delaware limited
liability company

By: EOP Operating Limited Partnership, a Delaware
limited partnership, its sole member

By: Equity Office Properties Trust, a
Maryland real estate investment trust,
its managing general partner

By: /s/ Jeff Sweeney
-----------------------------------

Name:
---------------------------------

Title: V.P. Leasing
--------------------------------

SUBLESSEE:

INTERLIANT, INC., a Delaware corporation

By: /s/ Jennifer Lawton
---------------------------------------------

Name:
-------------------------------------------

Title: Sr. Vice President
------------------------------------------

<PAGE>

EXHIBIT 21.1

Subsidiaries Jurisdiction
- ------------ ------------
<C> <S>
1. B.N. Technology, Inc. dba ICOM California
2. Digiweb, Inc. Maryland
3. Interliant Consulting and Professional Services, Inc. Massachusetts
(formerly Net Daemons Associates, Inc.)
reSOURCE PARTNER, INC. Delaware
rSP Insurance Agency, Inc. Ohio
Soft Link Holding Corp. Delaware
Soft Link, Inc. Minnesota
4. Interliant International, Inc. Delaware
(formerly Interliant of Texas, Inc.)
Interliant Europe B.V. The Netherlands
5. Sage Networks Acquisition Corp. Delaware
6. Sales Technology Limited England
Sales Success Limited England
7. Telephonetics, Inc. Delaware
8. The Jacobson Consulting Group, Inc. Delaware
9. Triumph Development, Inc. Delaware
10. Triumph Technology, Inc. Delaware
11. Web Provider, Inc. Maryland
</TABLE>

<PAGE>

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statement Form
S-8 (No. 333-83279) pertaining to the Interliant, Inc. 1998 Stock Option Plan of
Interliant, Inc. of our report dated January 31, 2000, except for Note 15, as to
which the date is March 2, 2000, with respect to the consolidated financial
statements and schedule of Interliant, Inc. included in its Annual Report (Form
10-K) for the year ended December 31, 1999.

/s/ Ernst & Young LLP

Boston, Massachusetts
March 28, 2000

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 27,608
<SECURITIES> 3,612
<RECEIVABLES> 15,359
<ALLOWANCES> 1,378
<INVENTORY> 0
<CURRENT-ASSETS> 49,683
<PP&E> 24,575
<DEPRECIATION> 6,376
<TOTAL-ASSETS> 162,875
<CURRENT-LIABILITIES> 22,797
<BONDS> 0
0
0
<COMMON> 446
<OTHER-SE> 137,129
<TOTAL-LIABILITY-AND-EQUITY> 162,875
<SALES> 0
<TOTAL-REVENUES> 47,114
<CGS> 0
<TOTAL-COSTS> 101,932
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 468
<INCOME-PRETAX> (53,932)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (53,932)
<EPS-BASIC> (1.50)
<EPS-DILUTED> (1.50)

</TABLE>