September 6, 2005

Peer 1 Network Announces Acquisition of Interland’s Dedicated Server Assets

Company Also Announces US$36 Million Recapitalization in Addition to the US$14 Million Acquisition

VANCOUVER, British Columbia

Peer 1 Network Enterprises, Inc. (TSX VENTURE:PIX – News), a provider of high performance Internet infrastructure, announced today that it has purchased the dedicated server assets of Interland, Inc., a leading provider of Web sites and online services for small and medium-sized businesses for a purchase price of US$14 million. The assets acquired include data centers in Atlanta, Georgia; Fremont, California; and Miami, Florida, totaling over 115,000 square feet and approximately 8,300 dedicated servers.

C. Geoffrey Hampson, president and chief executive officer of Peer 1, anticipates that all of Peer 1′s business units will benefit significantly from the acquisition. “The accretive acquisition of Interland’s dedicated server assets is a key strategic element in the evolution of Peer 1 Network,” he said. “This transaction adds a large customer base, skilled staff, solid dedicated server equipment and three data centers to Peer 1 Network’s existing infrastructure. Add that to Peer 1′s specialization in customer service and high performance network, and the innovation of our subsidiary ServerBeach Ltd, and you have an outstanding fit.”

According to Tier 1 Research’s February, 2005 “Internet Infrastructure Services” report, colocation revenues rose 6% year over year in the fourth quarter of 2004, and dedicated standardized hosting experienced an average of 25% increase in revenues over the same time period. “Peer 1 Network has been aggressively pursuing acquisition opportunities for over a year,” continued Hampson. “With such compelling growth numbers in an industry for which we already have significant high performance infrastructure in place, it is clear to see the strategic addition of Interland’s dedicated server assets.”

In connection with the acquisition, the Company has completed three financing transactions. Firstly, the Company has entered into an agreement with a lender who has provided a senior long term facility of up to US$28 million, of which US$24 million was drawn down upon completion of the acquisition. The proceeds of the loan were used to fund the acquisition and to repay indebtedness of the Company. The loan bears interest at a rate per annum equal to Libor plus 6.5%. The maturity date of the loan is September 2, 2008; however, the Company may extend the maturity date for two years. A portion of the net proceeds received by the Company or any of its subsidiaries on the sale of assets or the issuance of equity securities are to be used to repay the loan. The Company issued to the two lenders warrants to acquire an aggregate of 2,306,571 common shares of the Company at the price per share of US$0.23 for a period of 5 years.

Second, the Company’s subsidiary, Peer 1 Network (USA) Inc. (“Peer 1 USA”) has issued 7,000 shares of Series A Preferred stock at a price per share of US$1,000, for aggregate proceeds of US$7,000,000. Celerity Partners, of Menlo Park, California, acquired $4 Million and insiders of the Company acquired an additional US$2,620,000 of the Series A Preferred stock. The Series A Preferred stock is non-voting, carries a cumulative annual dividend of 8% and is redeemable by the holders after the 4th anniversary of the date of issuance. At any time after the 4th anniversary of the date of issuance, subject to certain conditions, the holders of the Series A Preferred stock may require the Company to purchase some or all of such holder’s shares of Series A Preferred stock for cash and the Company may require the holders to sell all of their shares of Series A Preferred stock to the Company for cash. In each case, the purchase price per share is US$2,000. In addition, a holder of Series A Preferred stock may require the Company to purchase any or all of such holder’s shares in exchange for the number of common shares of the Company equal to (i) US$1,000 per share of Series A Preferred stock, plus cumulative but unpaid dividends thereon until the 4th anniversary of the date of issuance of such stock, (ii) divided by US$0.2291.

Third, the Company has converted approximately CDN$7,023,000 of its aggregate indebtedness into approximately 25,309,000 common shares of the Company, at a price per share of CDN$$0.2775. This indebtedness was held by insiders of the Company.

ABOUT INTERLAND: Interland, Inc. is a leading provider of Web sites and online services focused on helping small and medium-sized businesses achieve success by providing the knowledge, services and tools to build, manage and promote businesses online. Interland offers a wide selection of online services, including standardized Web hosting, ecommerce, application hosting, Web site development, online marketing and optimization tools. For more information about Interland, please visit www.interland.com or call at 800-336-9883.

ABOUT PEER 1 NETWORK: Peer 1 Network, the first Internet infrastructure provider to offer a 100% uptime guarantee, delivers leading-edge server colocation, IP network and customer support solutions to performance-hungry customers worldwide. Since its inception in 1999, the company has grown to 12 state-of-the-art data centers and 17 points of presence across North America and Europe, all connected by Peer 1′s world class IP network. Peer 1 serves customers who range from gaming to VoIP, to enterprise. The company’s headquarters are located in Vancouver, Canada and the stock is traded on the TSX Venture exchange under the symbol PIX. In 2004 Peer 1 acquired ServerBeach Ltd, a self-managed dedicated server company. For more information visit www.peer1.net.

ABOUT CELERITY PARTNERS: Celerity Partners is a private equity fund whose objective is to build businesses, in partnership with management, to preeminence in their respective markets. Since its inception in September 1995, Celerity has invested in over 40 companies with an aggregate transaction value in excess of $2 billion. Celerity currently manages approximately $200 million of equity capital and has offices in Los Angeles and Menlo Park, CA. www.celeritypartners.com

Statements in this release relating to matters that are not historical fact are forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Factors that could cause or contribute to such differences include, but are not limited to, general economic conditions, changes in technology, reliance on third party manufacturing, managing rapid growth, global sales risks, limited intellectual property protection and other risks and uncertainties described in Peer 1′s public filings with securities regulatory authorities.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Peer 1 Network Enterprises, Inc. (TSX VENTURE:PIX – News)

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Contact:

Peer 1 Network Enterprises, Inc.
Katie Wilson
Director of Communications
1-866-683-7747
kwilson@peer1.net
www.peer1.net

OR

Interland, Inc.
Peter Delgrosso
VP, Corporate Communications
(404) 260-2500
investor@interland.com
www.interland.com

OR

Weber Shandwick
Scott Charlston
(425) 452-5429
scharlston@webershandwick.com

OR

Tier 1 Research report:
lori@tier1research.com

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Source: Peer 1 Network Enterprises, Inc.