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Subject: CoS / IRS Closing Agreement here!

Date: Tue, 30 Dec 1997 15:40:01 GMT

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Courtesy of Ron Newman...thanks Ron

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