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Form 906
Rev. January 1987
Department of the Treasury -- Internal Revenue Service

Closing Agreement On Final Determination Covering Specific Matters

    Under section 7121 of the Internal Revenue Code, the parties named
   herein and the Commissioner of Internal Revenue make the following
   closing agreement:
   
   WHEREAS, the Church of Scientology and its constituent entities (the
   "Church") and the Internal Revenue Service (the "Service") have a long
   history of controversy spanning over 30 years;
   
   WHEREAS, the Church has pending with the Service applications on Form
   1023 requesting that the Service recognize certain constituent
   entities within the Church as exempt from income taxation pursuant to
   section 501(a) of the Internal Revenue Service Code, as exclusively
   charitable organizations described in section 501 (c) (3) of the Code;
   
   WHEREAS, the controversy between the parties includes litigation
   (hereinafter "the section 170 litigation") in which the deductibility
   under Code section 170 of parishioners' payments to the Church in
   connection with their participation in religious services of the
   Scientology faith is at issue;
   
   WHEREAS, the Church signatories and individual Scientologists have
   initiated, supported and/or otherwise participated in litigation under
   the Freedom of Information Act (FOIA) to compel the Service to
   disclose information withheld by the Service in response to FOIA
   requests about its treatment of Scientologists and Churches of
   Scientology (hereinafter "FOIA litigation");
   
   WHEREAS, in October of 1991, the key officials of the Church, David
   Miscavige and Mark Rathbun, approached the Service seeking to
   negotiate the resolution of the above-described matters, and met with
   the then Commissioner;
   
   WHEREAS, at this meeting, the Commissioner indicated his desire to
   resolve all outstanding issues between the Church and the Service and
   appointed the Assistant Commissioner to negotiate and conclude a
   settlement with the Church on behalf of the Service;
   
   WHEREAS, the Church and the Service intend this closing agreement to
   be final and conclusive with respect to all matters but, while also
   final and conclusive, that its provisions relating to the continuing
   duties and obligations of both parties during the transition period
   shall generally be effective until December 31, 1999;
   
   NOW IT IS HEREBY DETERMINED AND AGREED, for purposes the Internal
   Revenue laws of the United States, and in consideration of the
   provisions contained herein that:
   
   TABLE OF CONTENTS
   I. Introduction
   II. Resolution of Outstanding Issues
   A. In General
   B. Payment in Consideration of Resolution of Outstanding Issues
   C. Effect of Agreement on Prior Tax Years and Waiver of Rights of
   Action
   D. Effect of Outstanding Administrative Matters
   1. Church tax inquiries under Code section 7611
   2. Other examinations of Scientology-related entities
   3. Outstanding tax assessments
   4. Trust fund recovery penalties
   5. Time period in which to effectuate paragraph D
   E. Effect on Outstanding Litigation Matters
   1. In general
   2. Zolin
   3. Stipulations
   4. Certain pending cases requiring coordination
   F. After-Discovered Cases of Examinations in Existence as of the Date
   of this Agreement
   G. Finality
   III. Service Determinations Regarding Scientology-Related Entities
   A. Issuance of Determination Letters
   B. Individual Determination Letters
   C. Group Determination Letters
   IV. Obligations and Undertakings During the Transaction Period
   A. Establishment of Church and Tax Compliance Committee
   1. Purpose of Church Tax Compliance Committee
   2. Membership of Church Tax Compliance Committee
   a. Corporate CTCC members
   b. At-large members of CTCC
   c. Individual CTCC members
   3. Responsibilities of CTCC
   a. Annual report
   b. Communications
   c. Meetings
   d. Guaranty
   e. Liability for penalties
   4. Actions of CTCC
   B. Financial Reporting Requirements
   1. Special accounting procedures
   a. In general
   b. Special Accounting Procedures --Operational aspects
   c. CPA's reports -- In general
   d. CTCC responsibilities
   e. Selection of a qualified CPA
   f. Definition of qualified CPA
   g. CTCC's approval of selection
   h. Notification of selection
   i. First Qualified CPA
   j. Special Purpose Report agreement
   k. Special Purpose Report scope limitation
   l. Access to Special Purpose Report - related to documents
   m. Required disclosures to CPA
   n. Submission of Special Purpose Reports
   o. Submission of plan of corrective action
   2. Internal financial reports
   3. Report on central reserves transactions and balances
   4. Tax returns
   5. Term
   C. Fiduciary Reporting Requirements
   1. Compensation information
   2. Modifications of organizational documents
   3. Reporting of any dividend payment with respect to any entity
   4. Reporting of any ownership change with respect to any entity
   5. Reporting on creation of new entities
   6. Reporting of any ecclesiastical modification or the restructuring
   of any entity
   7. Reporting of certain asset transfers and expenditures
   8. Reporting of certain asset transfers that diminish the assets of
   the corporate members of the CTCC
   9. Reporting of any amendment of any directive concerning the
   treatment of funds
   10. Activity or inaction in contravention of this Agreement
   11. Update on operational modifications
   12. Education and training issues under Code section 170
   F. Term of fiduciary reporting under section IV C
   D. Certifications
   1. In general
   2. Section 501 (c) (3)
   3. Continuing certifications
   E. Operational modifications
   F. Treatment of Information Exchanges
   V. Treatment of the Code Section 6104 Public Inspection
   File and Certain Other Materials
   A. Code section 6104 Public Inspection File
   B. Disclosure of Information by the Service
   C. Disclosure of Information by the CTCC
   D. Proceeding Under Agreement
   E. Disclosure Following Inquiries
   F. Correction of Misstatements
   G. Term of Undertaking
   VI. Penalty Provisions During Transition Period and Other Procedural
   Matters
   A. Introduction: Purpose and Scope of Sanctions
   B. Self-Dealing Transactions
   1. First-tier penalties
   a. On Individual CTCC member who is
   a self-dealer or who is related to
   a self-dealer
   b. On Individual CTCC member with
   knowledge of transaction
   2 . Second-tier penalties
   a. On Individual CTCC member who is a
   a self-dealer or who is related to
   a self-dealer
   b. On Individual CTCC member refusing
   to correct
   3. Self-dealing
   a. In general
   b. Special rules
   c. Exceptions
   d. Amount involved
   C. Noncharitable Expenditures
   First-tier penalties
   a. On Corporate CTCC members
   b. On Individual CTCC members
   2. Second-tier penalties
   a. On Corporate CTCC members
   b. On Individual CTCC members
   3. Noncharitable expenditure
   a. Noncharitable expenditure
   b. Expenditure responsibility
   c. Governing principles
   4. Special noncharitable expenditure
   5. Amount involved
   D. Reporting Obligations
   1. Penalty on Corporate CTCC members
   2. Penalty on Individual CTCC members
   a. Failure to comply with demand
   b. Application of penalties for failure
   to provide information
   3. Exception for reasonable cause
   4. Exception for inability to certify
   specific information
   E. Joint and Several Liability and Certain
   Penalty Limitations for Individual
   CTCC members
   F. Additional Penalty
   G. Third-Tier Penalty
   H. Procedures for Penalty Determinations
   1. a. First-tier penalty
   b. Second-tier penalties
   c. Other penalties
   2. Interest
   3. Non-assertion of penalties
   VII. Treatment of Parishioner's Contributions
   VIII. Definitions
   A. Code
   B. Entity
   C. Scientology-related entity
   D. Scientology-related individual
   E. Qualified Written Material
   F. Service
   G. Taxable Year
   H. Transition Period
   I. Agreement
   J. CTCC
   K. Church Signatories
   L. Settlement Agreement
   M. Annual Report
   N. Disqualified Person
   O. Willful
   P. Sanction Period
   Q. First-Tier Penalty
   R. Second-tier Penalty
   S. Correction
   T. Correction Period
   U. Church
   V. Commissioner
   W. Assistant Commissioner
   X. Knowing
   Y. Reasonable cause
   IX. Other Matters A. Representations
   B. Notices
   C. Rules of Construction
   D. Entire Agreement
   E. Survival of Agreement
   F. Cost of Compliance with Agreement
   G. Counterparts
   H. Finality
   I. Date of Agreement
   Signatures
   List of Exhibits
   
   I. Introduction.
   
   The parties have entered into this Agreement in order to put the past
   controversy behind them, to extinguish all potential claims and
   liabilities arising as a result of action or inaction prior to the
   date of this Agreement and to structure their relationship into the
   future. While complex, there are certain basic principles underlying
   the Agreement that will aid in its comprehension.
   
   First, under section II of the Agreement the Church will make a single
   payment that is intended to extinguish any potential tax liability
   that may be due and unpaid by any Scientology-related entity for all
   tax years up to and including the tax year ending in 1992. Thus, as of
   December 31, 1992, the Church will be current with respect to all
   income, employment and estate tax liability.
   
   Second, under section II of the Agreement, the Church and the Service
   will withdraw from virtually all existing controversy, including
   ongoing examinations of Church entities, ongoing litigation by the
   Service to enforce summonses for Church records, and all litigation by
   the Church against the Service and its current or former personnel. In
   addition, because the parties intend that the relationship between
   them begin anew, and in light of the other provisions contained in
   this Agreement, including the payment with respect to potential past
   tax liability, the Service and the Church agree under this section II
   of the Agreement that the Service will not examine the Church for any
   year ending prior to January 1, 1993. Similarly, no
   Scientology-related entity may initiate or support any legal action
   against the Service or any Service employee for any claim arising
   prior to the date of this Agreement.
   
   Third, it is the view of the Service that certain Church entities are
   entitled to recognition of tax-exempt status as entities described in
   section 501(c) (3) of the Internal Revenue Code. Thus, section III of
   the Agreement contains a list of entities that will be recognized as
   tax exempt entities, including certain entities that will receive
   group exemption letters covering their subordinate organizations.
   
   Notwithstanding the above, in light of, inter alia, the size and
   complexity of the Church and the Service, certain concerns of the
   Service and the Church remain. In addition, there is a need for
   improved communication between the parties. Thus, under section IV, a
   Church Tax Compliance Committee (CTCC) has been created to undertake
   certain obligations during a seven-year transition period. The CTCC is
   to be comprised of the largest United States Church entities, as well
   as those individuals who are the highest ecclesiastical or corporate
   authorities within the Church. The Service, through the Assistant
   Commissioner, has agreed to meet with the CTCC upon their request
   during the transition period to address any questions arising from the
   ongoing performance of the parties' obligations under this Agreement.
   
   The CTCC is in a position to monitor and effect the operations of the
   group entities that are defined as "Scientology-related entities"
   under this Agreement.
   Under section IV, the CTCC is responsible for certain reports produced
   and provided annually to the Service. These reports will include a
   report on the application of certain agreed-upon procedures by an
   independent certified public accounting firms, as well as certain
   other information collected and reported by the CTCC. These reports,
   and the information the CTCC collects
   from Scientology-related entities in order to prepare them, are
   intended solely for the purposes of administration of the tax laws and
   not for any other purpose.
   
   In light of the CTCC and its relationship to the whole of Scientology,
   the CTCC has agreed under section IV to guarantee the collection of
   taxes (including interest and penalties) from any Scientology-related
   entity for tax liability arising during the first three years of the
   seven-year transition period. The parties have agreed under section V
   to keep confidential both this Agreement and all underlying
   information that is not part of the public record under Code section
   6104 except to the extent that disclosure is necessary to interpret or
   apply this agreement or is permitted under the authority of law. In
   addition, the CTCC has agreed under section VI to certain consensual
   penalties intended to provide the Service intermediate sanctions for
   activities or conduct not in accordance with the Code or with this
   Agreement.
   
   Finally, under section VII, the Service and the Church have come to an
   agreement with respect to the treatment of contribution by Church
   parishioners and the extent to which those contributions are
   deductible under section 170 of the Internal Revenue Code, as well as
   the Service's acknowledgment of its obligation to interpret and apply
   the "gift or contribution" requirement of Code section 170 (c) equally
   and consistently to the fundraising practices of all religious
   organizations that receive fixed donations from parishioners in
   connection with participation in worship and similar religious rituals
   or services.
   
   II. Resolution of Outstanding Issues.
   
   A. In General. In general, the parties to the Agreement intend that
   the below-described issues be finally and conclusively resolved under
   this Agreement.
   
   B. Payment in Consideration of Resolution of Outstanding Issues.
   
   1. At the same time this Agreement is executed, Church of Scientology
   International is paying by banker's draft the sum of Twelve and
   One-Half Million United States Dollars (US$12,500,000.00), receipt of
   which the Service hereby acknowledges, as consideration for the
   settlement of outstanding issues with the Service as set forth in this
   Agreement.
   
   2.The amount paid under this Agreement includes recognition that the
   Church will not collect the attorneys' fees awarded to the Church in
   the Church of Scientology of Boston, Inc. litigation referred to in
   Exhibit II-2, thus extinguishing the Service's liability under that
   decision.
   
   3. The amount paid under this Agreement is not considered part of, or
   attributable to, the federal tax liability of any Scientology-related
   individual or Scientology parishioner, and is not deductible,
   refundable or creditable to any such individual for any purpose, nor
   may the amount be the subject of any other offset of liability under
   this Agreement.
   
   4. If, after application of the provisions of paragraph IX.H., the
   Service assesses a tax liability for a taxable year ending before
   January 1, 1993 against any Scientology-related entity, the amount
   paid under this Agreement shall be treated as a payment of the taxes
   so assessed against such entity as of the date of this Agreement in
   the manner designated by the CTCC. Otherwise, such amount shall not be
   considered part of, or attributable to, the federal tax liabilities of
   any Scientology-related entity and is not deductible, refundable or
   creditable to any such entity for any purpose, nor may the amount be
   the subject of any other offset of liability under this Agreement.
   
   5. The amount paid under this Agreement may be designated as the
   Service provides (including penalties or liquidated damages) so as to
   avoid characterization as a refundable or creditable amount.
   
   6. The amount paid under this Agreement shall not be deductible in
   computing the taxable income of any Scientology-related entity or
   Scientology parishioner and shall not be treated as compensation of
   either income to any Scientology-related entity or Scientology
   parishioner.
   
   7. The performance of the various obligations under this Agreement by
   the CTCC or by any Scientology-related entity, including (but not
   limited to) the payment under paragraph II.B.1. hereof, shall not in
   and of itself be considered by the Service to constitute the
   conferring of substantial private benefits by any Scientology-related
   entity, the private inurement of the net earnings of any
   Scientology-related entity, nor shall such performance adversely
   affect in any other way the tax exempt status under Code section 501
   (c) (3) of any Scientology-related entity.
   
   8. No inference shall be drawn from the fact that the payment provided
   in paragraph II.B.1 has been made with respect to whether any
   Scientology-related entity agrees that any tax liability was actually
   due or owing for any pre-1993 period.
   
   C. Effect of Agreement on Prior Tax Years and Waiver of Rights of
   Action.
   
   1. The Service agrees not to commence an examination or assess any tax
   liability under subtitles A, B, or C of the Code or under Chapter 42
   of subtitle D of the Code for any taxable period ending on or before
   December 31, 1992, with respect to any Scientology-related entity.
   Similarly, no Scientology-related entity shall have any right to
   refund or offset with respect to any payment made for any taxable
   period ending prior to the date this Agreement is executed.
   Notwithstanding the previous sentence, any amounts held in accounts
   under the joint signatory authority of any Scientology-related entity
   and a representative of the Service, and any other amounts otherwise
   in the nature of bond, to defer collection action by the Service with
   respect to any liability assessed against a Scientology-related entity
   for the a pre- taxable period (including, but not limited to, joint
   signature accounts at Sumitomo Bank to serve as collateral for FICA
   assessments against CSI, RTC, CSWUS, and CST) shall be released or
   otherwise returned to the Scientology-related entity. The Service and
   the CTCC shall jointly draft notice to the bank (s) to effectuate
   release of such funds.
   
   2. To the extent any payments have been made and/or claims for refund
   filed
   for any taxable period prior to the date of this Agreement by a
   Scientology- related entity, the Church and Service agree that such
   payments are not subject to refund and will not be refunded. The CTCC
   certifies that no Scientology-related entity will continue to pursue
   such claim for refund or file any new claim for refund for any
   pre-1993 period.
   
   3. The Service and the Church agree that no inference is to be drawn
   from any provision of the Agreement as to the tax treatment of any
   activity or item relating to any liability under the Code for any
   post-1992 periods unless expressly provided herein. For example, the
   fact that the Service has not assessed any unrelated business income
   tax for past years may not be construed to mean that activities that
   occurred in those years did not give rise to such liability and that
   if such activities continue into post-1992 taxable years, that they
   will not give rise to such income. For further example, the fact that
   the Church has made the payment provided in paragraph B.1. shall not
   be construed as an admission, or otherwise used in any way as
   evidence, that any Scientology-related entity was not exempt from
   federal tax for any taxable period before 1993.
   
   4. In reliance upon the covenant of good faith and fair dealing that
   underlies this Agreement, the Church signatories, as well as the
   Individual At-large members of the CTCC agree to relinquish all claims
   arising out of any action or inaction of the Service of current or
   former Service employees that occurred prior to the date of this
   Agreement, including, but not limited to, any claims of continued
   conspiracy having a genesis prior to the date of this Agreement. In
   addition, the Church signatories, and the Individual and At-large
   members of the CTCC certify that no Scientology-related entity or
   Scientology-related individual shall assist (directly or indirectly)
   any party in any suit against the United States, the Service or
   current or former Service employees based upon any claim arising out
   of any action or inaction of the Service or former or current
   employees that occurred prior to the date of this Agreement including,
   but not limited to, any claims of continued conspiracy having its
   genesis prior to the date of this Agreement. If any
   Scientology-related entity or Scientology-related individual commences
   any such action or provides any such assistance, then section VI shall
   apply.
   
   5. The CTCC shall indemnify and hold the United States, the Service or
   any Service employee (former or present) harmless with respect to any
   litigation filed or pursued in contravention of the Agreement, that
   is, any litigation filed or pursued by or with the assistance of any
   Scientology-related entity or Scientology-related individual. For
   purposes of this paragraph C.5, direct or indirect assistance
   includes, but is not limited to, financial aid, litigation support, or
   the use in connection with litigation of documents obtained from the
   Service by any Scientology-related entity or Scientology-related
   individual prior to the date of this Agreement or under the Inspection
   provisions of the Settlement Agreement entered into by the parties on
   even date herewith.
   
   6. Subject to the requirements of section VII, paragraph G., nothing
   in the preceding two paragraphs shall be construed to prevent any
   Scientology-related entity from conducting, supporting, or
   participating in, directly or indirectly, any judicial proceeding to
   construe or enforce the obligation under this Agreement, nor to impose
   any sanction or require indemnification to the Service as a result of
   such proceeding.
   
   D. Effect on Outstanding Administrative Matters.
   
   1. Church tax inquiries under Code section 7611. The Service shall
   close the following church tax inquiries on a no-change basis:
   
   Church of Scientology International
   
   Church of Scientology Flag Service Organization, Inc. (two outstanding
   inquiries)
   
   Church of Scientology Western United States
   
   2. Other examinations of Scientology-related entities The Service
   shall close the following income or employment tax examinations on a
   no-change basis:
   
   Church of Scientology Expansion Trust
   
   Church of Scientology Religious Trust
   
   Scientology Endowment Trust
   
   Bridge Publications, Inc.
   
   Applied Scholastics International
   
   Author's Family Trust B
   
   International Association of Scientologists
   
   Religious Technology Center
   
   Church of Scientology International
   
   Church of Spiritual Technology
   
   Church of Scientology Flag Service Organization, Inc.
   
   Church of Scientology Western United States
   
   Church of Scientology of California (employment)
   
   3. Outstanding tax assessments. The Service shall abate in their
   entirety the following unpaid tax assessments:
   
   Church of Scientology of California, FICA and FUTA for all quarters of
   the years 1976 through 1986.
   
   Religious Technology Center, FICA for all quarters of the years 1986
   and 1987.
   
   Church of Scientology International, FICA for all quarters of the
   years 1986 and 1987.
   
   Church of Spiritual Technology, FICA for all quarters of the years
   1986 and 1987.
   
   Church of Scientology Western United States, FICA for all quarters of
   the years 1986 and 1987.
   
   Religious Technology Center, Form 1120 Corporate Income Taxes,
   interest and penalties for the years 1982 to 1988.
   
   Church of Scientology International, Form 1120 Corporate Income Taxes,
   interest and penalties for the years 1981 to 1988.
   
   With respect to the foregoing tax assessments, the Service agrees to
   withdraw any notices of levy and to release any notices of tax lien
   filed or made prior to the date of this Agreement.
   
   4. Trust fund recovery penalties. The Service shall abate in their
   entirety assessments made under Code section 6672 with respect to
   certain FICA assessments against Church of Scientology of California
   (1985-1986), Church of Scientology International (1988), Church of
   Spiritual Technology (1988), Religious Technology Center (1988), and
   Church of Scientology Western United States (1988), against the
   following individuals: David Miscavige, Norman F. Starkey, Marc Yager,
   Mark Ingber, Lyman Spurlock, Patrick Broeker, and Ann Marie Tidman
   (Broeker). In addition, with respect to the foregoing penalty
   assessments, the service shall (1) refund upon proper claim any
   amounts collected, along with interest as permitted by law, (2)
   withdraw any notices of levy, and (3) release any notices of tax lien
   filed.
   
   5. Time period in which to effectuate paragraph D. The Service shall
   take the actions required under this paragraph D. by April 1, 1994.
   
   E. Effect on Outstanding Litigation Matters.
   
   1. In general. The Service and the CTCC agree that all litigation set
   forth in Exhibits II-1 and II-2 shall be dismissed with prejudice by
   stipulation of the parties (or, where appropriate, the pending appeal
   shall be withdrawn) with all litigation costs (e.g., attorney fees) to
   be borne by the respective parties. The parties agree that no damages,
   costs, attorney fees, or any other amounts of relief shall be sought
   by any Scientology-related entity or Scientology-related individual,
   the United States, the Service or any individual plaintiff in any suit
   contained in Exhibits II-1 or II-2.
   
   2. Zolin. The Service further agrees that following dismissal of the
   litigation listed on Exhibit II-2 as Zolin, it shall use its best
   efforts to return to the CTCC all materials and all copies thereof
   produced to the Service in response to the summons at issue in that
   litigation by no later than April 1, 1994. The CTCC hereby certifies
   that CSI shall retain all such materials during the transition period.
   No inference shall be drawn from the fact the Service is returning
   these materials that they were summonsed for an improper law
   enforcement purpose and the CTCC agrees not to assert such an
   inference in any future litigation.
   
   3. Stipulations. At Exhibit II-3, are copies of stipulations to
   dismiss the cases discussed at paragraph E.1. executed by counsel of
   record for the non-governmental parties thereto. The parties agree
   that, to the extent practicable, these stipulations shall be used to
   cause the dismissal of these cases and will provide a complete
   resolution of all issues arising out of the same subject matter. The
   parties agree that these stipulations shall be executed by counsel of
   record for the government and returned to the CTCC. The CTCC will file
   the fully executed stipulations with the appropriate court within 30
   days of its receipt of the executed stipulations. The parties further
   agree not to undertake any further actions to prosecute or defend any
   such litigation during the period of time following execution of this
   Agreement until the court has acted on the parties' dismissal
   stipulations. In addition, the parties agree to file as necessary
   requests to stay any action on such cases pending dismissal.
   
   4. Certain pending cases requiring coordination. Recognizing that
   carrying out the provisions of this paragraph E. shall require
   coordination with persons and agencies not parties to this Agreement,
   the parties further agree as follows:
   
   a. The Service shall use its best efforts to secure the voluntary
   dismissal with prejudice of all litigation listed in Exhibits II-1 and
   II-2 in which the Commissioner, the Service and /or Service employees
   are represented by the United States Department of Justice.
   
   b. The CTCC shall use its best efforts to secure the voluntary
   dismissal with prejudice of all litigation listed in Exhibits II-1 and
   II-2 insofar as it involves litigants who are not Scientology-related
   entities or individual members of the CTCC. Following execution of
   this agreement, the Church signatories, and the Individual and
   At-large members of the CTCC certify that no Scientology-related
   entity nor Scientology-related individual shall provide any further
   support or assistance (directly or indirectly) in such litigation.
   
   F. After-Discovered Cases or Examinations in Existence as of the Date
   of this Agreement. It is the intention of the parties to cease
   activity and dismiss with prejudice all existing cases in controversy
   between the Service and any Scientology-related entity or
   Scientology-related individual, costs to be borne by each party (e.g.,
   attorney fees), as well as all existing current examinations of
   Scientology-related entities for years prior to 1993. Thus, if there
   exists other civil actions that are not contained in Exhibits II-1 and
   II-2 or in the Settlement Agreement, Exhibit IV-6, or an examination
   of a Scientology-related entity is not listed in paragraphs D.1 and
   D.2, and the exclusion of such suit was inadvertent (i.e., not
   specifically discussed and intentionally excluded by the parties
   during their negotiations), the parties agree to dismiss such suit or
   cease such examination as soon as administratively feasible.
   
   G. Finality. The provisions of this section II. are final and
   conclusive, except as provided in section IX, paragraph H.,
   notwithstanding the seven-year transition period set forth in other
   provisions of this agreement.
   
   III. Service Determinations Regarding Scientology-Related Entities.
   
   A. Issuance of Determination Letters.
   
   Having received and reviewed the completed Forms 1023, Applications
   For Recognition of Exemption and the attachments thereto for the
   entities described in paragraphs B.1, B.2, B.3, B.4, B.5, B.6, B.7,
   B.8, and B.9 together with requests for group exemption letters and
   the attachments thereto described in paragraphs in paragraphs C.1,
   C.2, C.3 and C.4, on the basis of that information, the Service is
   issuing the individual determination letters and group determination
   letters described below and copies of which are attached at Exhibits
   III-1 through III-30.
   
   B. Individual Determination Letters.
   
   1. The Service hereby issues individual determination letters (copies
   attached as Exhibits III-1 through III-5, respectively) that the
   following entities are organizations described in Code sections 501(c)
   (3), 170(c) (2), 509(a) (1), and 170 (b)(1)(A)(i):
   
   Religious Technology Center ("RTC")
   
   Church of Scientology International ("CSI")
   
   Scientology Missions International ("SMI")
   
   Church of Spiritual Technology ("CST")
   
   Church of Scientology Flag Service Organization, Inc. ("CSFSO")
   
   2. The Service hereby issues an individual determination letter
   (copies attached as Exhibit III-6) that Foundation Church of
   Scientology Flag Ship Service Organization ("CSFSSO") is an
   organization described in Code sections 501(c) (3), 509(a) (1), and
   170(b)(1) (A) (i). CSFSSO is not described in Code section 170 (c) (2)
   because it is a foreign entity.
   
   3. The Service hereby issues individual determination letters (copies
   attached as Exhibits III-7 through III-14, respectively) that the
   following Scientology-related entities are organizations described in
   Code sections 501(c) (3), 170(c) (2), and 509(a) (3):
   
   Inspector General Network ("IGN")
   
   International Hubbard Ecclesiastical League of Pastors ("IHELP")
   
   Building Management Services ("BMS")
   
   Bridge Publications, inc. ("BPI")
   
   Dianetics Centers International ("DCI")
   
   Dianetics Foundation International ("DFI")
   
   Hubbard Dianetics Foundations ("HDF")
   
   U.S. IAS Members' Trust
   
   4. The Service hereby issues individual determination letters (copies
   attached as Exhibits III-15 and III-16, respectively) that the
   following Scientology-related entities are organizations described in
   Code sections 501 (c) (3), 170 (c) (2), 509 (a) (1) and, 170 (b) (1)
   (A) (vi):
   
   The Way to Happiness Foundation ("TWTH")
   
   Association for Better Living and Education ("ABLE")
   
   5. The Service hereby issues individual determination letters (copies
   attached as Exhibits III-17 and III-19, respectively) that the
   following Scientology-related entities are organizations described in
   Code sections 501 (c) (3) and 509 (a) (3):
   
   Scientology International Reserves Trust ("SIRT")
   
   Flag Ship Trust ("FST")
   
   New Era Publications International ApS ("NEP")
   
   However, these organizations are not describe in Code section 170 (c)
   (2) because they are foreign entities.
   
   6. Pursuant to a ruling request, the Service hereby modifies the
   individual determination letter (copy attached as Exhibit III-20) that
   the Church of Scientology Religious Trust ("CSRT") is an organization
   described in Code sections 501(c) (3), 170 (c) (2), and 509(a) (3).
   
   7. The Service hereby issues individual determination letters (copies
   attached as Exhibits III-21 through III-23, respectively) that the
   International Association of Scientologists ("IAS") and its operating
   arms: Membership Services Administration, Ltd., and Foundation
   International Membership Services Administration d/b/a IAS
   Administrations, are organizations described in Code sections 501(c)
   (3), and 509(a) (3). IAS and its operating arms are not described in
   Code section 170(c) (2) because they are foreign entities.
   
   8. The Service hereby issues an individual determination letter (copy
   attached as Exhibit III-24) that the Hubbard College of Administration
   ("HCA") is an organization described in Code sections 501(c) (3), 170
   (c) (2), 509 (a) (1), and 170 (b) (1) (A) (ii).
   
   9. Having previously issued a determination letter to the Church of
   Scientology Western United States ("CSWUS") (under the name Church of
   Scientology of San Diego) recognizing CSWUS as an organization
   described in Code sections 501(c) (3), 170 (c) (2), 509 (a) (1), and
   170 (b) (1) (A) (i), and having received and reviewed an updated Form
   1023 and attachments thereto (dated August 30, 1993), the Service
   hereby issues a revised determination letter (copy attached as Exhibit
   III-25) recognizing CSWUS as an organization described in Code
   sections 501(c) (3), 170 (c) (2), 509 (a) (1), and 170 (b)(1) (A) (i).
   
   10. The Service agrees that the organizations listed in paragraphs
   B.1, B.2. and B.9. are churches described in Code section 6033 (a) (2)
   (A) (i). Pursuant to Code section 6033(a) (2), Treas. Reg. [Section]
   1.6033-2(g) (6), and Rev. Proc. 86-23, 1986-1 C.B. 564, the service
   determines that the organizations described in paragraphs B.3, B.5,
   B.6, B.7, and B.8. are church-affiliated organizations that need not
   file annual Forms 990. However, nothing in this Agreement relieves any
   Scientology-related entity from any requirement to file a return
   (e.g., filing the Form 990-T in the event of unrelated business
   taxable income).
   
   C. Group Determination Letters.
   
   1. The Service hereby issues a group determination letter (as
   described in Rev. Proc. 80-27, 1980-1 C.B. 677 and Treas. Reg.
   [Section] 601.201 (n) (8) (copy attached as Exhibit III-26)) that the
   subordinate organizations of the Church of Scientology International
   are organizations described in Code sections 501(c) (3), 170 (c) (2),
   509 (a) (1), 170 (b) (1) (A) (i), and 6033 (a) (2) (A) (i).
   
   2. The Service hereby issues a group determination letter (as
   described in Rev. Proc. 80-27, 1980-1 C.B. 677 and Treas. Reg.
   [Section] 601.201(n)(8) (copy attached as Exhibit III-27)) that the
   subordinate organizations of Scientology Missions International are
   organizations described in Code sections 501(a) (2) (A) (I), 170
   (c)(2), 509(a)(1), 170(b) (1)(A)(i), and 6033 (a)(2)(A)(i).
   
   3. The Service hereby issues a group determination letter (as
   described in Rev. Proc. 80-27, 1980-1 C.B. 677 and Treas. Reg.
   [Section] 601.201(n)(8) (copies attached as Exhibit III-28 and III-29,
   respectively)) that the subordinate organizations of the following
   Scientology-related entities, are organizations described in Code
   sections 501 (c) (3), 170 (c) (2), 509 (a) (1), 170 (b) (1) (A) (ii)
   (but are not described in Code section 6033 (a) (2) (A) (I):
   
   Applied Scholastics Inc.
   
   Hubbard College of Administration ("HCA")
   
   4. The Service hereby issues a group determination letter (as
   described in Rev. Proc. 80-27, 1980-1 C.B. 677 and Treas. Reg. Section
   601.201(n)(8) (copy attached as Exhibit III-30)) that the subordinate
   organizations of the Citizens Commission on Human Rights ("CCHR") are
   described in Code sections 501 (c) (3), 170 (c) (2), 509 (a) (1), 170
   (b) (1) (A) (vi) (but are not described in Code section 6033(a) (2)
   (A) (i)).
   
   5. Subordinate organizations initially covered by the group exemptions
   recognized under paragraphs C.1, C.2, C.3 and C.4 are set forth in the
   following respective Exhibits:
   
   Church of Scientology International Exhibit III-31
   
   Scientology Missions International Exhibit III-32
   
   Applied Scholastics Inc. Exhibit III-33
   
   Citizens Commission on Human Rights Exhibit III-34
   
   Hubbard College of Administration Exhibit III-35
   
   IV. Obligations and Undertakings During the Transition Period.
   
   A. Establishment of Church Tax Compliance Committee
   
   1. Purpose of Church Tax Compliance Committee. The Church Signatories
   and others as described below shall form a Church Tax Compliance
   Committee (the "CTCC"). The purpose of the CTCC is to ensure that
   Scientology-related entities, including those recognized under section
   III of this Agreement as tax-exempt continue to be organized and
   operated in conformity with the requirements of Code section 501 (c)
   (3) and the provisions of this Agreement. Further, the CTCC is to
   ensure that no Scientology-related entity, regardless of whether the
   entity is described in Code section 501 (c) (3), engages in any
   conduct that may endanger the tax-exempt status of any other
   Scientology-related entity or that would otherwise be in contravention
   of this Agreement. The membership of the CTCC shall guarantee the
   obligations of any Scientology-related entity as to necessary
   compliance with the Code and the requirements of this Agreement. In
   addition, the CTCC will facilitate communication between the parties
   to this Agreement.
   
   2. Membership of Church Tax Compliance Committee. The CTCC shall
   consist of Corporate, At-large and Individual members.
   
   a. Corporate CTCC members. The Corporate CTCC members are RTC, CST,
   CSFSO, CSWUS, BMS, and CSRT (hereinafter "Corporate CTCC members").
   The Church of Scientology Religious Trust is also a Corporate member,
   to be represented by one CSRT trustee designated for this purpose. The
   Presidents of RTC, CSI, CST, CSFSO, CSWUS and BMS shall serve as
   representatives of their respective entities on the CTCC. No Corporate
   CTCC member many withdraw from the CTCC.
   
   b. At-large members of CTCC. The Watchdog Committee (as described in
   the Qualified Written Material) shall be an At-large member of the
   CTCC and shall be represented on the CTCC by the Chairman of the WDC.
   In addition, the International Finance Director and the Chief
   Accountant International shall serve as At-large representatives on
   the CTCC. The At-large members of the CTCC may not withdraw from the
   CTCC, although the individuals representing WDC or serving as Finance
   Director or Chief Accounting International may be replaced by reason
   of the prior office holder no longer serving in that capacity. The
   CTCC shall give prompt notice to the Service of any replacement of
   these individuals on the CTCC.
   
   c. Individual CTCC members. The individual members of the CTCC are
   David Miscavige, Norman Starkey, Mark Rathbun and Heber Jentzsch. No
   individual member of the CTCC shall be permitted to withdraw from
   service on the CTCC, except by reason of death, being adjudicated an
   incompetent, or by mutual agreement of the parties to this Agreement.
   
   3. Responsibilities of CTCC. In general, the CTCC is responsible for
   overall implementation of the duties and obligations imposed with
   respect to the Scientology-related entities by this Agreement during
   the transition period. Specific responsibilities and duties of the
   CTCC shall include the following:
   
   a. Annual Report. The CTCC is responsible for submission of the Annual
   Report transmitting the information required under section IV.
   paragraphs B., C., D.2 and D.3 of this Agreement (the Annual Report).
   The CTCC is also responsible for engaging the certified public
   accounting firm that is required to perform and report on certain
   agreed-upon accounting procedures under section IV. paragraph B. of
   this Agreement. Information required to be reported shall be contained
   in the Annual Report relating to the taxable year at issue and due no
   later than July 15 following the end of such year. This date may be
   extended by written agreement between the Service and the CTCC. No
   extensions beyond November 15 shall be granted, absent extraordinary
   circumstances . The Annual Report, any supplements thereto, and any
   responses to inquiries under paragraphs B. and C. shall be submitted
   under penalties of perjury in a manner similar to that set out in the
   form 990 (hence subject to prosecution under Code section 7206(1)).
   This report will be signed by all members of the CTCC.
   
   b. Communications. i. If the CTCC determines that it needs to
   communicate with the Service regarding any issue related to the Church
   and the Service, the CTCC may so notify the Service in writing.
   Included within the notice will be specific information regarding the
   issue the CTCC wishes to raise. Such disclosure is intended to provide
   the Service with sufficient information to determine if waivers under
   Code section 6103 may be required. If the Service determines that it
   needs to communicate with the CTCC regarding any issues related to the
   Church, the Assistant Commissioner may so notify the CTCC in writing.
   
   ii. The CTCC shall submit waivers in favor of CTCC members and their
   counsel as required under Code section 6103 on behalf of all
   Scientology-related entities recognized as described in Code section
   501(c)(3) under section III of this Agreement as soon as practicable
   but in no event later than 120 days after execution of this Agreement.
   Every such waiver also shall be submitted to the Service not more than
   60 days after its execution by the relevant Scientology-related
   entity.
   
   iii. Not withstanding the provisions for written notice in
   subparagraph i., nothing shall prohibit the parties from other, less
   formal modes of communication, such as the telephone. It is
   contemplated that there will be regular and frequent informal
   communications with respect to matters arising under this Agreement.
   
   c. Meetings. i. The CTCC and the Assistant Commissioner shall meet no
   less than once each year during the transition period, such meeting to
   be held no later than 90 days following the Service's receipt of the
   CTCC's annual report under subparagraph a.
   
   ii. If the CTCC submits a written request for a meeting, then a
   meeting with the Assistant Commissioner shall be held within 15
   working days after the receipt of such written request.
   
   iii. All meetings under this subparagraph c. shall be held at a
   mutually agreeable time at the National Office of the Service or other
   mutually agreeable location.
   
   d. Guaranty.
   
   i. In general. The Corporate CTCC members absolutely and
   unconditionally, jointly and severally, guarantee to the Service the
   full and prompt payment of all U.S. tax liabilities under the Code
   (including but not limited to income tax (including tax imposed under
   Code section 511) and employment tax), together with all interest and
   penalties, accruing or arising during the first three years of the
   transition period with respect to all Scientology-related entities.
   This guaranty is for the sole benefit of the Service and is for
   purposes of collection of the tax. The specific Scientology-related
   entity that is allegedly liable for the tax may contest the liability
   as permitted under the Code and regulations, and any final
   adjudication thereof, after exhaustion of all appeals, shall be
   binding and conclusive on the CTCC. If the liability is assessed
   against the specific Scientology-related entity without judicial
   review, the CTCC may dispute the underlying liability in any suit by
   the Service under paragraph A.3.d.ii. of this section IV. to collect
   on the guaranty. In addition, the guaranty shall not be operative to
   the extent that the Scientology-related entity satisfies the
   underlying liability or is successful in disputing the fact or amount
   of such liability.
   
   ii. Procedure for collection. At the time such liability is due and
   owing (i.e., the Scientology-related entity has exhausted its
   remedies), the Service may, at its sole option, present the CTCC with
   a notice substantially in the form of a Revenue Agent's Report
   detailing the unpaid tax, interest and penalty. The CTCC shall have
   180 days from such notice to make the payment, with interest, or to
   arrange for installment payments, with interest, to be made over a
   period not to exceed three years, which will provide the Service the
   present value of the liability. If no payment (and no arrangement for
   installment payments) is timely made, the Service may enforce the
   guaranty provisions of this Agreement.
   
   iii. Term of guaranty. This guaranty will apply only to tax
   liabilities of Scientology-related entities for taxable years 1993
   through 1995. The Service must present the CTCC with notice for
   payment in accordance with subparagraph ii., no more than two years
   following its receipt of the CTCC's report under paragraph A.3.a for
   the year 1997 or be forever barred from collecting on this guaranty.
   For purposes of this subparagraph d.iii, the notice under subparagraph
   d.ii may be given the CTCC prior to such time as the
   Scientology-related entity has exhausted its judicial remedies.
   
   iv. Example. A Class V church is determined by the Service to have
   engaged in an activity giving rise to unrelated business taxable
   income. The Class V Church disputes that the activity was a trade or
   business and the Class V Church brings suit in Tax Court. The Tax
   Court upholds the Service's position and the decision becomes final
   (including completion of appeal thereof or expiration of the time for
   bringing an appeal). At this time, the Service may collect the UBIT
   along with any applicable interest or penalties, upon notice, from the
   CTCC.
   
   v. Certain events not impairing guaranty. Without in any way limiting
   the generality of the absolute and unconditional guaranty in paragraph
   A.3.d, the obligations of the Corporate CTCC members under this
   Agreement shall not be affected or impaired by reason of the happening
   from time to time of any of the following events with respect to this
   Agreement, even if any such events happen without the giving of notice
   to, or obtaining the consent of, the Corporate CTCC member:
   
   a. any compromise, settlement, release, renewal, extension,
   indulgence, modification or termination of any or all of the
   obligations, covenants or agreements of any Church signatory,
   Scientology-related entity, or any Corporate CTCC member under this
   Agreement, including but not limited to any modification or amendment
   (whether material or otherwise) of any obligation, covenant, or
   agreement set forth in this Agreement;
   
   b. any waiver of the performance or observance by the Service or any
   Church signatory or Scientology-related entity, as the case may be, of
   any of the obligations, covenants, agreements, duties, terms or
   conditions in this Agreement;
   
   c. any extension of time for the filing of any tax return, payment of
   all or any part of any U.S. tax liability or the extension of the time
   for payment of any sums of money due under this Agreement or of the
   time for performance of any obligation under or arising out of this
   Agreement;
   
   d. any change in the composition of the CTCC, whether by the addition
   of any Individual, At-large or Corporate member, or the substitution,
   admission, withdrawal or removal of any CTCC member;
   
   e. any voluntary or involuntary liquidation, dissolution, merger, sale
   or other disposition of all or substantially all of the assets,
   marshaling of assets and liabilities, receivership, insolvency,
   bankruptcy, assignment for the benefit of creditors, reorganization,
   arrangement, composition, readjustment of debt, or other similar
   proceeding affecting any Church signatory, Scientology-related entity,
   any member of the CTCC or any of their assets, any say of the
   enforcement by the Service of any remedies against any Church
   signatory, Scientology-related entity or any member of the CTCC, in
   connection with any of the foregoing;
   
   f. the taking of any actions referred to in the Agreement or any
   failure, omission, delay, or deficiency on the part of the Service in
   enforcing, asserting or exercising any right, power, sanction or
   remedy pursuant to the Code or this Agreement;
   
   g. any release or discharge of any Church signatory,
   Scientology-related entity, or CTCC member from the performance or
   observance of any obligation, covenant, agreement, duty, term or
   condition herein, respectively, by operation of law;
   
   h. any merger, consolidation or sale, transfer, gift or other
   disposition of assets by any Church signatory, Scientology-related
   entity or CTCC member; or
   
   i. any default or failure by any member of the CTCC fully to perform
   the obligations, agreements, covenants, or duties under this
   Agreement.
   
   vi. No set-off. No set-off, counterclaim, reduction or diminution of
   obligation, claim for refund, abatement, or any defense of any kind or
   nature which any member of the CTCC has or may have against the
   Service shall be available to any member of the CTCC against the
   Service with respect to the guaranty set forth in this section IV.
   paragraph A.3.d.
   
   vii. Right to proceed directly against Corporate CTCC members. The
   Service, in its sole discretion, shall have the right to proceed first
   and directly against any one or all Corporate CTCC members under this
   Agreement, without proceeding against or exhausting its remedies
   against any other Corporate CTCC member of any other
   Scientology-related entity.
   
   viii. Agreement by CTCC not to diminish assets during transition
   period. The CTCC agrees that it shall not allow the material
   diminution of the assets of the Corporate members of the CTCC during
   the transition period. Diminution of assets will be deemed to be
   material to the extent that there has been in any year during the
   transition period, the transfer, grant, contribution, loan, payment
   for services, gift, voluntary or involuntary conversion, exchange,
   sale or any other disposition of assets (including but not limited to
   trademarks, copyrights, cash, securities, mortgages, etc.) by one or
   more Corporate CTCC members within the taxable year at issue resulting
   in the reduction in aggregate value, reflecting the greater of cost or
   market, of ten-percent or more of the aggregate total value
   (reflecting the greater of cost or market) of all Corporate CTCC
   members as of the beginning of the taxable year at issue. At no time
   during the transition period may the aggregate value of gross assets
   of the Corporate CTCC members be reduced by over fifty percent from
   the aggregate net value of their assets on December 31, 1993 through
   the disposition of assets as defined in this subparagraph. Transfers,
   etc., within the Corporate membership of the CTCC shall be disregarded
   for purposes of determining whether there has been a material
   diminution of assets, as will transfers between a Corporate CTCC
   member and a party that is not a Scientology-related entity for which
   the Corporate CTCC member receives fair market value in exchange. The
   involuntary loss or diminution in value of assets not attributable to
   the action or conduct of any Scientology-related entity shall not be
   considered in determining whether there has been a diminution of
   assets to which this subparagraph applies.
   
   ix. Discharge of guaranty. Upon a material breach by the Service of
   any of its obligations under this Agreement, the guaranty under this
   paragraph A.3.d. shall be null and void as to amounts not yet
   collected, and no amounts may be collected that would otherwise have
   been due under the guaranty prior to such material breach. For
   purposes of this subparagraph, only the following actions will be
   considered to be a material breach by the Service:
   
   a. the filing of suit to collect sanctions under section VI. from any
   corporate or individual CTCC member without engaging in substantive
   discussion with the CTCC of the parties' respective positions as
   required by paragraph H.3.a.iii of section VI;
   
   b. the issuance of a Regulation, Revenue Ruling or other pronouncement
   of general applicability providing that fixed donations to a religious
   organization other than a church of Scientology are fully deductible
   unless the Service has issued previously or issues contemporaneously a
   similar pronouncement that provides for consistent and uniform
   principles for determining the deductibility of fixed donations for
   all churches including the Church of Scientology;
   
   c. the knowing, negligent or willfull disclosure of information
   described in section V. paragraph A.4 of this Agreement in violation
   of any provision of section 6103, to the extent such disclosure is not
   the result of a good faith but erroneous interpretation of section
   6103; or
   
   d. the knowing, negligent or willful failure to disseminate the Church
   Fact Sheet as required by paragraph 5 of the Settlement Agreement
   attached hereto as Exhibit IV-5; or
   
   e. examining, assessing or seeking to collect any tax liability of any
   Scientology-related entity for any taxable year ending before January
   1, 1993, unless the Service terminates such action and refunds or
   credits any amounts collected within 90 days of notice from the CTCC,
   or unless section IX, paragraph H. applies.
   
   e. Liability for penalties. The CTCC shall be liable for the penalties
   set forth in section VI. of this Agreement.
   
   4. Actions of CTCC. David Miscavige will act as the initial Chairman
   of the CTCC. He may be removed from this office and replaced by
   another individual CTCC member by majority vote of the CTCC members.
   The CTCC shall promptly notify the Service of any change in the
   Chairmanship. The Chairman may act on behalf of the CTCC, and bind the
   CTCC, except where a specific provision of this Agreement requires the
   action of more than one CTCC member.
   
   B. Financial Reporting Requirements.
   
   1. Special Accounting Procedures.
   
   a. In general. The special accounting procedures of this section IV.
   paragraph B. apply to each corporate member of the CTCC, CSFSSO, NEP,
   BPI, Church of Scientology Celebrity Centre International, and to (i)
   any other Scientology-related entity formed under the laws of, and
   operating primarily in, a country other than the United States for any
   year in which such entity has United States source gross receipts
   (including contributions) in excess of $1,000,000 in value, and to
   (ii) any Scientology-related entity formed under the laws of, and
   operating primarily in, the United States for any year in which it has
   either (a) gross assets, or (b) gross receipts in excess of
   $10,000,000 in value. The entities with respect to which special
   accounting procedures apply are collectively called the "reporting
   entities."
   
   b. Special accounting procedures -- operational aspects.
   
   i. Required procedures. The CTCC shall retain a qualified CPA (defined
   below) to perform the agreed-upon procedures enumerated in Exhibit
   IV-2 of this Agreement with respect to each of the reporting entities.
   Following its performance of these procedures, the qualified CPA so
   selected shall report to the CTCC and to the Service in the form
   prescribed by the American Institute of Certified Public Accountants
   for engagements to apply Agreed-Upon Procedures (SAS No. 35, Special
   Reports -- Applying Agreed-upon Procedures to Specified Elements,
   Accounts, or Items of a Financial Statement) (hereinafter referred to
   as "Special Purpose Reports"). These Special Purpose Reports shall
   include a summary of any exceptions the qualified CPA discovers
   through the agreed-upon procedures.
   
   ii. Foreign entities. To the extent that the particular reporting
   entity is required under the laws of a foreign jurisdiction to have
   certified financial statements or an accountant's review prepared
   annually, those reports (converted to the English language and to
   United States dollars) may, in general, be substituted for the special
   purpose reports enumerated in Exhibit IV-2. However, the special
   purpose reports relating to fundraising and overseas cash flows must
   be performed for all reporting entities. In addition, this section IV.
   paragraph B.1.b.ii. shall not apply unless: (a) the financial
   statements are prepared by an accountant that otherwise meets the
   definition of Qualified CPA under this Agreement (or their equivalent
   under the laws of the foreign jurisdiction in which the accountant is
   admitted to practice); (b) the financial statements include a balance
   sheet, income statement accountants' report, and accountants' notes to
   the financial statements, (statements of cash flows and management
   letters shall be included to the extent they are prepared); and, (c)
   the foreign entity remains a reporting entity for purposes of special
   procedures to be performed in connection with other reporting
   entities.
   
   c. CPA's reports--In general. The CTCC shall also deliver to the
   Service two (2) copies of the special purpose reports and management
   letter (described below) for all reporting entities for each year
   during the Reporting Period. The Special Purpose Report must state
   that the Special Purpose Report was conducted in accordance with SAS
   no. 35, Special Reports--Applying Agreed-upon Procedures to Specified
   Elements, Accounts, or Items of a Financial Statement and this
   Agreement.
   
   d. CTCC responsibilities. The CTCC shall cause all reporting entities
   to fully and timely cooperate with the Qualified CPA in the
   preparation and submission of the Special Purpose Reports.
   
   e. Selection of a qualified CPA. The CTCC shall be responsible for the
   selection of a qualified CPA that meets the requirements set forth
   below. When selecting a CPA, the CTCC should consider, among other
   matters:
   
   i. The qualification of CPAs available to do the work;
   
   ii. The CPA's experience in performing audits of churches and other
   nonprofit organizations; and
   
   iii. The CPA's ability to timely complete and submit the Special
   Purpose Report.
   
   f. Definition of a qualified CPA.
   
   i. In general. For the first two taxable years to which this section
   IV. paragraph B. applies (i.e., for calendar years 1993 and 1994), the
   CPA must be a Big Six firm or, in the alternative, another firm agreed
   to by the Service. For the last taxable year to which this paragraph
   B. applies (i.e., 1995), the CPA may be designated by the CTCC,
   provided that the firm or CPA is (i) a qualified CPA and (ii) is
   acceptable to the Service. The Service consents to the designation of
   Richard D. Clark for the last year, provided that, at that time, he
   otherwise meets the requirements of being a qualified CPA.
   
   ii. Requirements for qualified CPA. For purposes of this Agreement,
   any CPA that meets the qualifications criteria of this section IV.
   paragraph B.1.f. and enters into a Special Purpose Report agreement
   with the CTCC, Corporate CTCC members and all reporting entities, and
   that complies with the provisions of this Agreement, will be
   considered a qualified CPA and acceptable to the Service.
   
   (a) Certification. The CPA must be a CPA in good standing in a state
   or the District of Columbia. The CPA does not have to be licensed by
   the state in which the Corporate CTCC members are located; however,
   the CPA must abide by the rules and regulations of professional
   conduct promulgated by the accountancy board of the state in which the
   Corporate CTCC members are located.
   
   (b) Practice before the Service. The CPA (or any accountant working
   for such CPA who is participating in the required reporting process
   under this Agreement) may not be, or have been, under suspension from
   practice before the Service.
   
   (c) Independence. The CPA must be independent. A CPA will be
   considered independent if the CPA meets the standards for independence
   contained in the AICPA Code of Professional Conduct in effect at the
   time the CPA's independence is under review. In addition, the CPA may
   not, at the time engaged (or at any time prior to that time), be a
   Scientology-related individual, a Scientology-related entity or a WISE
   sublicensee.
   
   (d) Peer review requirement. The CPA must belong to and participate in
   a peer review program, and must have undergone a satisfactory peer
   review conducted by the AICPA's Division for CPA Firms. After the
   initial peer review has been performed, the CPA must submit to a peer
   review of the accounting and audit practice every three years or at
   such additional times as designated by the peer review executive
   committee.
   
   g. CTCC's approval of selection. The CTCC's approval of a CPA must be
   recorded in writing and state the following:
   
   i. The CPA meets the Service's qualifications to perform the Special
   Purpose Report required by this Agreement; and
   
   ii. The CTCC, the Corporate CTCC members and all reporting entities
   and CPA will enter into a Special Purpose Report agreement in
   accordance with the provisions of this Agreement.
   
   h. Notification of selection. When the selection of a CPA by the CTCC
   has been made, the CTCC must notify the Service, in writing, prior to
   the execution of the Special Purpose Report agreement (as defined
   below) and in no event less than 90 days prior to the end of the
   taxable year for which the change of CPA is effective. The Service
   will notify the CTCC, in writing, within 30 days of the date of
   receipt of such notice, if the selection of a CPA is not satisfactory.
   A copy of the Special Purpose Report agreement, or any amendment to
   such agreement, is to be provided to the Service as soon as feasible
   after the execution thereof. One copy of the current Special Purpose
   Report agreement must be maintained in the CPA's workpapers or
   permanent file.
   
   i. First qualified CPA. The Service has been notified that the CTCC
   has selected Nanas, Stern, Biers, Neinstein and Co., 9454 Wilshire
   Boulevard, Beverly Hills, California, 90212 as its first qualified
   CPA. The Service approves of such selection. Notwithstanding paragraph
   h., the Special Purpose Report Agreement with Nanas, Stern, Biers,
   Neinstein and Co. shall be provided to the Service no later than with
   the First Annual Report due under this Agreement.
   
   j. Special Purpose Report agreement. The CTCC, Corporate CTCC members
   and all reporting entities shall enter into a Special Purpose Report
   agreement with the CPA that specifically complies with all of the
   following:
   
   i. The CTCC, Corporate CTCC members, all reporting entities and CPA
   acknowledge that the agreed-upon procedures are being performed and
   the Special Purpose Report is being issued in order to enable the
   CTCC, the Corporate CTCC members and the reporting entities to comply
   with the provisions of the Code and this Agreement.
   
   ii. The CTCC, Corporate CTCC members and all reporting entities
   acknowledge that this Agreement provides that if the CTCC fails to
   have a Special Purpose Report performed and documented in compliance
   with this Agreement, the CTCC and Corporate CTCC members are in
   violation of the provisions of this Agreement.
   
   iii. The CPA represents that he meets the requirements under this
   Agreement satisfactory to the Service.
   
   iv. The CPA will perform the agreed upon procedures in Exhibit IV-1
   and will prepare the Special Purpose Report in accordance with the
   requirements of this Agreement.
   
   v. The CPA will document the Special Purpose Report work performed in
   accordance with the professional standards of the AICPA and the
   requirements of this Agreement.
   
   k. Special Purpose Report scope limitation. The CTCC, Corporate CTCC
   members and reporting entities shall not limit the scope of the
   Special Purpose Report, nor suffer or permit the Special Purpose
   Report scope to be limited, to the extent that the CPA is unable to
   meet the Service's Special Purpose Report requirements.
   
   l. Access to Special Purpose Report-related documents. Pursuant to the
   terms of the Special Purpose Report agreement, the CPA must (at no
   charge to the Service):
   
   i. retain all Special Purpose Report-related documents (including but
   not limited to CPA's reports, workpapers, and management letters) for
   a period of four years after the close of the taxable year for which
   each Special Purpose Report was prepared; and
   
   ii. following the Service's request of, and the consent by, the CTCC,
   
   (a) make all Special Purpose Report-related documents available to the
   Service, and
   
   (b) permit the Service to photocopy all Special Purpose Report-related
   documents.
   
   m. Required disclosures to CPA. Prior to commencing the agreed upon
   procedures, the CTCC shall provide to the CPA a copy of all
   Scientology scripture concerning finances and accounting (e.g. the
   Treasury Division volumes) and any other written material relating to
   or involving the handling of funds by Church personnel in effect at
   that time. The CTCC also shall promptly provide to the CPA copies of
   any newly-issued materials on these subjects or any modification,
   amendment, or rescission of any existing material on the subject. In
   addition, the CPA is to be given a copy of the Agreement and any
   future amendments to the Agreement.
   
   n. Submission of Special Purpose Reports. The Annual Report shall
   include separate Special Purpose Reports for each reporting entity.
   These Special Purpose Reports are for the use of only the CTCC and the
   Service.
   
   o. Submission of plan of corrective action. The CTCC shall submit
   written comments to the Service on the exceptions and recommendations
   in the Special Purpose Reports and shall also submit to the Service:
   (i) a written plan for any corrective action taken or planned; and,
   (ii) comments on the status of any corrective action taken on
   previously reported exceptions and recommendations.
   
   2. Internal financial reports.
   
   a. As part of the Annual Report, the CTCC shall deliver a copy of the
   internally generated annual financial statements (either (i) income
   and expense statement, balance sheet, and all notes to financial
   statements or (ii) if such records are not generated in the normal
   course of church operations, then the adjusted trial balance and all
   adjusting journal entries) prepared for the internal use of the
   particular entity or other Scientology-related entity for the
   following entities.
   
   Church of Scientology International
   
   Religious Technology Center
   
   Church of Spiritual Technology
   
   Foundation Church of Scientology Flag Ship Service Organization
   
   Church of Scientology Flag Service Organization, Inc.
   
   Church of Scientology Western United States
   
   Church of Scientology Religious Education College, Inc.
   
   Church of Scientology Celebrity Centre International
   
   Scientology Missions International
   
   International Hubbard Ecclesiastical League of Pastors
   
   Church of Scientology Religious Trust
   
   Scientology International Reserves Trust
   
   Flag Ship Trust
   
   New Era Publications International ApS (including subsidiaries)
   
   Bridge Publications, Inc.
   
   Building Management Services
   
   FSO Oklahoma Investments Corporation
   
   World Institute of Scientology Enterprises
   
   Church of Scientology Advanced Organization Saint Hill, Europe and
   Africa (CS AOSH EU&AF)
   
   Church of Scientology, Inc. (CS AOSH ANZO)
   
   SOR Services (UK) Ltd.
   
   SOR Services Ltd. (Cyprus)
   
   Transcorp Services S.A.
   
   San Donato Properties Corporation
   
   In addition, internal annual financial statements as required above
   are to be provided for any Scientology-related entity not designated
   above (or in paragraph B.1.a. above) for any year in which it has
   either (a) gross assets (based on the greater of cost or fair market
   value) in excess of $15,000,000 in value, or (b) gross receipts in
   excess of $15,000,000 in value.
   
   b. As part of each Annual Report, the CTCC also shall include a
   consolidation of the above internal reports in a master balance sheet,
   and income and expense statement prepared in the same manner as the
   consolidated financial data submitted with the Qualified Written
   Materials. These consolidations are to be done in accordance with
   reasonable accounting practices and consistently year to year. The
   Annual Report also shall include a separate consolidated balance sheet
   for the corporate CTCC members. Consolidating adjustments shall
   include, but are not limited to, liabilities and corresponding
   receivables between Corporate members of the CTCC. The nature of
   consolidating adjustments will be explained in the Annual Report. All
   amounts shall be reported in United States dollars.
   
   c. As part of each Annual Report, the CTCC also shall include copies
   of audited financial statements (in the English language and U.S.
   dollars) for the International Association of Scientologists,
   Foundation International Membership Services Administrations,
   Membership Services Administration (U.K.), Ltd., and the U.S. IAS
   Members' Trust.
   
   3. Report on central reserves transactions and balances. As part of
   the Annual Report, the CTCC shall deliver to the Service a summary of
   central reserves transactions containing information in similar format
   to the summary information that was provided as part of the Qualified
   Written Material, with the exception that the information included in
   the Annual Report need not contain a list of reserves transfers to
   non-reserves accounts of the same Scientology-related entity. In this
   regard, for each year that this subparagraph applies, the Annual
   Report should contain a list of all expenditures (as described below)
   that have been made from the Church's central reserves system as
   described in the Qualified Written Material, or from the central
   reserves account of one Scientology-related entity into the central
   reserves account of another such entity. The list should include (i)
   the date of the expenditure, (ii) to whom the payment was made, (iii)
   by whom the payment was received, (iv) the purpose of the expenditure,
   and whether, and if so, why, in the opinion of the CTCC, this transfer
   furthers Code section 501(c) (3) purposes. For this purpose, the term
   "expenditure" includes, but is not limited to, grants, purchases,
   transfers, loans or repayments of loans, or other expenditures of
   assets under the control of the central reserves committee. In
   addition, the Annual Report shall include a beginning balance and a
   year-end balance showing the amount of cash and other assets in the
   Central Reserves.
   
   4. Tax returns. As part of the Annual Report, the CTCC shall provide a
   copy of each United States tax return (including information returns)
   and all United States tax forms filed by any Scientology-related
   entity. These returns may not be included in the Annual Report in
   electronic form unless agreed to by the parties. Forms W-2, 1099, 940,
   941 and 941E need not be submitted under this paragraph. The Annual
   Report shall also include copies of the annual update on the group
   exemptions required by Rev. Proc. 80-27, 1980-1 C.B. 677 and Treas.
   Reg. Section 601.201(n) (8).
   
   5. Term. Reporting under this section IV. paragraph B. is required for
   three taxable years, beginning with the 1993 Annual Report.
   
   C. Fiduciary Reporting Requirements.
   
   1. Compensation information. For each calendar year in issue, the
   Annual Report shall contain the following information with respect to
   compensation paid certain individuals by Scientology-related entities:
   
   a. The names and total compensation (as more fully described below)
   paid to each of the twenty natural persons with the highest amount of
   compensation during the calendar year in issue. For purposes of
   determining the highest paid individuals, the compensation of an
   individual includes amounts received from Scientology-related entities
   by the spouse of that individual. Where a spouse has such
   compensation, the spouse's name and the nature and amount of the
   compensation are to be separately listed. To determine those
   individuals for whom this paragraph requires disclosure, all
   compensation from all Scientology-related entities is to be
   aggregated. A husband and wife are to be treated as a single entry on
   this list (i.e., not as two highly paid individuals). In addition, any
   individual who is included in the list required in paragraph C.1.b.
   below is not to be included in this list.
   
   b. The total compensation paid to each Individual CTCC member, as well
   as natural persons serving on the CTCC in a representative or At-Large
   capacity, and to (i) each such person's spouse, (ii) siblings of each
   such individual CTCC member (including compensation of each sibling's
   spouse), (iii) with respect to Individual CTCC members, each
   Individual CTCC member's parents, and (iv) with respect to Individual
   CTCC members, each Individual member's children. The Annual report
   shall separately list the name and compensation of each such family
   member.
   
   c. The Annual Report also shall include (i) copies of Forms W-2 and
   1099 for each natural person listed whose compensation must be
   reported under paragraphs C.1.a. or C.1.b. and (ii) a description of
   any relationship (direct or indirect) between any Scientology-related
   entity and a natural person whose compensation must be reported under
   paragraphs C.1.a. or C.1.b. in which anything of value is exchanged.
   Thus, for example, if an individual or any member of that individual's
   family is a shareholder or holds another ownership interest in an
   entity that does business, or receives anything of value from any
   Scientology-related entity, the existence of such relationship and the
   facts relating to it are required to be disclosed in the Annual
   report. Under subparagraph (ii) of this paragraph c., reporting is not
   required if the stock or ownership interest is less than five percent.
   
   d. For purposes of the Annual Report, the term "compensation" includes
   anything of value provided (directly or otherwise) by, or attributable
   to, any Scientology-related entity. Whether an item is considered
   "compensation" is determined without regard to whether that item of
   value is includible in the individual's gross income for purposes of
   reporting or taxation. "Compensation" includes, but is not limited to,
   the following: (i) wages or salary (including any bonus or overtime
   pay); (ii) other payments (as an independent contractor, provider of
   goods or services, or otherwise), including but not limited to any
   interest, dividend or other corporate distribution; (iii) gross
   commissions; (iv) the value of any deferred compensation (qualified or
   non-qualified and valued without regard to any risk of forfeiture,
   vesting or other restriction); (v) the value of any beneficial
   interest in any trust attributable in any fashion to contributions
   made by or on behalf of any Scientology-related entity (valued without
   regard to any risk of forfeiture, vesting or other restrictions); (vi)
   any fringe benefit (other than de minimis fringes excludible under
   sections 132 (a) (4) and 132 (e) of the Code; (vii) the highest
   balance of any loan or loans outstanding from any Scientology-related
   entity to the individual at any time during the year in question;
   (viii) any personage or rental allowance; and, (ix) the amount of any
   reimbursed expenses (business or otherwise). For the purposes of (ix),
   compensation from this source may be ignored if the individual
   received in the aggregate less than $10,000 for all reimbursements in
   the year.
   
   To the extent compensation is provided in a form other than wages or
   salary, such compensation is to be listed separately with a short
   description of which category it falls within. If a fair market value
   is not available, the type of compensation should be listed along with
   an explanation that will be helpful to understand its nature and
   possible worth.
   
   Finally, if compensation is received from more than one
   Scientology-related entity, compensation should be listed separately
   for each such entity.
   
   2. Modifications of organizational documents. The Annual Report shall
   describe any amendment or other change in any organizational document
   of any of the following organizations: (i) any organization whose
   tax-exempt status is recognized under this Agreement, other than
   subordinate entities under the group exemptions provided in section
   III. paragraph C.; (ii) those entities described in paragraph B.2 or
   D.2, below. For purposes of this paragraph, an organizational document
   includes any document that is necessary for inclusion in a Form 1023.
   Thus, articles of incorporation, articles of association,
   constitution, bylaws, trust instrument or indenture or similar
   document, including any board or trustee resolution interpreting such
   document are organizational documents.
   
   3. Reporting of any dividend payment with respect to any entity. The
   Annual Report shall disclose any dividend or other distribution with
   respect to its stock (including, but not limited to any distribution
   in liquidation or reorganization of the company) paid during the year
   by any Scientology-related entity formed as a company or corporation.
   This report will include the facts surrounding the distribution.
   Reporting under this paragraph shall also occur if a payment is made
   in the nature of a dividend or a return of capital by any other
   Scientology-related entity (e.g., a partnership distribution).
   
   4. Reporting of any ownership change with respect to any entity. The
   Annual Report shall disclose any change in ownership or control of any
   Scientology-related entity. Thus, if such entity is a stock company or
   trust, any changes in the legal or beneficial ownership of the stock
   or trust must be reported. With respect to trusts, nonstock or
   nonprofit organizations, any change in the ability to any other entity
   or individual to appoint the board or trustees must be reported.
   
   5. Reporting on creation of new entities. The Annual Report shall
   include an update disclosing the existence of any entity meeting the
   definition of Scientology-related entity that has not been previously
   disclose to the Service. The report must include, for example, every
   new entity formed after December 31 of the prior taxable year (or with
   respect to the first Annual Report, after November 1, 1992) other than
   a subordinate entity included under one of the group exemptions
   provided in section III. paragraph C. The following information must
   be included for purposes of disclosure in the Annual Report: (i) name
   and address; (ii) employer identification number, if applicable; (iii)
   the nature of its purposes and activities; (iv) the officers, trustees
   and/or directors of the entity; (v) a balance sheet as of the end of
   the taxable year; (vi) an income and expense statement as of the end
   of the taxable year; (vii) the ownership of the entity; (viii) the
   relationship of the entity to any other Scientology-related entity,
   and, (ix) an explanation of whether, and to what extent, the new
   entity or any of its operations has, or may have, an effect on the
   tax-exempt status of any other Scientology-related entity, or, in the
   alternative, the specific reasons the CTCC believes that the creation
   and operation of the new entity have no such effect.
   
   6. Reporting of any ecclesiastical modification or the restructuring
   of any entity. The Annual Report shall include any changes to the
   ownership (e.g., corporate organization) of any Scientology-related
   entity or to the ecclesiastical management structure of the Church,
   including, but not limited to, any changes in the structure outlined
   in the booklet entitled "The Command Channels of Scientology" as
   submitted in the Qualified Written Material. Changes in the personnel
   who hold positions within the ecclesiastical structure need not be
   included within the report required under this paragraph, other than
   those who serve on the CTCC.
   
   7. Reporting of certain asset transfers and expenditures.
   
   a. The Annual Report shall disclose the transfer, grant, contribution,
   loan, payment for services, gift, voluntary or involuntary conversion,
   exchange, sale or any other disposition of assets (hereinafter an
   "expenditure") by one Scientology-related entity to another
   Scientology-related entity within the taxable year at issue, if the
   transfer involved assets (including trademarks, copyrights, cash,
   securities, mortgages, etc.) with an aggregate value, reflecting the
   greater of cost or market, of $1,000,000 or more.
   
   b. The Annual Report shall contain the fact of and the steps taken to
   ensure expenditure responsibility with respect to a specific
   expenditure if that expenditure is made by one or more
   Scientology-related entities recognized as tax-exempt under section
   III of this Agreement to a noncharitable beneficiary and if, in any
   single taxable year, such payments to the specific noncharitable
   recipient exceed $25,000. For purposes of this paragraph, the term
   expenditures does not include a transaction with a person other than a
   Scientology-related entity or a Scientology-related individual for
   which fair market value is received in return.
   
   c. The Annual Report disclosure required under section IV. paragraph
   C.7.a. and C.7.b. is to contain the following information: (i) the
   name and address of both transferor and transferee; (ii) the amount
   and nature of the assets transferred; (iii) the purpose of the
   transfer; and, (iv) whether, and if so, why, in the opinion of the
   CTCC, this transfer furthers Code section 501(c)(3) purposes.
   
   d. Reserves transaction reported under paragraph B.3. need not be
   reported again under this paragraph C.7.
   
   8. Reporting of certain asset transfers that diminish the assets of
   the corporate members of the CTCC. The Annual Report shall disclose
   the transfer, grant, contribution, loan, payment for services, gift,
   voluntary or involuntary conversion, exchange, sale or any other
   disposition of assets by one or more Corporate CTCC members where
   within the calendar year at issue, the transfer involved assets
   (including but not limited to trademarks, copyrights, cash,
   securities, mortgages, etc.) with an aggregate value of ten-percent or
   more of the aggregate total value (reflecting the greater of cost or
   market) of all Corporate CTCC members as of the beginning of the
   taxable year at issue. The report is to contain the following
   information: (i) the name and address of both transferor and
   transferee; (ii) the amount and nature of the assets transferred;
   (iii) the purpose of the transfer; and, (iv) whether, and if so, why,
   in the opinion of the CTCC, this transfer furthers Code section
   501(c)(3) purposes. Transfers, etc. within the Corporate membership of
   the CTCC shall be disregarded for reporting purposes under this
   paragraph C.8.
   
   9. Reporting of any amendment of any directive concerning the
   treatment of funds. The Annual Report shall disclose the issuance,
   modification, amendment, or rescission of any written material
   relating to or involving the handling of funds by Church personnel.
   The Annual Report also shall include copies of relevant materials and
   an explanation of the reasons for change. Under this paragraph,
   disclosure is required with respect to all directives, including but
   not limited to HCO Policy Letters, Executive Directives and similar
   items. Thus, for example, disclosure under this paragraph would be
   required in the event of any modification to the book entitled
   Treasury Division, Volume 3 of the Organization Executive Course (by
   L. Ron Hubbard).
   
   10. Activity or inaction in contravention of this Agreement. The CTCC
   shall use its best efforts to include with the Annual Report
   information relating to any action or inaction by any
   Scientology-related entity or individual that occurred during the year
   that is in contravention of, or inconsistent with, any provision of
   the Code, Treasury regulations or this Agreement, including the
   recognition of exemption for certain entities contained in section
   III. paragraphs B. and C. and the certifications contained in section
   IV. paragraph D. Information disclosed under this paragraph shall
   include an explanation of the action or inaction involved, the name of
   the individual or entities involved, the date of the act or inaction,
   and whether, and to what extent, the CTCC has investigated, including
   any findings and any actual or planned corrective action with respect
   thereto.
   
   11. Update on operational modifications. The Annual Report is also to
   contain an update on the operational modifications that are required
   to be undertaken under section IV. paragraph E.
   
   12. Education and training issues under Code section 170. The Annual
   Report shall disclose any modifications to the training side of the
   "Scientology Classification, Gradation and Awareness Chart". Such
   disclosure shall contain sufficient information to enable the Service
   to determine whether the new or modified training courses should be
   afforded the same treatment as that set forth in section VII.,
   paragraph B.
   
   13. Term of fiduciary reporting under section IV.c. The term of the
   fiduciary reporting required under this paragraph C. is three taxable
   years, beginning with 1993.
   
   D. Certifications.
   
   1. In general. by executing this Agreement, the Church signatories in
   their trust or corporate capacities, and their subscribing officers or
   trustees individually, certify under penalty of perjury the following
   to the best of their knowledge, information and belief:
   
   a. that all Scientology-related entities are in compliance with the
   Code, Treasury regulations and other Service pronouncements of general
   guidance and applicability;
   
   b. that the Church signatories and CTCC will use their best efforts to
   educate Scientology parishioners as to the nondeductibilty of
   donations to foreign organizations and the provisions of section VII.
   paragraph B.;
   
   c. that no Scientology-related entity or Scientology-related
   individual (in his or her capacity as such) has, after 1986, knowingly
   committed any act of fraud or criminal conduct that might constitute a
   violation of public policy endangering the tax-exempt status of any
   Scientology-related entity (assuming for the limited purpose of this
   paragraph that all Scientology-related entities are otherwise
   described in Code section 501(c)(3)); and
   
   d. that all Qualified Written Material submitted in connection with
   this Agreement was correct and truthful as of the date submitted
   through the date of signature of this Agreement, as supplemented by
   the Forms 1023 filed in August and September 1993.
   
   2. Section 501(c)(3). The Annual Report shall include a certification
   to the Service from CTCC members, in their Corporate, At-large, or
   Individual status, that Scientology-related entities recognized as
   described in Code section 501(c)(3) under section III, paragraphs B.
   or C. will operate in conformity with Code section 501(c)(3) and the
   regulations thereunder and that other Scientology-related entities
   will operate in a manner that does not jeopardize the tax-exempt
   status of any Scientology-related entity so recognized. Specifically,
   but not by way of limitation, such certification shall include the
   following Scientology-related entities: Church of Scientology
   Religious Education College Inc., Church of Scientology Advanced
   Organization Saint Hill Europe and Africa, Church of Scientology, Inc.
   (Advanced Organization Saint Hill Australia, New Zealand and Oceania),
   RTC Australia, San Donato Properties Corporation, Transcorp Services,
   S.A., MCL Services, N.V., Media Storage, Inc, Mile High, Inc., Galaxy
   Productions, Inc., Mastertech, Inc., Nesta Investments, Ltd., and FSO
   Oklahoma Investments Corporation.
   
   3. Continuing certifications. The CTCC must certify in the Annual
   Report that the certifications described in this paragraph D. continue
   to be correct, to the best of their knowledge and belief. Such
   certification shall be substantially in the form of Exhibit IV-3
   hereto. In addition, the CTCC must certify as part of the Annual
   Report that nothing has occurred that would significantly impair
   (directly or indirectly) the efficacy of the guaranty contained in
   section IV. paragraph A.3.d.
   
   E. Operational modifications. The Church signatories and the CTCC will
   assure the following:
   
   1. All payments or tithes for ecclesiastical management services to
   Scientology-related entities, including but not limited to parishioner
   contributions in connection with the ministry of religious services,
   payments or tithes for purchase of religious materials, payments or
   tithes for ecclesiastical management services, and transfers to
   reserve entities, are to be invoiced by the Scientology-related entity
   actually intended to perform the services and that receives such
   payment or tithe, irrespective of whether such payments or tithes are
   initially deposited into the performing entity's bank account.
   
   2. Deposit of Funds.
   
   a. U.S. dollar-denominated checks drawn on U.S. banks and credit card
   advices payable to Scientology-related entities for serves or goods to
   be provided within the United States shall first be deposited within
   the United States.
   
   b. Checks and credit card advices payable to Scientology-related
   entities in currencies other than U.S. dollars may be couriered
   overseas prior to deposit, provided that there are in place
   appropriate financial controls to ensure the processing, handling and
   tracing of such deposits to the account of the Scientology-related
   organization to which such payment is drawn.
   
   c. To the extent U.S. dollar-denominated checks drawn on non-U.S.
   banks payable to Scientology-related entities for services or goods to
   be provided within the United States are physically received outside
   the United States, they may be first deposited outside the United
   States. To the extent such payments are physically received inside the
   United States they may be couriered overseas prior to deposit,
   provided that there are in place appropriate financial controls to
   ensure the processing, handling and tracing of such deposits to the
   account of the Scientology-related organization to which such payment
   is drawn.
   
   d. U.S. dollar-denominated checks and credit card advices payable to
   Scientology-related entities for goods and services provided outside
   the United States may be deposited outside of the United States.
   
   e. Any other funds of a Scientology-related entity received from
   sources within the United States may be couriered overseas for deposit
   only if, and only to the extent, there are in place appropriate
   financial controls to ensure the processing, handling and tracing to
   such deposits to the account of the Scientology-related organization
   to which such payment is drawn.
   
   3. Management and accounting procedures (whose material provisions are
   attached to this Agreement as Exhibit IV-3) are to be implemented to
   assure that all commissions or similar payments from
   Scientology-related entities to individual fundraisers are properly
   reported to the Service by the payor, and that contributions collected
   by individual fundraisers are not commingled with other funds held by
   such individual. Further, no payments from one Scientology-related
   entity shall be made to another such entity by way of being made to an
   individual , whether that individual is an agent of either
   Scientology-related entity or otherwise.
   
   4. As of the date of this Agreement, parishioner advance donations to
   CSFSO and CSWUS shall no longer be transferred to United States
   Parishioners Trust and/or the Trust for Scientologists. Nor shall USPT
   or TFS receive any such payments directly from parishioners.
   
   5. United States Parishioners Trust and the Trust for Scientologists
   shall be dissolved as soon as practicable consistent with the terms of
   their respective trust instruments. The assets (including mortgages)
   contained in such trusts as of the date of this Agreement shall, along
   with earnings thereon, be transferred to one or more corporate members
   of the CTCC in accordance with their documents of dissolution, except
   that the ship mortgage on the M/V Freewinds presently held by the
   Trust for Scientologists may be distributed to Flag Ship Trust.
   Documents to effectuate the dissolution are attached as Exhibit IV-4.
   Dissolution shall be completed within 12 months of the date of this
   Agreement.
   
   6. Norman F. Starkey, as Trustee of Author's Family Trust B, shall, no
   later than December 31, 1993, effectuate the transfer of substantially
   all of the corpus and income in Author's Family Trust B, including all
   the shares of Author Services, Inc. ("ASI") as permitted under the
   will of L. Ron Hubbard to the Church of Spiritual Technology ("CST")
   without consideration. Mr. Starkey, as trustee, may retain sufficient
   cash and securities to cover any remaining actual or contingent
   liabilities of the Trust until those liabilities have been resolved or
   satisfied. The members of the CTCC shall use their best efforts to
   assure that such transfer is accomplished.
   
   7. The members of the CTCC shall use their best efforts to effectuate,
   by no later than December 31, 1993, the dissolution of Theta
   Management Limited. All property and functions of Theta will be
   transferred without consideration to IASA.
   
   8. The members of the CTCC shall, no later than December 31, 1993,
   effectuate the dissolution of the Church of Scientology Freewinds
   Relay Office, Inc., FSS Organization N.V., and majestic Cruise Lines,
   Inc., and the transfer of all of their assets and functions to the
   Foundation Church of Scientology Flag Ship Service Organization.
   
   9. The members of the CTCC shall, no later than December 31, 1993,
   effectuate the dissolution of International Publications Trust. The
   shares of New Era Publications International, ApS shall be transferred
   without consideration to Church of Scientology International.
   
   10. The members of the CTCC shall, no later than December 31, 1995,
   effectuate the dissolution of WISE, Inc. and the transfer of all of
   its assets, including but not limited to its rights to the Scientology
   religious marks, to the Inspector General Network.
   
   F. Treatment of Information Exchanges.
   
   1. All information provided by the CTCC under this section IV. shall
   constitute return information for purposes of Code section 6103. No
   information constituting Code section 6103 information, separately or
   collectively, shall constitute a return or other information for
   purposes of Code section 6104 (a)(1)(A) and 6104 (b).
   
   2. The Service may seek further information regarding the application
   of any provision of the Code, this Agreement or the Settlement
   Agreement attached as Exhibit IV-5, to any Scientology-related entity
   (whether or not such inquiry is raised by reason of information
   contained in the Annual Report) from the CTCC. Because the Service is
   obtaining information from the CTCC, as opposed to one or more
   churches, the provisions of Code section 7611 do not apply. However,
   if at any time the CTCC believes that the Service is seeking
   information that should be obtained under the provisions of Code
   section 7611, then the CTCC shall so notify the Service, in writing,
   of its views and unless the pending request for additional information
   from the Service otherwise meets the definition of routine request or
   other exception under Code section 7611 and the regulations
   thereunder, the provisions of that section shall apply as of the date
   the Service contacts the specific taxpayer involved.
   
   3. The Annual Report or other information request under this Agreement
   including follow-up questions under paragraph F.2., or any other
   contacts with the CTCC do not constitute an examination under Code
   section 7611 or an inquiry or examination under any other section of
   the Code (including sections 7602 and 7605), unless such contact is
   either (i) designated by the Service specifically as a Church Tax
   Inquiry letter under section 7611 or a notice of examination under
   section 7602, or (ii) the CTCC notifies the Service that it considers
   the contact to be subject to section 7611 or section 7602.
   
   V. Treatment of the Code Section 6104 Public Inspection File and
   Certain Other Materials.
   
   A. Code section 6104 Public Inspection File.
   
   1. The Code section 6104 public inspection file for Church of
   Scientology International shall include a Form 1023 with information
   and financial data for taxable years 1989, 1990, and 1991. In
   addition, the Code section 6104 public inspection file for CSI shall
   include agreed upon portions of the Qualified Written Material. These
   documents and the resulting determination letter shall be the only
   materials considered as the application, supporting papers and
   determination information described in Code section 6104(a)(1)(A) with
   respect to Church of Scientology International.
   
   2. The Code section 6104 public inspection file of each
   Scientology-related entity (other than Church of Scientology
   International) to be recognized as exempt under section III. paragraph
   B. hereof shall include the individual Form 1023 with information and
   financial data for taxable years 1989, 1990, and 1991, previously
   submitted by the Church. With respect to the parent
   Scientology-related entities listed in section III. paragraph C., the
   Code section 6104 public inspection file shall include a group
   exemption request with information for taxable years 1989, 1990, and
   1991, as previously submitted by the Church. Each such application
   shall incorporate by cross-reference the application and Code section
   6104 public inspection file of Church of Scientology International as
   described in paragraph A.1. These documents, including Church of
   Scientology International's Code section 6104 public inspection file
   incorporated by reference and the resulting determination and ruling
   letters, shall be the only materials considered as the application,
   supporting papers and determination information described in Code
   section 6104(a)(1)(A) for each remaining Scientology-related entity to
   be recognized as exempt pursuant to this Agreement.
   
   3. The Service shall close without action exemption determination
   applications by the following Scientology-related entities:
   
   Religious Technology Center ("RTC")
   
   Church of Scientology International ("CSI")
   
   International Hubbard Ecclesiastical League of Pastors ("IHELP")
   
   The Way to Happiness Foundation ("TWTH")
   
   Association for Better Living and Education ("ABLE")
   
   Church of Scientology Celebrity Centre Dallas
   
   Church of Scientology of Georgia
   
   Church of Scientology Mission of New Jersey
   
   RTC, CSI, IHELP, TWTH and ABLE submitted revised and updated Forms
   1023 and are being recognized as exempt under paragraph B. of section
   III. of this Agreement. The remaining three entities are being
   recognized as subordinate entities under group exemptions being
   recognized under paragraph C. of section III. of this Agreement.
   
   4. All information submitted in connection with the closed
   applications as described in paragraph A.3., and all information
   submitted in connection with this Agreement other than that listed in
   paragraph A.1. and A.2., including but not limited to (i) all
   Qualified Written Material information not specifically included as
   part of the Code section 6104 public inspection file of Church of
   Scientology International pursuant to paragraph A.1., and (ii) this
   Agreement itself, shall be considered to be return information
   described in Code section 6103(b)(2).
   
   B. Disclosure of Information by the Service.
   
   1. The Service shall maintain the information described in section V.
   paragraph A.4. of this Agreement in the office of the Assistant
   Commissioner and shall disseminate such information within the Service
   only to the extent the Assistant Commissioner determines it necessary
   for the administration of the Code (including actions taken in
   administering this Agreement).
   
   2. The Service shall not disclose any information described in section
   V. paragraph A.4. of this Agreement, including but not limited to this
   Agreement itself, to any third party other than as permitted under
   Code section 6103 or otherwise as permitted under applicable law or
   under this Agreement.
   
   3. The Service agrees to use its best efforts to notify the CTCC of
   any litigation against the Service by a third party to compel
   production of information described in section V. paragraph A.4. of
   this Agreement.
   
   C. Disclosure of Information by the CTCC.
   
   1. The CTCC may use information described in section V. paragraph A.4.
   only to the extent necessary to carry out its obligations hereunder to
   inform Church parishioners of the provisions of section VII of this
   Agreement.
   
   2. The CTCC may use information described in section V. paragraph A.4.
   only to the extent it determines it is necessary in connection with
   any tax matter by any state or local governmental body in the United
   States or by any foreign governmental body. To minimize the extent of
   such disclosure, the Service agrees to certify the effect of relevant
   provisions of this Agreement to any other governmental taxing
   authority upon request by the CTCC and following consultation with the
   CTCC concerning the text of such certification. This paragraph C.2. of
   this section V in no way limits the obligations or discretion of the
   Service with the respect to governmental taxing authorities under
   section 6103.
   
   3. The CTCC shall not produce information described in section V.
   paragraph A.4. of this Agreement, including but not limited to this
   Agreement itself, except to the extent allowed under this section V.
   It is the specific intent of the Parties that such materials,
   including but not limited to this Agreement itself, shall not be the
   subject of discovery in any civil litigation between a third party and
   any Scientology-related entity or individual, and the CTCC agrees not
   to produce such information in such circumstances except to the extent
   disclosure is compelled by a court of competent jurisdiction after
   exhaustion of all available judicial review. The parties agree that
   the provisions of this paragraph C. of this section V. are the result
   of shared concerns regarding confidentiality. Except in carrying out
   the provisions of paragraph C. of this section V., the CTCC agrees not
   to assert or otherwise publicly characterize this Agreement in a
   manner that would indicate that the Service has required that
   information under this Agreement be kept confidential.
   
   D. Proceeding Under Agreement. Notwithstanding any other paragraph of
   this section V, information described in section V. paragraph A.4. of
   this Agreement may be disclosed in any proceeding to construe or
   enforce any provision of this Agreement or in any proceeding relating
   to the federal tax liability of any Scientology-related entity. In the
   event disclosure becomes necessary under this paragraph D., the
   parties agree to use their best efforts to file all information
   described in section V. paragraph A.4. under seal so that it does not
   become part of the public judicial or administrative record.
   
   E. Disclosure Following Inquiries. The CTCC agrees that the Service,
   in response to inquiries, may characterize the information in the
   section 6104 public inspection files and may acknowledge the existence
   of an agreement that has settled a variety of longstanding issues
   between the Church and the Service, including exemptions from tax as
   well as a variety of outstanding tax and litigation matters. In
   addition, in response to such inquiries, the Service may disclose that
   there is a Closing Agreement concerning the nature and extent of
   permissible disclosure by the Service in light of the requirements of
   Code section 6103 and acknowledge the existence and extent of tax
   information authorizations submitted pursuant to this Agreement and
   the Settlement Agreement.
   
   F. Correction of Misstatements. Either the Service or the CTCC may
   disclose information described in section V. paragraph A.4. of this
   Agreement in the event of a misstatement of fact or
   mischaracterization published or disclosed about the contents of, the
   effects of, or reasons for, this Agreement or matters related thereto.
   Information described in section V. paragraph A.4. may be disclosed
   for this purpose only to the extent necessary to correct the
   misstatement or mischaracterization and only if the Assistant
   Commissioner and the CTCC have consulted prior to such disclosure.
   
   G. Term of Undertaking. Paragraph A. of this section V. applies as
   long as the Service retains any of the information described in
   paragraph A. The remaining paragraphs of this section V. apply only
   through December 31, 1999.
   
   VI. Penalty Provisions During Transition Period and Other Procedural
   Matters.
   
   A. Introduction: Purpose and Scope of Sanctions.
   
   This section VI sets forth sanctions to provide assurance to the
   Service that the Church Tax Compliance Committee will ensure that all
   Scientology-related entities will operate in a manner consistent with
   Code section 501(c)(3) and will carry out specified obligations under
   this Agreement during the transition period. The provisions of this
   section are in addition to, and not in lieu of, any other enforcement
   measures available to the Service under this Agreement, the Code, at
   law or in equity. Thus, notwithstanding any provisions of this section
   or this Agreement in its entirety, the Service may question its
   recognition or exemption of any Scientology-related entity for any
   taxable year subsequent to 1992 (and for previous years if this
   Agreement is not final by reason of section IX. paragraph H.) or take
   any other action permitted under the Code, without regard to whether
   the Service has asserted (successfully or otherwise) any penalty under
   this section VI. Nevertheless, it is intended that the consensual
   sanctions set forth in this section are to provide the Service with
   intermediate sanctions for activities or conduct not in accordance
   with the provisions of Code section 501(c)(3) for which revocation of
   recognition of exemption may be too harsh or otherwise inappropriate
   as a sanction, and that the Service will notify and consult with the
   CTCC prior to pursuing any sanctions under this Agreement.
   
   B. Self-Dealing Transactions.
   
   1. First-tier penalties.
   
   a. On Individual CTCC member who is a self-dealer or who is related to
   a self-dealer. Under this Agreement, there is a penalty imposed on
   each knowing act of self-dealing between a disqualified person and a
   Scientology-related entity. The penalty shall equal 5 percent of the
   amount involved with respect to the act of self-dealing for each
   taxable year (or part thereof) in the sanction period (defined below).
   The penalty imposed by this paragraph shall be paid by each Individual
   CTCC member: (i) who is the disqualified person who engaged in such
   act of self-dealing; or (ii) who is related (as described in section
   VIII. paragraph N.2. through 9., including the attribution rules
   contained therein) to any person that participates in the act of
   self-dealing. No penalty shall be due under this paragraph B.1.a. if
   and to the extent that an act of self-dealing has been corrected
   within the correction period.
   
   b. On Individual CTCC members with knowledge of transaction. In any
   case in which a penalty is imposed by section VI. paragraph B.1.a.,
   there is an additional penalty imposed on the participation of any
   Individual CTCC member in an act of self-dealing between any
   disqualified person and a Scientology-related entity, knowing that it
   is such an act, equal to 2 1/2 percent of the amount involved with
   respect to the act of self-dealing for each taxable year (or part
   thereof) in the sanction period, unless such participation is not
   willful and is due to reasonable cause. The penalty imposed by this
   paragraph shall be paid by any Individual CTCC member who participated
   in the act of self-dealing. No penalty shall be due under this
   paragraph B.1.b. if and to the extent that an act of self-dealing has
   been corrected within the correction period.
   
   2. Second-tier penalties.
   
   a. On Individual CTCC member who is a self-dealer or who is related to
   a self-dealer. In any case in which a first tier penalty is imposed by
   section VI. paragraph B.1. on an act of self-dealing by a disqualified
   person with a Scientology-related entity and the act is not corrected
   within the sanction period, there is hereby imposed a penalty equal to
   200 percent of the amount involved. The penalty imposed by this
   paragraph shall be paid by each Individual CTCC member: (i) who is the
   disqualified person who engaged in such act of self-dealing; or (ii)
   who is related (as described in section VIII. paragraph N.2 through
   9., including the attribution rules contained therein) to any person
   that participates in the act of self-dealing. No penalty shall be due
   under this paragraph B.2.a. if and to the extent that an act of
   self-dealing has been corrected within the correction period.
   
   b. On Individual CTCC member refusing to correct.
   
   i. In any case in which a second tier penalty is imposed under section
   VI. paragraph B.2.a., if any Individual CTCC member refuses to agree
   to part or all of the correction, a penalty is imposed equal to 50
   percent of the amount involved. The penalty imposed by this paragraph
   shall be paid by each Individual CTCC member who refused to agree to
   part or all of the correction.
   
   ii. In addition, in the event that correction does not occur by reason
   of any officer or director of any Scientology-related entity refusing
   to agree to part or all of the correction, there is a penalty equal to
   50 percent of the amount involved. The penalty imposed under this
   paragraph shall be paid by each Individual CTCC member.
   
   iii. No penalty shall be due under this paragraph B.2.b. if and to the
   extent that an act of self-dealing has been corrected within the
   correction period.
   
   3. Self-dealing.
   
   a. In general. For purposes of this section VI., the term
   "self-dealing" means any direct or indirect:
   
   i. sale or exchange, or leasing, of property between a
   Scientology-related entity and a disqualified person;
   
   ii. lending of money or other extension of credit between a
   Scientology-related entity and a disqualified person;
   
   iii. furnishing of goods, services, or facilities between a
   Scientology-related entity and a disqualified person;
   
   iv. payment of compensation (or payment or reimbursement of expenses)
   by a Scientology-related entity to a disqualified person;
   
   v. transfer to, or use by or for the benefit of, a disqualified person
   of the income or assets of a Scientology-related entity; and
   
   vi. payment by any Scientology-related entity of any penalty imposed
   under this section VI. upon any Individual CTCC member.
   
   b. Special rules. For purposes of section VI. paragraph B.3.a.--
   
   i. the transfer of real or personal property by a disqualified person
   to a Scientology-related entity shall be treated as a sale or exchange
   if the property is subject to a mortgage or similar lien which the
   Scientology-related entity assumes or if it is subject to a mortgage
   or similar lien which a disqualified person placed on the property
   within the 10-year period ending on the date of the transfer;
   
   ii. the lending of money by a disqualified person to a
   Scientology-related entity shall not be an act of self-dealing if the
   loan is without interest or other charge (determined without regard to
   Code section 7872) and if the proceeds of the loan are used
   exclusively for purposes specified in Code section 501(c) (3);
   
   iii. the furnishing of goods, services, or facilities by a
   disqualified person to a Scientology-related entity shall not be an
   act of self-dealing if the furnishing is without charge and if the
   goods, services, or facilities so furnished are used exclusively for
   purposes specified in Code section 501(c) (3);
   
   iv. the furnishing of goods, services, or facilities by a
   Scientology-related entity to a disqualified persona shall not be an
   act of self-dealing if such furnishing is made on a basis no more
   favorable than that on which such goods, services, or facilities are
   made available to the general public; and
   
   v. the payment of compensation (and the payment of reimbursement of
   expenses) by a Scientology-related entity to a disqualified person for
   personal services which are reasonable and necessary to carrying out
   the exempt purpose of Scientology-related entities shall not be an act
   of self-dealing if the compensation (or payment or reimbursement) is
   not excessive.
   
   c. Exceptions. Notwithstanding section VI. paragraphs B.3.a. and
   B.3.b., the following shall not be treated as an act of self-dealing:
   
   i. The provision to a disqualified person of goods, services and
   facilities by a Scientology-related entity on the same basis as
   generally provided to other members of the Sea Organization, with
   commensurate adjustments for the ecclesiastical rank and
   responsibilities of the disqualified person. The goods, services and
   facilities described in this section VI. paragraph B.3.c.i. include
   all benefits generally provided by Scientology-related entities to
   members of the Sea Organization, including but not limited to room and
   board, medical care, uniforms, child care and education, use of
   corporate vehicles and ministry of religious services.
   
   ii. The provision of insurance coverage by any Scientology-related
   entity to any disqualified person against a claim of misconduct in his
   or her capacity as an executive of any Scientology-related entity (but
   not including any penalty imposed under this section VI. paragraph B.
   upon any Individual CTCC member), as well as reasonable litigation
   costs and attorneys' fees incurred in defending any such claim.
   
   iii. The direct payment, without the use of insurance, by any
   Scientology-related entity of a disqualified person's personal
   liability arising from any claim of misconduct in his or her capacity
   as an executive of any Scientology-related entity (excluding a penalty
   imposed under this section VI. upon any Individual CTCC member), as
   well as payment or reimbursement of reasonable litigation costs and
   attorney's fees incurred in defending against any such claim
   (including defense against a penalty imposed under this section VI.
   upon any Individual CTCC member), provided that the board of the
   Scientology-related entity that is making the expenditure and the
   other Individual CTCC members determine, upon appropriate review of
   the circumstances and consultation with outside legal counsel, that
   the Individual CTCC member acted reasonably under the circumstances,
   in the best interest of the relevant Scientology-related entity or
   entities, and without knowledge or reason to believe that such action
   would be in violation of any applicable law or of this Agreement.
   
   iv. Any transaction for which the disqualified person and the affected
   Scientology-related entity have obtained guidance in advance from the
   Service that the proposed transaction would be in the best interest of
   the continued operation of the affected Scientology-related entity and
   will not be penalized under this Agreement. Any request for such
   guidance shall be sent to the Assistant Commissioner as provided in
   section IX of the Agreement. If after 120 days no response to the
   request has been received, the transaction described in the ruling
   request shall be deemed not to create a situation in which the
   penalties of this section VI will be applied.
   
   v. Theft, embezzlement or other misappropriation of property or funds
   from a Scientology-related entity is an act of self-dealing only if,
   and only to the extent, that a disqualified person participates in
   such misconduct.
   
   d. Amount involved. For purposes of this section VI., paragraph B.,
   the term "amount involved" means, with respect to any act of
   self-dealing, the greatest of (i) the amount of money and the fair
   market value of the other property given; (ii) the amount of money and
   the fair market value of the other property received; or (iii) the sum
   of $100,000. Notwithstanding the preceding sentence, in the case of
   services described in section VI. paragraph B.3.iv., the amount
   involved shall be the greater of $100,000 or the excess compensation.
   In addition, in the case of a lease or loan, the amount involved shall
   be the greatest of (i) the fair market interest rate or rental, (ii)
   the amount actually charged, or (iii) $100,000. For purposes of
   determining the amount involved, the fair market value in the case of
   the penalties imposed by section VI. paragraph B.1.a., shall be
   determined as of the date on which the act of self-dealing occurs; and
   in the case of the penalties imposed by section VI. paragraph B.1.b.,
   shall be the highest fair market value during the sanction period.
   
   C. Noncharitable Expenditures.
   
   1. First-tier penalties.
   
   a. On Corporate CTCC members. Under this section VI. paragraph C., a
   penalty is imposed on each noncharitable expenditure (as defined in
   section VI. paragraph C.3.) of any Scientology-related entity
   described in the Code section 501(c) (3). The penalty shall be equal
   to 10 percent of the amount involved as defined in paragraph C.5.. The
   penalty imposed by this paragraph shall be paid on a joint and several
   basis by the CTCC Corporate members. No penalty shall be due under
   this paragraph C.1.a. if and to the extent that a taxable expenditure
   has been corrected within the correction period.
   
   b. On Individual CTCC members. There is hereby imposed on the
   agreement of any Individual CTCC member to the making of an
   expenditure or undertaking an activity, knowing that it is a
   noncharitable expenditure, a penalty equal to 2 1/2 percent of the
   amount involved, unless such an agreement is not willful and is due to
   reasonable cause. The penalty imposed by this paragraph shall be paid
   by any Individual CTCC member who agreed to the making of the
   expenditure of undertaking the activity. No penalty shall be due under
   this paragraph C.1.b. if and to the extent that a taxable expenditure
   has been corrected within the correction period.
   
   2. Second-tier penalties.
   
   a. On Corporate CTCC members. In any case in which a first tier
   penalty is imposed by section VI. paragraph C.1.a. by reason of a
   noncharitable expenditure and such expenditure or activity is not
   corrected within the sanction period, there is hereby imposed a
   penalty equal to 100 percent of the amount involved. The penalty
   imposed by this paragraph shall be paid on a joint and several basis
   by the CTCC Corporate members. No penalty shall be due under this
   paragraph C.2.a. if and to the extent that a taxable expenditure has
   been corrected within the correction period.
   
   b. On Individual CTCC members.
   
   i. In any case in which an additional penalty is imposed by paragraph
   C.2.a., if an Individual CTCC member refused to agree to part or all
   of the correction, there is hereby imposed a penalty equal to 50
   percent of the amount involved. The penalty imposed by this paragraph
   shall be paid by each Individual CTCC member who refused to agree to
   part or all of the correction.
   
   ii. In addition, in the event that correction does not occur by reason
   of any officer or director of any Scientology-related entity refusing
   to agree to part or all of the correction, there is a penalty equal to
   50 percent of the amount involved. The penalty imposed under this
   paragraph shall be paid by each Individual CTCC member.
   
   iii. No penalty shall be due under this paragraph C.2.b. if and to the
   extent that a taxable expenditure has been corrected within the
   correction period.
   
   3. a. Noncharitable expenditure. For purposes of this section VI., the
   term "noncharitable expenditure" means:
   
   i. any amount paid or incurred by a Scientology-related entity
   described in Code section 501 (c) (3):
   
   (a) to an entity or individual unless:
   
   (1) the recipient entity is described in Code section 501 (c) (3), or
   
   (2) the payment will directly further a charitable purpose and the
   Scientology-related entity exercises expenditure responsibility with
   respect to such payment as required and in accordance with paragraph
   C.3.b.
   
   (b) any amount paid or incurred by a Scientology-related entity for
   any purpose other than one specified in Code section 170 (c) (2) (B).
   
   ii. any amount paid or incurred by a Scientology-related entity as a
   special noncharitable expenditure as defined in paragraph C.4.
   
   b. Expenditure responsibility. The expenditure responsibility referred
   to in section VI. paragraph C.3.a.i. (a) (1) means that the
   Scientology-related entity is responsible to exert all reasonable
   efforts and to establish adequate procedures during the transition
   period:
   
   i. to see that the payment is spent solely for the charitable purpose
   for which made,
   
   ii. to obtain full and complete reports from the recipient on how the
   funds are spent, and
   
   iii. to make full and detailed reports on such expenditures to the
   Service as part of the Annual Report described in section IV paragraph
   C.7.
   
   Expenditure responsibility is required under this section VI.
   paragraph C.3.b. only to the extent the CTCC is required to report
   with respect to its expenditure responsibility as part of the Annual
   Report under section IV., paragraph C.7.
   
   c. Governing principles. In determining whether a particular
   expenditure is a noncharitable expenditure, the Service shall be
   guided by principles of section 53.4945-6 (b) (2) of the Treasury
   Regulation (regardless of whether the expenditure involves an
   administrative expense), under which it is neither the policy nor the
   prerogative of the Service to substitute its judgment for the
   reasonable exercise of business judgment by executives of the affected
   Scientology-related entity.
   
   4. Special noncharitable expenditure. For purposes of this section
   VI., the term "special noncharitable expenditure" means any amount
   paid or incurred by a Scientology-related entity or
   Scientology-related individual in connection with the following:
   
   a. Any act or omission that any CTCC member knew would impair the
   efficacy of the guaranty of collection set forth in section IV.
   paragraph A.3.d. of this Agreement.
   
   b. The diminution of assets in violation of section IV. paragraph
   A.3.d.viii.
   
   c. Any expenditure by a Scientology-related entity that has not been
   recognized as tax exempt under section III. of this Agreement or by
   any Scientology-related individual, if such expenditure jeopardizes
   the tax-exempt status of any Scientology-related entity recognized
   under section III. of this Agreement as described in Code section 501
   (c) (3).
   
   d. The conduct or support of litigation by a Scientology-related
   entity or a Scientology-related individual against the Service or any
   present or former Service employee in violation of section II.
   paragraph C.4. or C.5. of this Agreement.
   
   e. The financial support by a Scientology-related entity or
   Scientology-related individual of a tax refund claim against the
   Service in violation of section VII., paragraph G..
   
   5. Amount involved. For purposes of this section VI. paragraph C., the
   term "amount involved" as it relates to the penalties provided under
   this section imposed on a noncharitable expenditure means:
   
   a. For the penalties imposed under this section VI. paragraph C.
   (except as provided below with respect to certain of the special
   noncharitable expenditures and noncharitable activities described in
   paragraph C.4.), the "amount involved" shall be the greater of (1) the
   amount paid or incurred in connection with a noncharitable expenditure
   or (2) the sum of $25,000.
   
   b. For the penalties imposed by reason of special noncharitable
   expenditure defined in paragraph C.4.a., the "amount involved" is
   equal to the greater of (1) the difference between the assets of the
   CTCC Corporate members before the impairment of the guaranty and the
   assets of the CTCC Corporate members subsequent to the impairment, or
   (2) the sum of $25,000.
   
   c. For the penalties imposed by reason of special noncharitable
   expenditure defined in paragraph C.4.b., the "amount involved" is
   equal to the greater of (1) the excess value of the assets over
   10-percent of the difference between the assets of the CTCC Corporate
   members before the transfer and the assets of the CTCC Corporate
   members subsequent to the transfer, or (2) the sum of $25,000.
   
   d. For the penalties imposed by reason of special noncharitable
   expenditure or noncharitable activity defined in paragraphs C.4.d. and
   C.4.e., the "amount involved" is equal to the greatest of (1) the
   number of staff hours of Service or Department of Justice attorneys
   required for the year to respond to any litigation, multiplied by
   $100, (2) the cost to indemnify the Service and the United States in
   any litigation for the year and for all costs including any damages,
   or (3) the sum of $25,000.
   
   D. Reporting Obligations.
   
   1. Penalty on Corporate CTCC members. A penalty is imposed jointly and
   severally on the Corporate CTCC members in the event of certain
   failures in providing the Annual report.
   
   a. In the case of a failure to submit the Annual Report required under
   section IV. paragraph A.3.a. of this Agreement by the date and in the
   manner prescribed therefor (determined with regard to any extension of
   time for filing), there shall be paid $250 for each day until the
   submission of such report.
   
   b. In the case of a failure to include within the Annual Report any of
   the information required to be shown under this Agreement or to show
   information that is materially correct, there shall be paid by the
   Corporate CTCC members $250 for each day during which such failure
   continues.
   
   The maximum penalty under this section VI. paragraph D.1. with respect
   to any one Annual Report shall not exceed $75,000.
   
   2. Penalty on Individual CTCC members. Upon a failure to submit an
   Annual Report in a timely and complete fashion, the Service may make a
   written demand on the CTCC specifying therein a reasonable future date
   by which the Annual Report shall be submitted (or the missing or
   correct information furnished) for purposes of this paragraph.
   
   a. Failure to comply with demand. If the CTCC fails to comply with any
   demand under paragraph D. 2. on or before the date specified in such
   demand, there shall be paid by each Individual CTCC member $250 for
   each day after the expiration of the time specified in such demand
   during which such failure continues. The maximum penalty imposed under
   this paragraph on all Individual CTCC members for failures with
   respect to any one Annual Report shall not exceed $75,000 per
   Individual member.
   
   b. Application of penalties for failure to provide information. Each
   failure to include with the Annual Report information required under
   any single subparagraph of section IV. paragraph B. or section IV.
   paragraph C. of this Agreement shall be treated as a separate failure
   to provide information and shall be subject to a separate penalty or
   penalties under this section VI., except that the $75,000 maximum
   applies to the Annual Report as a whole and, therefore, is not
   increased by reason of multiple failures to comply within the same
   Annual Report.
   
   3. Exception for reasonable cause. No penalty shall be imposed under
   this section VI. paragraph D. with respect to any failure if the CTCC
   shows that such failure is due to reasonable cause.
   
   4. Exception for inability to certify specific information. If the
   CTCC is unable to certify any matter as required under this Agreement
   due to an actual or potentially noncompliant act or acts or failure to
   act, no penalty shall be imposed under this section VI. paragraph D.
   with respect to the failure to provide such certification, provided
   that:
   
   a. the CTCC makes the required certifications with respect to all but
   those actual or potentially noncompliant acts,
   
   b. the CTCC takes appropriate and timely steps to determine whether a
   potentially noncompliant act is in fact noncompliant,
   
   c. the CTCC discloses all noncompliant acts as soon as possible under
   the circumstances, and currently discloses that it is investigating a
   particular act or acts that may be noncompliant,
   
   d. the CTCC takes appropriate and timely steps to correct all
   noncompliant acts, and
   
   e. the CTCC reports to the Service with respect to the correction of
   noncompliant acts as soon as possible under the circumstances.
   
   E. Joint and Several Liability and Certain Penalty Limitations for
   Individual CTCC Members.
   
   1. The Corporate CTCC members shall be jointly and severally liable
   for payment of the penalties imposed by section VI. paragraphs C.1.a.,
   C.2.a., and D.1. The penalties on the Individual CTCC members are to
   be paid by the specific Individual CTCC member subject to the penalty.
   
   2. The maximum amount of any penalty imposed on any Individual CTCC
   member under section VI. with respect to (1) any one act of
   self-dealing under paragraph B., (2) any one noncharitable expenditure
   under section VI. paragraph C., or (3) deficiencies in the Annual
   Report under section VI., paragraph D., shall not exceed the lesser of
   (i) the individual CTCC member's total compensation for the taxable
   year from all Scientology-related entities, or (ii) the sum of $50,000
   each taxable year, except that the maximum penalty on an individual
   CTCC member charged with an act of self-dealing in no event shall be
   less than the sanction imposed for that act.
   
   3. No single act or expenditure by a Scientology-related entity shall
   be subject to multiple penalties under paragraphs B.1.b, C.1.b, and/or
   D.2, or multiple penalties under paragraphs B.2.b, C.2.b, and/or D.2.
   (for example, an expenditure constituting both an act of self-dealing
   under paragraph B. and a noncharitable expenditure under paragraph
   C.). Such an act or expenditure shall be subject to the applicable
   penalty in paragraph B., C., or D. that results in the highest penalty
   amount.
   
   F. Additional Penalty. If any person or entity becomes liable for any
   penalty under paragraphs B. or D. of this section VI. by reason of any
   act or failure to act which is not due to reasonable cause and either:
   
   1. such person has theretofore been liable for a penalty under any of
   such paragraphs; or
   
   2. such act or failure to act was both willful and flagrant;
   
   then such person shall be liable for an additional penalty equal to
   the amount of the applicable first tier penalty.
   
   G. Third-Tier Penalty.
   
   1. If there has been (i) willful, repeated and flagrant misconduct,
   and (ii) a failure to correct such misconduct, giving rise to
   penalties under paragraphs B. and/or C. of this section VI., there is
   imposed on the Corporate members of the CTCC a penalty equal to
   $50,000,000.
   
   2. For purposes of this section VI., various terms are defined as
   follows:
   
   a. the phrase "flagrant misconduct" means:
   
   (i) For any act of self-dealing under section VI. paragraph B., the
   intentional diversion of assets from one or more Scientology-related
   entities that is not corrected within the correction period.
   
   (ii) For any noncharitable expenditure under paragraph C., the
   intentional use of assets from one or more Scientology-related
   entities for any purpose other than one specified in Code section 170
   (c) (2) (B) that is not corrected within the correction period.
   
   b. The phrase "diversion" means the transfer of assets by a
   Scientology-related entity that constitutes the private inurement of
   its net earnings to the benefit of a private shareholder or
   similarly-situated individual.
   
   c. The phrase "repeated," with respect to misconduct, means more than
   two occurrences of conduct resulting in the imposition of second-tier
   sanctions under this Agreement.
   
   H. Procedures for Penalty Determinations
   
   1. a. First-tier Penalty
   
   i. With respect to a claimed penalty arising from information in the
   Annual Report, the Service shall notify the CTCC in writing of its
   belief than an event subject to penalty under paragraphs B.1., C.1. or
   D. of this section VI. has occurred within 180 days of receipt of the
   Annual Report. Such notice (hereinafter the "initial notice") shall
   identify the expenditure, act (or failure to act) or transaction the
   Service believes warrants the imposition of penalties and an
   explanation of its reasons for this conclusion. The notice shall
   specify the exact provisions of the applicable law or of this
   Agreement the Service believes has been violated and shall, subject to
   the requirements of Code section 6103, cite and append evidence in its
   possession that supports its belief.
   
   ii. Upon receipt of the initial notice, the CTCC shall investigate the
   matter and report its conclusions back to the Service within 90 days
   of receipt of the initial notice.
   
   iii. If, following receipt of the CTCC's report under section VI.
   paragraph H.1.a.(ii), or in the event of a failure to respond, the
   Service still believes that an event warranting imposition of a
   penalty has occurred and has not been corrected, the Service will
   provide a conference of right with the Assistant Commissioner to
   undertake a discussion on the merits of the respective positions of
   the CTCC and the Service.
   
   iv. If, following the conference of right under paragraph H.1.a.(iii)
   of this Section VI., the Service still believes that an event
   warranting imposition of a penalty has occurred and is not in the
   process of being corrected, the Service will issue a final
   determination of penalty and send notice thereof to the CTCC. Such
   notice shall specify the exact provisions of applicable law or of this
   Agreement the Service believes have been violated and shall, subject
   to the requirements of Code section 6103, cite and append evidence in
   its possession that supports its belief, including its reasons for not
   accepting the arguments and evidence submitted by the CTCC in support
   of its position that no violation has occurred.
   
   v. With respect to a claimed penalty arising from information in the
   Annual Report, the Service must issue a final determination of
   first-tier penalty to the CTCC no later than one year from the date
   the Service receives the CTCC report described in section VI.
   paragraph H.1.a.(2).
   
   vi. If the CTCC continues to disagree with the Service's determination
   of a first-tier penalty notice, it shall so notify the Service in
   writing. Upon receipt of such notice, the Service may sue under
   paragraph H.1.e. to collect the first-tier penalty. Until the
   completion of such suit, including the exhaustion of any appeals or
   other proceedings for appellate review, the CTCC need not pay any
   first-tier penalty determined by the Service.
   
   b. Second-tier penalties. If an event subject to a first-tier penalty
   under this Agreement has not been corrected with the sanction period
   as defined in section VIII. P., the Service may issue a notice of
   final determination of second-tier penalty. The Service must issue any
   notice of final determination of second-tier penalty no later than 90
   days after expiration of the sanction period. No second-tier penalty
   shall be due under this Agreement if and to the extent that a taxable
   expenditure has been corrected within the correction period.
   
   c. Other penalties. In the case of penalties other than those
   described in paragraphs H.1.a. or H.1.b. of this determination of
   penalty to the CTCC.
   
   d. No notice of determination, initial or final, may be made under
   this Agreement if the notice is not sent by certified mail to the CTCC
   by the 120th day after the end of the transition period. In addition,
   no penalty may accrue for any period after December 31, 1999. However,
   provided that the initial notice was mailed prior to this date, the
   penalty asserted may be collected and enforced notwithstanding the
   expiration of the transition period.
   
   e. Any penalty imposed under this section VI. is payable upon notice
   and demand, and may be collected by the Service through suit. The
   Service and the Corporate, Individual and At-large CTCC members agree
   that all parties shall have the right to specific performance (in
   addition to all other remedies available under the Code, at law, in
   equity or under this Agreement).
   
   f. Should correction, as defined in section VIII., paragraph S., occur
   within the correction period, as defined in section VIII. paragraph
   T., no penalty shall be collected under this section VI.
   
   2. Interest. In the event that any penalty under this section VI. is
   asserted by the Service and the CTCC fails to make payment within 90
   days of the final notice of penalty, interest on the amount of such
   penalty shall accrue from the date of issuance of such final notice to
   the date of payment at the Federal short-term applicable rate (as set
   forth and applied in Code sections 6621(b) and 6622).
   
   3. Non-assertion of penalties.
   
   a. If it is established to the satisfaction of the Service, in the
   exercise of its reasonable discretion, that any event subject to
   penalty has been correction during the correction period for such
   event, then any penalty imposed with respect to such event (including
   interest) shall not be asserted, and if asserted, shall not be
   collected, and, if collected, shall be promptly credited or refunded
   to the extent permitted by law.
   
   b. The Service shall not assert any penalty under this section VI.
   when the CTCC has established to the Service's satisfaction in the
   exercise of its reasonable discretion, that:
   
   i. what would otherwise constitute a transaction or event warranting
   imposition of penalties caused no financial detriment to charitable
   interests;
   
   ii. the transaction of expenditure has been corrected;
   
   iii. the CTCC has acted promptly and in good faith to correct any such
   transaction or expenditure and prevent its recurrence; or
   
   iv. the penalty is disproportionate to the severity of the transaction
   or expenditure.
   
   VII. Treatment of Parishioners' Contributions
   
   A. The Service acknowledges its obligation to interpret and apply the
   "gift or contribution" requirement of Code section 170(c) equally and
   consistently to the fundraising practices of all religious
   organizations that receive fixed donations from parishioners in
   connection with participation in worship and similar religious rituals
   or services.
   
   B. Until the earlier of (i) December 31, 1999, (ii) the issuance or
   adoption by the Service of audit policies or practices in the
   examination of tax returns utilizing uniform and consistent principles
   for determining the deductibility of fixed donations to all churches,
   or (iii) until legislation is enacted which affects the deductibility
   of such fixed donations, the Service agrees not to contest the
   deductibility of Church of Scientology fixed donations in connection
   with qualified religious services. The phrase "qualified religious
   services" means those appearing on the "Scientology Classification,
   Gradation and Awareness Chart." If the taxpayer produces an accurate
   receipt or other documentation from the donee Church of Scientology
   substantiating (1) the amount of the taxpayer's fixed donation and (2)
   the qualified religious services with respect to which the donation
   was made, then, for as long as this paragraph B. of this section VII.
   applies, as set forth in paragraph F., the full amount of the fixed
   donation for these services shall be treated as a charitable
   contribution under Code section 170 and shall not be challenged on
   that basis. Nothing in the preceding sentence affects other
   requirements, including substantiation, as provided by law. In the
   absence of such documentation, the Service also may independently
   determine the amount of and the extent to which the taxpayer's fixed
   donations were made in connection with qualified religious services.
   Individual taxpayers' contributions to churches of Scientology not in
   connection with religious services or any substantial return benefit
   remain fully deductible if other requirements under the law are met.
   Payments to churches of Scientology for books or other religious
   articles are not deductible except to the extend that a dual payment
   exists.
   
   C. To apply paragraph B. for taxable years before 1993, and in
   consideration of the other provisions of this agreement, the Service
   will settle all outstanding controversies with individual Church of
   Scientology parishioners involving the deductibility of their fixed
   donations under Code section 170 on a no-change basis (subject to
   substantiation of payment for qualified religious services and
   compliance with other requirements of the Code). Any future deficiency
   controversies with individual taxpayers involving the deductibility of
   Church of Scientology fixed donations for taxable years beginning
   before 1993 also will be resolved on a no-change basis on the section
   170 issue subject to substantiation of payment for qualified religious
   services and compliance with other requirements of the Code. This
   process will be implemented as follows:
   
   1. The Office of Chief Counsel, Internal Revenue Service will enter
   into stipulated decision documents with the taxpayers listed on
   Exhibit VII-I (or authorized representatives) to carry out this
   paragraph in the cases pending before the United States Tax Court.
   Upon notice and request of the CTCC, the office of Chief Counsel will
   enter into a similar stipulated decision document in any future case
   that becomes docketed in the Tax Court with respect to a taxable year
   beginning before 1993. The stipulated decision documents will reflect
   an allowance of charitable contribution deductions for Church of
   Scientology fixed donations in the full amount of the payments
   substantiated as being paid for qualified religious services as
   provided in paragraph B. above. The stipulated decision documents also
   will identify as overpayments any credible or refundable amounts paid
   by the taxpayers for the years at issue, provided that the Tax Court
   has jurisdiction to determine the existence and amount of such
   overpayment.
   
   2. The Service will issue administrative refunds for the full amount
   of the tax that is attributable to the fixed donations to churches of
   Scientology for qualified religious services, plus interest, to the
   taxpayers in the following cases:
   
   Powell v. United States, No. CV 90-8271 (S.D. Fla.)
   Nieves v. United States, No. CV 90-4211 (S.D. N.Y.)
   
   Following the issuance of the administrative refund, the taxpayers
   will dismiss with prejudice their respective cases.
   
   3. In the case of a refund claim for a taxable year beginning before
   1993 that is not barred by the statute of limitations and is not the
   subject of a docketed deficiency cases before the Tax Court or a
   refund cases before a District Court or the Court of Federal Claims at
   the time of the execution of this Agreement, the taxpayers shall be
   entitled to an allowance of 80 percent of his or her fixed donations
   in connection with qualified religious services, as provided in
   paragraph B. and the claim shall be treated accordingly. The Office of
   Chief Counsel shall request the Untied States Department of Justice to
   enter into a stipulation with taxpayer's counsel (or taxpayer) in any
   future case seeking a refund of income taxes for taxable years
   beginning before 1993 based on the Service's disallowance of
   charitable contribution deductions for Church of Scientology fixed
   donations for which the statute of limitations has nor expired, in
   accordance with the preceding sentence. See, however, the CTCC's
   obligation not to promote such claims as provided in paragraph G.
   
   4. For any refund controversy described in subparagraph 3., above, the
   provisions of paragraph B. shall remain open until the Service mails a
   notice of final disallowance of such refund claim.
   
   5. If the Service is in compliance with the provisions of
   subparagraphs 1-3, above, and the taxpayer refuses the Service's offer
   to provide a stipulation or settlement in resolution of the fixed
   donation issue of the taxpayer/parishioner to the Church of
   Scientology as provided herein, then, notwithstanding any other
   provision of his section VII., the Service shall not be bound by this
   paragraph as to that taxpayer (and that year for which there is no
   agreement) and shall not thereafter be bound to the 80/20 dual payment
   percentage as to that taxpayer for that tax year. Nothing in this
   paragraph prevents the Service, at its election, from stipulating or
   settling on any other basis (or proceeding in any manner) with any
   taxpayer if the taxpayer declines to settle in accordance with this
   section VII.
   
   6. This paragraph C. shall apply to all pending and future
   administrative cases in examination, appeals, or collection for
   taxable years beginning before 1993.
   
   7. All overpayments resulting from the stipulations or judgments
   provided in subparagraphs 1. through 3., above, shall be promptly
   credited or refunded under applicable provisions of the Code
   (including section 6611) and regulations.
   
   D. To apply paragraph B. for taxable years after 1992, the Service
   shall prepare and transmit instructions to all appropriate IRS
   functions and Offices at the National, Regional and District level and
   to IRS Service Center explaining their obligations to carry out
   paragraph B. of this section VII. In particular, those instructions
   shall direct the various Service functions not to disallow any portion
   of deductions for Church of Scientology fixed donations in connection
   with qualified religious services on the ground that the payments are
   not charitable contributions, until the earliest of (i) December 31,
   1999, (ii) the issuance by Service of the audit policies or practices
   described in paragraph B. (ii) or (iii) until legislation is enacted
   which affects the deductibility of such fixed donations. Nothing in
   the paragraph prevents the Service, at its election, from stipulating
   or settling on any other basis (or preceding in any manner) with any
   taxpayer of the taxpayer declines to settle in accordance with this
   section VII.
   
   E. The Service also agrees to withdraw, obsolete or supersede, Rev.
   Rul. 78-189 no later than April 1, 1994, irrespective of whether the
   audit policies or practices described in paragraph B. (ii) are ever
   issued.
   
   F. 1. Except as provided in subparagraph 2., below, the Service shall
   apply paragraph B. to all pending and future administrative cases in
   examination, appeals, or collection for taxable years beginning after
   1992 through taxable years ending before January 1, 2000.
   
   2. If the Service implements the audit policies or practices described
   in paragraph B. (ii) for a taxable year ending before January 1, 2000,
   then the service shall allow individual taxpayers charitable
   contribution deductions for no less than 80 percent of their Church of
   Scientology fixed donations in connection with qualified religious
   services, as defined in paragraph B., to the extend substantiated as
   provided in paragraph B., for taxable years ending before January 1,
   2000.
   
   3. If, prior to January 1, 2000, the Service has not issued or adopted
   audit policies or practices described in paragraph B. (ii), the
   parties agree to meet to discuss further agreements or actions that
   nay be undertaken to implement paragraph A. in the spirit of this
   entire Agreement.
   
   G. While recognizing that all individual Scientologists not barred by
   law or agreement are entitled to file claims for refund to recover
   amounts covered by this settlement and that the CTCC may inform Church
   parishioners of the provisions of section VII of this Agreement, the
   CTCC agrees not to promote or encourage individual Scientologists to
   file claims for refund of taxes for the taxable year 1993.
   
   H. Individual taxpayers making fixed donations to churches of
   Scientology shall be considered to be third-party beneficiaries of
   this section VII. and shall be entitled to enforce its terms in any
   administrative or judicial proceeding. Such individual taxpayers shall
   not be charged with the receipt of taxable income by virtue of any of
   the provisions of this agreement.
   
   I. The CTCC shall use its best efforts to have Scientology
   parishioners agree to the stipulations and settlements as provided in
   this section VII.
   
   J. If the Service either holds a meeting regarding the deductibility
   of fixed donations to religious organizations and invites religious
   organizations to participate or solicits comments from religious
   organizations on the subject, the Service shall invite the Church of
   Scientology to participate or to supply comments on the same basis as
   the other religious organizations.
   
   VIII. Definitions.
   
   For purposes of this Agreement:
   
   A. "Code" means the Internal Revenue Code of 1986 and the regulations
   thereunder, as amended from time to time.
   
   B. "Entity" includes any corporation, limited liability company,
   trust, association, committee, partnership, or unincorporated
   organization, as well as any "person" (other than an individual), as
   defined in Treas. Reg. sec. 301.7701-1 through -4.
   
   C. An entity is a "Scientology-related entity" if that entity is
   described in one or more of the paragraphs set forth below:
   
   1. An entity is a Scientology-related entity if it is a signatory to
   this Agreement or is identified in section III., paragraphs B. or C.
   or section IV., paragraph D.2. of this Agreement or Exhibits III-1
   through III-35 of this Agreement.
   
   2. An entity is a Scientology-related entity if it delivers religious
   services to parishioners in a manner prescribed by the works of L. Ron
   Hubbard and as authorized (directly or indirectly) by Religious
   Technology Center, Church of Scientology International or other entity
   described in another paragraph as a Scientology-related entity. Thus,
   for example, all Class V churches, Continental organizations, CSFSSO,
   CSFSO, CSWUS, Saint Hill or other advanced organizations and missions
   are Scientology-related entities.
   
   3. The publications organizations discussed at page 1-21 through 1-27
   of the letter to John Burke, Monique Yingling dated June 29, 1992,
   (the "June Submission") and part of the Qualified Written Material are
   Scientology-related entities. Thus, for example, Bridge Publications,
   Inc., and New Era Publications International ApS, as well as their
   related subsidiaries or affiliates, are Scientology-related entities.
   Pages 1-21 through 1-27 are attached as Exhibit VIII-1 to this
   Agreement.
   
   4. The social benefit and other public benefit entities discussed at
   pages 1-28 through 1-42 of the June submission along with all
   subsidiaries, subordinate chapters, subordinate organizations, or
   sublicensees thereof (e.g., organizations that are permitted to use
   particular names, copyrights, service marks, and/or technologies) are
   Scientology-related entities. Thus, for example, Citizens Commission
   on Human Rights, National Commission on Law Enforcement and Social
   Justice, Scientology Defense Fund Trust, Association for the Better
   Living and Education, Applied Scholastics Incorporated, Narconon
   International, The Way to Happiness Foundation, and the Foundation for
   Religious Freedom are Scientology-related entities. Pages 1-28 through
   1-42 are attached as Exhibit VIII-2 to this Agreement.
   
   5. Any entities subject to the ecclesiastical direction or general
   guidance of Church of Scientology International or Religious
   Technology Center, directly or indirectly, including but not limited
   to any trusts, that hold assets (including but not limited to
   intellectual property and mortgages) for any other Scientology-related
   entity or for the advancement or protection of the Scientology
   religion whether or not those entities were discussed at pages 1-43
   through 1-56 of the June submission are Scientology-related entities.
   This definition does not include the trust or estate of any
   parishioner who has made an intervivos or testamentary transfer of
   assets to the Church. This definition does not include financial
   institutions that are not owned (directly or indirectly) in whole or
   in part by any entity that otherwise meets the definition of
   Scientology-related entity under another subparagraph of this
   paragraph VIII. C. This definition does not include (i) any fiduciary
   that is not a Scientology-related entity or a Scientology-related
   individual (ii) the employee of any such fiduciary, (iii) any escrow
   agent holding assets of a Scientology-related entity under and escrow
   arrangement of a strictly temporary nature, (iv) any trustee under a
   deed of trust upon real property to secure the debt of a
   Scientology-related entity (v) any person acting under the power of
   attorney to Scientology-related entity, provided that any such
   fiduciary described in (i) through (v) above, and is nor otherwise a
   Scientology-related entity under paragraph of this section VIII,
   paragraph C. Pages 1-43 through 1-56 are attached as Exhibit VIII-3 to
   this Agreement.
   
   6. Any entity directly or indirectly involved in, or related to, the
   ownership and /or operation of the M.V. Freewinds including those
   listed at pages 1-57 through 1-59 of the June submission are
   Scientology-related entities. Thus, for example, the Foundation Church
   of Scientology Flag Ship Service Organization, Flag Ship Trust,
   Transcorp Services S.A., San Donato Properties Corporation and MCL
   Services N.V. are Scientology-related entities. Pages 1-57 thorough
   1-59 are attached as Exhibit VIII-4 to this Agreement.
   
   7. Any membership entity primarily composed of Scientologists, whether
   or not listed on pages 1-60 through 1-62 of the June submission,
   including but not limited to the International Association of
   Scientologists, Danish Association of Scientologists, and European
   Association for Scientology, along with any entities performing the
   operations of (or holding the assents of ) such organizations
   (including Foundation of International Membership Services
   Administration N.V., Membership Services administration (UK) Ltd and
   U.S. IAS Members' Trust), are Scientology-related entities. Pages 1-60
   through 1-62 are attached as Exhibit VIII-5 to this Agreement.
   
   8. Any entity that owns, (including, but not limited to, those
   entities listed below in this subparagraph C.8.), (sub) licenses to
   others to use, and/or has rights to (sub) license others to use what
   has been described in the Qualified Written Material as the Scriptures
   (the written and spoken words of L. Ron Hubbard on Scientology and
   Dianetics) or any technology, copyright, trademark or service mark
   held by RTC, CSI, CST, any publications organization (described in
   paragraph C.3 above), the Estate of L. Ron Hubbard or Author's Family
   Trust B, is a Scientology-related entity.
   
   9. Any other entity licensed to use, or otherwise granted permission
   to use or employ, any copyright, service mark, or trademark that has
   been, is now (or shall in the future) be held or owned, directly or
   indirectly, by Religious Technology Center, Church of Scientology
   International, the Estate of L. Ron Hubbard, Author's Family Trust B
   or Church of Spiritual Technology, is a Scientology-related entity.
   
   10. Any taxable or for-profit entity of which one or more
   Scientology-related entities and/or any of the trustees, directors
   and/or officers of any entity defined as a Scientology-related entity
   under this section VIII. paragraph C, separately or together, owned or
   had a beneficial interest of more than twenty-five percent is a
   Scientology-related entity. In addition, any non-profit entity of
   which one or more Scientology-related entities and/or any of the
   trustees, directors and/or offices of any entity defined as a
   Scientology-related entity under this section VIII. paragraph C,
   separately or together, control the voting power of, or have a
   beneficial interest of, more than twenty-five percent, is a
   Scientology, related entity. For purposes of this definition, any
   Individual or At-Large member of the CTCC shall be considered an
   officer of a Scientology-related entity.
   
   11. For purposes of subparagraphs 4, 8, or 9, the term
   Scientology-related entity includes only those entities that are under
   the ecclesiastical direction or general guidance of CSI, directly or
   indirectly, and that are not owned in whole or in part by any entity
   that otherwise meets the definition of Scientology-related entity
   under another subparagraph of this section VIII. paragraph C.. Thus,
   by the way of example, the term Scientology-related entity generally
   does not include (I) sublicensees of the World Institute of
   Scientology Enterprises (hereinafter "WISE"), (ii) any entity that
   would not otherwise be described above, except that it has been
   licensed to publish or disseminate solely the fictional works of L.
   Ron Hubbard, and (iii) licenses of Applied Scholastics, Inc. that are
   not included as subordinate entities under its group exemption, as
   provided in section III., paragraph 3.c and listed on Exhibit III-28
   (or will be subordinate entities in the future) .
   
   12. a. In general. The term Scientology-related entity generally
   includes an entity whether formed under the laws of the United States
   or of a country other than the United States, except to the extent
   other provisions of this Agreement expressly include only U.S.
   entities or expressly exclude non-U.S. entities.
   
   b. Exception.
   
   i. With respect to certain provisions of this Agreement, the term
   Scientology-related entity does not include an Excluded Foreign
   Scientology-related Entity. A Scientology-related entity is an
   Excluded Foreign Scientology-related Entity if it is formed under the
   laws of, and substantially all of its operations are in, a country
   other than the United States and it (a) is described in section VIII,
   paragraph C.2 and is a Mission or Class V church; (b) is described in
   Section VIII, paragraph C.4; (c) is described in Section VIII,
   paragraph C.5, provided that it is not an entity that has as its
   primary function the holding of assets for the Church of Scientology;
   or (d) is described in Section VIII, paragraph C.9 but has neither
   annual gross receipts not gross assets in excess of $15 million.
   
   ii. To the extent a Scientology-related entity is otherwise
   specifically included in a provision (notwithstanding the fact that is
   an Excluded Foreign Scientology-related Entity), it is a
   Scientology-related entity for the specified purposes of the affected
   provision. Specifically, but not by the way of limitation, an Excluded
   Foreign Scientology-related entity with respect to the following
   provisions of this Agreement:
   
   Section II.: paragraphs B.5., B.7 through B.9, C.1. through C.6, E.1.,
   E.4.b. and F.
   
   Section III.: Paragraph B.10
   
   Section IV.: paragraphs A.3.d., B.1.a., B.1.f.ii. B.2.a., B.3., B.4.,
   C.1., C.3., C.4., C.5., C.6., C.7.a.,C.7.b., C.10.,E.1., E.2.,E.3.,
   and F.2.
   
   Section V.: all
   
   Section VI.: paragraph B.
   
   iii. An Excluded Foreign Scientology-related Entity is excluded from
   the definition of Scientology-related entity with respect to the
   following provisions of this Agreement:
   
   Section IV.: paragraphs A.3. (other than A.3.d.), D.1., D.2., D.3.
   
   Section VI: paragraph A, C (unless paragraph C.10. of section IV
   applies) and G.
   
   Section IX: paragraph A.
   
   iv. With respect to other provisions of this agreement concerning
   procedural matters (such as reporting term limitations) that relate to
   the specific provisions referred to in Section VIII, paragraph C.
   12.b.ii., Scientology-related entity also includes Excluded Foreign
   Scientology-related entity.
   
   c. Limitation. paragraph 12.b. shall not apply to exclude from
   treatment as a Scientology-related entity any entity that otherwise
   meets the definition of Scientology-related entity under a
   subparagraph of this section VIII. paragraph C. other than
   subparagraphs 2.,4.,5., or 9.
   
   13. If an entity is treated as a Scientology-related entity by reason
   of paragraph C.1. of this section VIII., then such entity shall be
   treated as a Scientology-related entity notwithstanding that one or
   more of the other subparagraphs of paragraph C. of this section VIII
   might otherwise apply to exclude such entity from being treated as a
   Scientology-related entity.
   
   14. The term Scientology-related entity is not limited to those
   entities that are in existence as of the date of this Agreement but
   also includes those described in paragraph C. created after this
   Agreement is signed.
   
   D. "Scientology-related Individual" means an individual rendering
   services to or on behalf of a Scientology-related entity as a staff
   member, agent officer, trustee, or attorney in fact of that
   Scientology-related entity. The term "Scientology-related individual"
   includes, without limiting the generality of the foregoing, Individual
   CTCC members, At-Large CTCC members and individuals serving on the
   CTCC as representatives of Corporate CTCC members. The term
   "Scientology-related individual" applies only to the extent that such
   individual is acting in his capacity as staff member or other
   service-provider to or on behalf of the Scientology-related entity.
   
   E. "Qualified Written Material" means any information designated as
   "Qualified Written Material" pursuant to paragraph 4 of the agreement
   between Church of Scientology International and the Service, executed
   on behalf of the CSI on May 5, 1992. This material was obtained as
   part of the discussions in which the Service requested information
   relating to the organizational structure and operations of the Church
   mostly by written requests dated May 4, 1992 and October 16, 1992, to
   which the Church responded in June and November of 1992, respectively,
   and in various other written responses.
   
   F. "Service" means the Internal Revenue Service, including but not
   limited to the Office of Chief Counsel. References to officers or
   employees (present or former) of the Service shall include, but not
   limited to, officers or employees (present or former) of the Officer
   of Chief Counsel.
   
   G. "Taxable year" means calendar year.
   
   H. "Transition period" means taxable years 1993, 1994, 1995, 1996,
   1997, 1998 and 1999.
   
   I. "Agreement" means this closing agreement.
   
   J. "CTCC" means the Church Tax Compliance Committee.
   
   K. "Church Signatories" means the following entities: Church of
   Scientology International, Religious Technology Center, Church of
   Spiritual Technology, Church of Scientology Religious Trust, Building
   Management Services, Church of Scientology Flag Service Organization,
   Inc. and the Church of Scientology Western United States.
   
   L. "Settlement Agreement" means an agreement entered into between the
   Church Signatories and the Service on even date herewith relating to
   the disposition of certain other matters between the parties attached
   hereto as Exhibit IV-5.
   
   M. "Annual Report" means the report complied and submitted during the
   transition period by the CTCC as required under section IV of this
   Agreement.
   
   N. Disqualified Person. In General. The term "disqualified person"
   means with respect to a Scientology-related entity, any of the
   following persons:
   
   1. an Individual CTCC member (within the meaning of section IV.
   paragraph A.2.c. of this Agreement);
   
   2.A member of the family (as defined in paragraph 9) of an Individual
   CTCC member;
   
   3. a corporation not recognized as exempt under Code section 501 (c)
   (3) of which any person described in section VIII. paragraph N.1. or
   N.2. owns more than 35 percent of the total combined voting stock or
   stock value;
   
   4. a limited liability company not recognized as exempt under Code
   section 501 (c) (3) in which any person described in section VIII.
   paragraph N.1. or N.2. owns more than 35 percent of the membership
   interests;
   
   5. a partnership not recognized as exempt under Code section 501 (c)
   (3) in which any person described in section VIII. paragraph 1. or 2.
   owns more than 35 percent of the profits interests or capital
   interests; or
   
   6. an estate or a trust not recognized as exempt under Code section
   501 (c) (3) in which any person described in section VIII. paragraph
   N.1. or N.2. holds more than 35 percent of the beneficial interest.
   
   7. Stockholdings; Membership Interests. For purposes of paragraphs 3.
   and 4., there shall be taken into account indirect stockholdings and
   membership interests which would be taken into account under section
   267 (c) and 318 (a) (4), except that, for purposes of this paragraph,
   Code section 267 (c) (4) shall be treated as providing that the
   members of the family of an individual are the members within the
   meaning of section VIII. paragraph N.9.
   
   8. Partnerships, Trusts, Estates. For the purposes of paragraphs 4.
   and 5. the ownership of profits interest, capital interest or
   beneficial interest shall be determined in accordance with the rules
   for constructive ownership of stock provided in Code section 267 (c)
   (other than paragraph (3) thereof), except that Code section 267 (c)
   (4) shall be treated as providing that the members of the family of an
   individual are the members within the meaning of paragraph 9.
   
   9. Members of Family. For purposes of this definition, the family of
   any individual shall include on the individual's parents, children,
   spouse, siblings and the spouses of the individual's siblings.
   
   10. Time of determination. A person is a disqualified person, if, at
   any time during the transition period that a person is described in
   this definition.
   
   O. Willful. There term "willful" means a knowing, voluntary,
   intentional violation of a known legal duty.
   
   P. Sanction Period. The term "sanction period" means, with respect to
   any act of self-dealing under section VI. paragraph B or noncharitable
   expenditure under section VI. paragraph C, the period beginning on the
   date on which the act of self-dealing or noncharitable expenditure
   occurs and ending on the earliest of :
   
   1. the date on which the penalty imposed by section VI. paragraph
   B.a.1. or C.a.1 is paid;
   
   2. the date on which correction of the act of self-dealing or
   noncharitable expenditure is completed; or
   
   3. 180 days after the final judicial decision sustaining the Service's
   final determination with respect to a penalty imposed by section VI.
   paragraph B.1. or C.1. hereof under section VI. paragraph H.1..
   
   Q. First-Tier Penalty. For purposes of this paragraph P., the term
   "first tier penalty" means any penalty imposed by section VI.
   paragraph B.1. or C.1.
   
   R. Second-Tier Penalty. For purposes of this paragraph P., the term
   "first tier penalty" means any penalty imposed by section VI.
   paragraph B.1. or C.2.
   
   S. Correction. The terms "correction" and "correct" mean:
   
   1. for any act of self-dealing, undoing the transaction to the extent
   possible, but in any case placing the Scientology-related entity in a
   financial position not worse than that in which it would be if the
   disqualified person were dealing under the highest fiduciary
   standards;
   
   2. for any noncharitable expenditure (A) recovering part of all of the
   expenditure to the extent recovery is possible, and where full
   recovery is not possible such additional corrective action as is
   prescribed by the Service or (B) in the case of a failure to comply
   with paragraph D making or correcting the report in question, and
   
   3. for any failure to report under paragraph IV.D., the filing with
   the Service of an annual Report or corrected Annual Report 9 (or
   relevant part thereof), meeting the requirements of this Agreement.
   
   T. Correction Period. The term, "correction period" means, with
   respect to any event that is subject to penalty under the Agreement,
   the period beginning on the date on which such events occurs and
   ending 180 days after the date of the mailing under section VI.
   paragraph H.1.b. of a final notice of determination with respect to
   the second tier penalty imposed on such event, extended by any other
   period the Service determines is reasonable and necessary to bring
   about correction of the event.
   
   U. Church. The term "Church" when used in a descriptive sense refers
   to all Scientology-related entities. When used in connection with
   specific obligations under this Agreement, however, the term "Church"
   shall generally mean the CTCC.
   
   V. Commissioner. The term "Commissioner" means the Commissioner of the
   Internal Revenue Service.
   
   W. Assistant Commissioner. The term "Assistant Commissioner" means the
   Assistant Commissioner of the Internal Revenue Service for Employee
   Plans and Exempt organizations (or the successor to his or her
   function in any reorganization of the Service).
   
   X. Knowing. An individual shall be considered to have participated in
   a transaction "knowing" that it is either an act of self-dealing under
   section VI., paragraph B. or a noncharitable expenditure under section
   VI., paragraph C. only if
   
   1. He has actual knowledge of sufficient facts so that, based solely
   upon such facts, such transaction would be an act of self-dealing or a
   noncharitable expenditure, and
   
   2. He is aware that such an act under these circumstances may violate
   the relevant provisions of this Agreement, and
   
   3. He negligently fails to make reasonable attempts to ascertain
   whether the transaction is an act of self-dealing or a noncharitable
   expenditure, or he is in fact aware that it is such an act.
   
   The term knowing does not mean "having reason to know," but evidence
   that a person had reason to know of a particular fact or of a
   provision of this Agreement can be circumstantial proof of actual
   knowledge.
   
   Y. Reasonable cause. The term "reasonable cause" means the exercise of
   responsibility by a CTCC member on behalf of the CTCC and
   Scientology-related entities with ordinary business care and prudence.
   
   IX. Other Matters.
   
   A. Representations. The Church signatories represent that all are duly
   organized, validly existing and in good standing under the laws of the
   jurisdiction in which they are organized and that all have the power
   and authority to execute and deliver this Agreement, to perform their
   duties and obligations and to exercise their rights under this
   Agreement, to cause Scientology-related entities to comply with the
   terms of this Agreement, and further represent that the execution of
   this Agreement by the officers or trustees has duly and properly
   authorized by each Church signatory and that upon execution, this
   Agreement constitutes a valid and legally binding obligation of each
   Church signatory.
   
   B. Notices.
   
   1. All notices and reports hereunder shall be in writing and sent by
   certified mail, return receipt requested.
   
   2. Notice to the Service shall be sent as follows:
   
   Assistant Commissioner
   Employee Plans and Exempt Organizations
   Internal Revenue Service
   Room 3408E
   1111 Constitution Avenue, N.W.
   Washington, D.C. 20224
   
   In the event of a reorganization of functions within the Service in
   which the office of Assistant Commissioner (Employee Plans and Exempt
   Organizations) is eliminated, notices hereunder to the Service shall
   be sent to the Service official succeeding to the functions now served
   by the Assistant Commissioner (Employee Plans and Exempt
   Organization), as determined by the Service and sent to the CTCC in
   accordance with paragraph B. 4. hereof.
   
   3. Notice to the CTCC shall be sent as follows:
   
   Church Tax Compliance Committee
   c/o Church of Scientology International
   6331 Hollywood Blvd., Suite 1200
   Los Angeles, California 90028-6329
   
   4. Either party may change the address designated for future notices
   hereunder by notice in the manner provided in paragraph B. 1. to the
   other party to the existing address of record as provided in paragraph
   B. 2. or B. 3..
   
   C. Rules of Construction.
   
   1. This Agreement has been prepared by the combined efforts of the
   parties and their respective attorneys.
   
   2. The parties may by written agreement extend the time for
   performance of any obligation under this Agreement, except and only to
   the extent that another provision of this Agreement precludes such an
   extension of time.
   
   3. Unless otherwise expressly provided herein, no remedy conferred on
   or reserved to a party to this Agreement is intended to be exclusive
   of any other available remedy or remedies, but each and every such
   remedy shall be cumulative and shall be in addition to every other
   remedy given under this Agreement or now or hereafter existing
   pursuant to the Code, at law or in equity. No delay or omission to
   exercise any right or power accruing upon any default, omission or
   failure of performance hereunder shall impair any such right or power
   or shall be construed to be a waiver thereof, but any such right or
   power may be exercised from time to time and as often as may be deemed
   expedient. In the event any provision of this Agreement should be
   breached by any party, and thereafter duly waived by the other party
   so empowered to act, such waiver shall be limited to the particular
   breach so waived and shall not be deemed to waive any other breach
   hereunder.
   
   4. The words "hereof," "herein," "hereunder," "hereto" and other words
   of similar import refer to this Agreement in its entirety.
   
   5. The words "agree" and "agreements" contained herein are intended to
   include and mean "covenant" and "covenants."
   
   6. References to section headings and other subdivisions of this
   Agreement are for convenience only and shall not define or limit the
   provisions hereof.
   
   7. All references made in (i) the neuter, masculine or feminine gender
   shall be deemed to have been made in all such genders, and (ii) in the
   singular or plural number shall be deemed to have been made,
   respectively, in the plural or singular number as well.
   
   D. Entire Agreement. This Agreement constitutes the entire agreement
   between the Service and the Church and supersedes all prior agreements
   and understanding, both written and oral, between the Service and the
   Individual CTCC members, Corporate CTCC members, At-large CTCC
   members, Church Signatories, Scientology-related entities and
   Scientology-related individuals with respect to the subject matter
   hereof. However, nothing contained herein shall affect the Settlement
   Agreement, executed on even date herewith.
   
   E. Survival of Agreement. All covenants, agreements, representations,
   and warranties made herein and in all reports (including any Annual
   Report under section IV.), certificates, tax returns prepared and
   delivered pursuant hereto shall continue in full force and effect so
   long as any of the provisions of this Agreement remain unperformed.
   
   F. Costs of Compliance with Agreement. The Church Signatories,
   Individual CTCC members, Corporate CTCC members, and At-large CTCC
   members shall, solely at their own cost, perform and discharge all of
   the obligations and duties and exercise all rights under this
   Agreement, For example, no set off is available against any penalty
   asserted under section VI. paragraph C. 1. by reason of such costs.
   The Service shall at its own cost perform and discharge all of the
   obligations and duties and exercise all rights under this Agreement.
   
   G. Counterparts. This Agreement shall be executed in counterparts,
   each of which shall be deemed an original, but all of which together
   shall constitute one and the same instrument.
   
   H. Finality. This Agreement is final and conclusive except:
   
   1. The matter it relates to may be reopened in the event of fraud,
   malfeasance, or misrepresentation of material fact;
   
   2. It is subject to the Internal Revenue Code sections that expressly
   provide that effect be given to their provisions (including any stated
   exception for Code section 7122) notwithstanding any other law or rule
   of law; and
   
   3. If it related to a tax period ending after the date of this
   Agreement, it is subject to any law, enacted after the Agreement date,
   that applied to that tax period.
   
   I. Date of Agreement.
   
   The date of this Agreement is October 1, 1993.
   
   Dated: October 1, 1993
   [Signature]
   DAVID MISCAVIGE,
   Individual Member of CTCC
   
   Dated: October 1, 1993
   [Signature]
   NORMAN F. STARKEY,
   Individual Member of CTCC
   
   Dated: October 1, 1993
   [Signature]
   MARK RATHBUN,
   Individual Member of CTCC
   
   Dated: October 1, 1993
   [Signature]
   HEBER JENTZSCH,
   Individual Member of CTCC
   
   Dated: October 1, 1993
   [Signature] (POA)
   MARC YAGER,
   Chairman, WatchDog Committee,
   At-Large Member of CTCC
   
   Dated: October 1, 1993
   [Signature] (POA)
   JONATHAN EPSTEIN,
   International Finance Director,
   At-Large Member of CTCC
   
   Dated: October 1, 1993
   [Signature] (POA)
   NIGEL OAKES,
   Chief Accountant International,
   At-Large Member of CTCC
   
   Dated: October 1, 1993
   RELIGIOUS TECHNOLOGY CENTER
   By: [Signature]
   Mark Rathbun
   Title: President
   
   Dated: October 1, 1993 CHURCH OF SCIENTOLOGY
   INTERNATIONAL
   By: [Signature]
   Heber Jentzsch
   Title: President
   
   Dated: October 1, 1993
   CHURCH OF SPIRITUAL TECHNOLOGY
   By: [Signature]
   Title: POA
   
   Dated: October 1, 1993
   CHURCH OF SCIENTOLOGY FLAG
   SERVICE ORGANIZATION, INC.
   By: [Signature]
   Title: POA
   
   Dated: October 1, 1993
   CHURCH OF SCIENTOLOGY
   WESTERN UNITED STATES
   By: [Signature]
   Title: POA
   
   Dated: October 1, 1993
   BUILDING MANAGEMENT SERVICES
   By: [Signature]
   Title: POA
   
   Dated: October 1, 1993
   CHURCH OF SCIENTOLOGY
   RELIGIOUS TRUST
   By: [Signature]
   Title: POA
   
   Dated: October 1, 1993
   COMMISSIONER OF INTERNAL
   REVENUE SERVICE
   By: [Signature]
   John E. Burke, Assistant Commissioner,
   Employee Plans and Exempt Organizations
   
   Dated: October 1, 1993
   COMMISSIONER OF INTERNAL
   REVENUE SERVICE
   By: [Signature]
   James J. McGovern,
   Associate Chief Counsel,
   Employee Benefits and Exempt Organizations
   
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