2020-10-20_GENERAL DOCUMENTS - C1980004 (2)

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Change (defined below) with respect to a corporation with NOL carryovers, such corporation will be subject to a limitation on its use of any NOL carryover incurred prior to the ownership change to offset taxable income earned after the Ownership Change (a " Section 382 Limitation"). Except as discussed below, the Section 382 Limitation on such corporation's NOL carryover will be equal to the product of (i) the net equity value of all of the corporation's stock immediately before the Ownership Change and (ii) the long-term tax-exempt rate as determined under IRS rules. The long- term tax-exempt rate is published monthly by the Treasury Department and is intended to represent current interest rates on long-term tax-exempt debt obligations. An Ownership Change also will require a corporation that, prior to the Ownership Change, has a Net Unrealized Built -In Loss (defined below), subject to certain limitations. to treat any built-in loss recognized during the five- year period beginning with the date of the Ownership Change (a " Recognized Built-in Loss") as a pre -change loss that is subject to the Section 382 Limitation described above. If the corporation has a Net Unrealized Built-in Gain (defined below). subject to certain limitations, the Section 382 Limitation for any taxable year within the recognition period will be increased by the amount of built-in gain recognized for such taxable year (a "Recognized Built-in Gain"). A "Net Unrealize d Built-in Gain" or "Net Unrealized Built- in Loss" exists to the extent the fair market value of the corporation's assets is more or less. respectively, than the aggregate adjusted tax basis of the assets immediately before an Ownership Change, provided that the resulting Net Unrealized Built-in Gain or Net Unrealized Built-in Loss is greater than the lesser of (i) 15% of the fair market value of the corporation's assets or (ii) $10 million. In general. an "Ownership Change" occurs if the percentage of stock of the corporation owned actually or constructively by one or more five (5) percent shareholders ("5% Shareholders", as defined below) increases by more than 50 percentage points on any Testing Date (defined below), taking into account all relevant adjustments as of the end of a Testing Date, as compared to the lowest percentage of stock of the corporation owned by those 5% Shareholders at any time during the statutory "Testing Period" (generally, the past three years or. if shorter, the period since the last Ownership Change). Generally, a " Testing Date" is any date on which there is any change in the ownership of stock that affects the percentage stock ownership of a 5% Shareholder. A " 5% Shareholder" is one who owns at least 5% of the stock of the corporation, and all stock owned by shareholders who are not 5% Shareholders is generally treated as being owned by one 5% Shareholder. Although the determination of whether there is an Ownership Change is highly fact specific and dependent on circumstances which are difficult to accurately assess, RPL is comfortable that the Debtor has not experienced an Ownership Change prior to the filing of the Plan and expects, however. that an Ownership Change will occur pursuant to the Plan. If, as expected, the Plan causes an Ownership Change, then to the extent not reduced by the amount of realized COD Income discussed in "Cancellation of Indebtedness Income" above, the use of the remaining NOL carryover will be subject to the Section 382 Limitation unless the exception in Section 382(1)(5) of the Tax Code ("Section 382(1)(5)") applies. Section 382(1)(5) provides a special rule applicable in the case of a bankruptcy reorganization. If a 22