Atlanta, Georgia – (The Hosting News) – August 8, 2006 – Website and Internet services company, Web.com, Inc., has adopted a shareholder rights plan. Entered into with the Rights Agent,. the primary purpose of the plan is to preserve Web.com’s net operating loss carryforwards, or ”NOLs,” for federal income tax purposes.
NOLs are past losses that a corporation can use to reduce future taxable income. As of the beginning of 2006, Web.com had NOLs of approximately $300 million.
Jeffrey M. Stibel, Chief Executive Officer and President of Web.com explained, ”We believe our NOLs are a valuable asset to the company and our shareholders. While the rights plan cannot guarantee the continued availability of the company’s NOLs, after careful consideration, the company’s Board of Directors determined that it is in the best interests of the company and its shareholders to make a concerted effort to protect the NOLs by adopting the rights plan.”
Until Web.com’s market capitalization increases, Web.com’s future use of these NOLs could be substantially limited or eliminated in the event of an ”ownership change,” as defined under Section 382 of the Internal Revenue Code. In general, a company would experience an ownership change for this purpose if holders of at least 5% of the outstanding shares of common stock increase aggregate ownership interest in the company over a three-year testing period by more than 50%.
Future acquisitions of Common Stock by an existing 5% shareholder or a new 5% shareholder could cause a technical ”ownership change” and thereby limit or completely eliminate the availability of the NOLs to Web.com. The shareholder rights plan is designed to deter any person or group from becoming a 4.99% or greater beneficial owner of Web.com’s Common Stock. The rights plan also discourages, with certain exceptions, existing 4.99% or greater beneficial owners from acquiring any additional shares of Common Stock.
As part of the adoption of the rights plan, the Company’s Board of Directors declared a dividend of one right for each share of Common Stock held of record as of the close of business on August 15, 2006. The rights may cause substantial dilution to a person or group that attempts to acquire 4.99% or greater of Web.com’s Common Stock on terms not approved by the Board of Directors. Acquisitions of Web.com’s Common Stock that would otherwise trigger the rights under the terms of the plan are permitted where the Board of Directors has determined, prior to consummation, that the transaction is fair to and in the best interests of the Company’s shareholders.
The plan will automatically expire on July 23, 2007, unless earlier terminated, redeemed, exchanged, or amended by the Board of Directors because the change of control triggers will have reset to a more acceptable level by that time. Details of the shareholder rights plan will be outlined more fully in a letter that will be mailed to Web.com’s shareholders as of the record date, and in Web.com’s filings with the Securities and Exchange Commission.
Web.com, Inc., formerly Interland, Inc., provides web solutions, websites and web services, with do-it-yourself and professional website design, website hosting, ecommerce, web marketing and email. Since 1995, Web.com has assisted individuals and small businesses build a web presence, with more than 4 million websites utilizing Web.com’s proprietary tools, services and patented technology.
To learn more,
please visit: www.web.com.