_CoS / IRS Closing Agreement_ 

NEW YORK (AP) -- The Church of Scientology paid the Internal Revenue
Service $12.5 million as part of a settlement of a long-standing
dispute with the tax agency, The Wall Street Journal reported today. 

Details of the 1993 settlement, which helped secure the tax-exempt
status of the main Scientology church, previously had not been
released. 

The details included the church's agreement to drop thousands of
lawsuits against the IRS and to stop assisting others in other lawsuits
against the agency based on claims before the Oct. 1, 1993, settlement
date, the Journal said. 

The IRS canceled payroll taxes and penalties it had assessed against
certain church entities and seven officials, and dropped audits of 13
Scientology organizations. 

The 1993 agreement ended a struggle that began in 1967, when the IRS
argued that the main Scientology church should lose its tax-exempt
status because it was a for-profit business that enriched church
officials. 

>From the article "Scientology Settles With IRS"
in Wall Street Journal [http://www.wsj.com] Tuesday, December 30, 1997 
                                    
------------------------------------------------------------------------

A good source of background information about CoS and their tax
exemption is <B><EM>Scientology versus
the IRS</EM></B>
[http://wpxx02.toxi.uni-wuerzburg.de/~cowen/essays/irs.html] by Chris
Owen, and <B><EM>Scientology and the IRS</EM></B>
[http://wpxx02.toxi.uni-wuerzburg.de/~krasel/CoS/irs/] by Cornelius
Krasel. 
The only edits I've made in this copy og the agreemen is to insert
indent and make main headers bold. Also made this simple Table of
contens with only the main headers: _
  1. Introduction 
  2. Resolution of Outstanding Issues 
  3. Service Determinations Regarding Scientology-Related Entities 
  4. Obligations and Undertakings During the Transaction Period 
  5. Treatment of the Code Section 6104 Public Inspection File and
Certain Other Materials 
  6. Penalty Provisions During Transition Period and Other Procedural
Matters 
  7. Treatment of Parishioner's Contributions 
  8. Definitions 
  9. Other Matters_ *Go to original Table Of Contents...* 
------------------------------------------------------------------------

[START ORIGINAL TEXT] 

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_ 
_
  1. Introduction_ _
  2. Resolution of Outstanding Issues_ 
    1. In General 
    2. Payment in Consideration of Resolution of Outstanding Issues 
    3. Effect of Agreement on Prior Tax Years and Waiver of Rights of
Action 
    4. 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 
    5. Effect on Outstanding Litigation Matters 
      1. In general 
      2. Zolin 
      3. Stipulations 
      4. Certain pending cases requiring coordination 
    6. After-Discovered Cases of Examinations in Existence as of the
Date of this Agreement 
    7. Finality _
  3. Service Determinations Regarding Scientology-Related Entities_ 
    1. Issuance of Determination Letters 
    2. Individual Determination Letters 
    3. Group Determination Letters _
  4. Obligations and Undertakings During the Transaction Period_ 
    1. Establishment of Church and Tax Compliance Committee 
      1. Purpose of Church Tax Compliance Committee 
      2. Membership of Church Tax Compliance Committee 
        1. Corporate CTCC members 
        2. At-large members of CTCC 
        3. Individual CTCC members 
      3. Responsibilities of CTCC 
        1. Annual report 
        2. Communications 
        3. Meetings 
        4. Guaranty 
        5. Liability for penalties 
      4. Actions of CTCC 
    2. Financial Reporting Requirements 
      1. Special accounting procedures 
        1. In general 
        2. Special Accounting Procedures --Operational aspects 
        3. CPA's reports -- In general 
        4. CTCC responsibilities 
        5. Selection of a qualified CPA 
        6. Definition of qualified CPA 
        7. CTCC's approval of selection 
        8. Notification of selection 
        9. First Qualified CPA 
        10. Special Purpose Report agreement 
        11. Special Purpose Report scope limitation 
        12. Access to Special Purpose Report - related to documents 
        13. Required disclosures to CPA 
        14. Submission of Special Purpose Reports 
        15. Submission of plan of corrective action 
      2. Internal financial reports 
      3. Report on central reserves transactions and balances 
      4. Tax returns 
      5. Term 
    3. 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 
      13. Term of fiduciary reporting under section IV C 
    4. Certifications 
      1. In general 
      2. Section 501 (c) (3) 
      3. Continuing certifications 
    5. Operational modifications 
    6. Treatment of Information Exchanges _
  5. Treatment of the Code Section 6104 Public Inspection File and
Certain Other Materials_ 
    1. Code section 6104 Public Inspection File 
    2. Disclosure of Information by the Service 
    3. Disclosure of Information by the CTCC 
    4. Proceeding Under Agreement 
    5. Disclosure Following Inquiries 
    6. Correction of Misstatements 
    7. Term of Undertaking _
  6. Penalty Provisions During Transition Period and Other Procedural
Matters_ 
    1. Introduction: Purpose and Scope of Sanctions 
    2. Self-Dealing Transactions 
      1. First-tier penalties 
        1. On Individual CTCC member who is a self-dealer or who is
related to a self-dealer 
        2. On Individual CTCC member with knowledge of transaction 
      2. Second-tier penalties 
        1. On Individual CTCC member who is a a self-dealer or who is
related to a self-dealer 
        2. On Individual CTCC member refusing to correct 
      3. Self-dealing 
        1. In general 
        2. Special rules 
        3. Exceptions 
        4. Amount involved 
    3. Noncharitable Expenditures First-tier penalties 
      1. First-tier penalties. 
        1. On Corporate CTCC members 
        2. On Individual CTCC members 
      2. Second-tier penalties 
        1. On Corporate CTCC members 
        2. On Individual CTCC members 
      3. Noncharitable expenditure 
        1. Noncharitable expenditure 
        2. Expenditure responsibility 
        3. Governing principles 
      4. Special noncharitable expenditure 
      5. Amount involved 
    4. Reporting Obligations 
      1. Penalty on Corporate CTCC members 
      2. Penalty on Individual CTCC members 
        1. Failure to comply with demand 
        2. Application of penalties for failure to provide information 
      3. Exception for reasonable cause 
      4. Exception for inability to certify specific information 
    5. Joint and Several Liability and Certain Penalty Limitations for
Individual CTCC members 
    6. Additional Penalty 
    7. Third-Tier Penalty 
    8. Procedures for Penalty Determinations 
      1. 
        1. First-tier penalty 
        2. Second-tier penalties 
        3. Other penalties 
      2. Interest 
      3. Non-assertion of penalties _
  7. Treatment of Parishioner's Contributions_ _
  8. Definitions_ 
    1. Code 
    2. Entity 
    3. Scientology-related entity 
    4. Scientology-related individual 
    5. Qualified Written Material 
    6. Service 
    7. Taxable Year 
    8. Transition Period 
    9. Agreement 
    10. CTCC 
    11. Church Signatories 
    12. Settlement Agreement 
    13. Annual Report 
    14. Disqualified Person 
    15. Willful 
    16. Sanction Period 
    17. First-Tier Penalty 
    18. Second-tier Penalty 
    19. Correction 
    20. Correction Period 
    21. Church 
    22. Commissioner 
    23. Assistant Commissioner 
    24. Knowing 
    25. Reasonable cause _
  9. Other Matters_ 
    1. Representations 
    2. Notices 
    3. Rules of Construction 
    4. Entire Agreement 
    5. Survival of Agreement 
    6. Cost of Compliance with Agreement 
    7. Counterparts 
    8. Finality 
    9. Date of Agreement _
  + Signatures_ _
  + List of Exhibits_ 
_
  1. 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. 

_
  2. 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. 

_
  3. 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 

_
  4. 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) 

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. 

End of Part 1.