INAP: Adopts Plan to Protect Net Operating Loss Tax Benefit

At December 31, 2018, INAP had $366.6 million of NOLs available for use to offset INAP’s future federal taxable income. INAP’s ability to use its NOLs would be substantially limited if INAP experienced an “ownership change” as defined in Section 382 of the Internal Revenue Code. A company generally experiences such an ownership change if the percentage of its stock owned by its “5-percent shareholders,” as defined in Section 382, increases by more than 50 percentage points over a rolling three-year period. The NOL Rights Plan is intended to reduce the likelihood of such an ownership change at INAP by deterring any person or group from acquiring beneficial ownership of 4.9% or more of INAP’s outstanding common stock, thereby protecting stockholder value. The NOL Rights Plan has not been adopted as an anti-takeover measure.

Under the NOL Rights Plan, one right will be distributed for each share of INAP’s common stock outstanding as of the close of business on December 30, 2019 and will trade with the common stock until the rights expire or detach as noted below. The distribution of the rights is not taxable to stockholders, and stockholders are not required to take any action to receive the rights. The NOL Rights Plan will have a limited term and the rights will expire prior to the earliest of (1) December 18, 2022, (2) the time at which the rights are redeemed or exchanged by INAP as described in the NOL Rights Plan, (3) the day after INAP’s 2020 annual meeting of shareholders if shareholders do not vote to ratify the NOL Rights Plan at the meeting, (4) the date that Section 382 of the Internal Revenue Code is repealed if the Board determines that the NOL Rights Plan is no longer needed for the preservation of tax benefits, and (5) the first day of a taxable year if the Board determines that no tax benefits are available to be carried forward. The NOL Rights Plan may be extended by the Board prior to the expiration of the rights, as long as the extension is submitted to INAP’s stockholders for ratification at the annual meeting following such extension.

If at any time after the Board's adoption of the NOL Rights Plan (subject to certain exceptions) a person or group obtains beneficial ownership of 4.9% or more of INAP’s common stock outstanding at the time of such acquisition, or an existing holder with greater than 4.9% ownership acquires additional shares representing at least an additional 0.50% of INAP’s common stock outstanding at the time of such acquisition (subject to certain exceptions), there would be triggering event causing significant dilution in the economic and voting interests of that person or group. INAP’s independent directors have the discretion to exempt any person or group for purposes of the NOL Rights Plan if they determine the acquisition by that person or group will not jeopardize tax benefits or is otherwise in the company's best interests.