SECTION 13. EXPIRATION, TERMINATION AND DEFAULT

Sec. 13.01. Term of Agreement. This Agreement shall be in effect on January 1 of the calendar year following the year in which this agreement is executed and shall expire on December 31, of the sixth calendar year for which this Agreement is in effect. This Agreement may be renewed as provided in section 13.06 of this Agreement.

Sec. 13.02. Termination of Agreement. This Agreement may be terminated by either the IRS or QI prior to the end of its term by delivery of a notice to the other party in accordance with section 14.06 of this Agreement. The IRS, however, shall not terminate the Agreement unless there has been a significant change in circumstances, as defined in section 13.03 of this Agreement, or an event of default has occurred, as defined in section 13.04 of this Agreement, and the IRS determines, in its sole discretion, that the significant change of circumstances or the event of default warrants termination of this Agreement. In addition, the IRS shall not terminate this Agreement in the event of default if QI can establish to the satisfaction of the IRS that all events of default for which it has received notice have been cured within the time period agreed upon. The IRS shall notify QI, in writing, that an event of default has occurred and that the IRS intends to terminate the Agreement unless QI cures the default in accordance with section 13.05 of this Agreement. A notice of termination sent by either party shall take effect on the date specified in the notice.

Sec. 13.03. Significant Change in Circumstances. For purposes of this Agreement, a significant change in circumstances means:

(A) An acquisition of all, or substantially all, of QI’s assets in any transaction in which QI is not the surviving legal entity;

(B) A change in U.S. federal law that affects the validity of, or materially affects, the procedures contained in this Agreement;

(C) A ruling of any court that affects the validity of any provision of this Agreement;

(D) A change in the laws and procedures set forth in any Attachment to this Agreement; or

(E) A significant change in QI’s business practices that affects QI’s ability to meet its obligations under this Agreement.

Sec. 13.04. Events of Default. For purposes of this Agreement, an event of default occurs if QI fails to perform any material duty or obligation required under this Agreement, and includes, but is not limited to, the occurrence of any of the following:

(A) QI fails to implement adequate procedures, accounting systems, and internal controls to ensure compliance with this Agreement;

(B) QI underwithholds the amount required to be withheld under chapter 3 of the Code and fails to correct the underwithholding or file an amended Form 1042 reporting, and paying, the appropriate tax under sections 11.05 and 11.06 of this Agreement;

(C) QI underwithholds the amount required to be withheld under section 3406 of the Code;

(D) QI makes a misrepresentation on Forms W-8IMY or attaches to the form information regarding classes of assets that results in underwithholding by the withholding agent;

(E) QI makes excessive refund claims;

(F) QI knows or has reason to know that the documentation required under section 5 of this Agreement is lacking, incorrect, or unreliable for a significant number of account holders;

(G) QI fails to timely file Forms 945, 1042, 1042-S, or 1099 or files forms that are materially incorrect or fraudulent;

1999–5 I.R.B. 47 February 1, 1999

(H) QI fails to have an external audit performed when required, fails provide an external auditor’s report directly to the IRS on a timely basis, or QI or its external auditor fails to cooperate with the IRS;

(I) QI fails to disclose to a withholding agent or to the IRS those account holders required to be disclosed under sections 6 and 10 of this Agreement;

(J) QI fails to inform the IRS of any change in the laws and procedures described in any Attachment to this Agreement within 90 days of the change becoming effective;

(K) QI fails to inform the IRS within 90 days of any significant change in its business practices to the extent that change affects QI’s obligations under this Agreement;

(L) QI fails to inform the IRS of any private arrangement, as described in section 4 of this Agreement;

(M) QI fails to cure a defect identified in an external audit report;

(N) QI makes any fraudulent statement or a misrepresentation of material fact with regard to this Agreement to the IRS, a withholding agent, or its external auditor;

(O) The IRS determines that the external auditor is not sufficiently independent to adequately perform its audit function; or

(P) An intermediary with which QI has a PAI agreement is in default with that agreement and QI fails to meet its obligation to terminate that agreement within the time period specified in section 4.03 of this Agreement.

Sec. 13.05. Notice and Cure. Upon the occurrence of an event of default, the IRS may deliver to QI a notice of default specifying the event of default that has occurred. QI shall respond to the notice of default within 60 days from the date of the notice. The response shall contain an offer to cure the event of default, and the time period in which the cure will be accomplished, or shall state the reasons why QI does not agree that an event of default has occurred. If QI does not respond within 60 days of the notice of default, the IRS may deliver a notice of termination as provided in section 13.02 of this Agreement. The IRS shall respond to QI’s response, by either accepting or rejecting the offer of cure, or by setting forth a counter-proposal for cure of the event of default. If QI has stated that it does not agree that an event of default has occurred, or if the IRS rejects an offer of cure by QI and QI does not accept the IRS’s counterproposal within 30 days of receiving that counterproposal, the parties shall seek to resolve their disagreement within 30 days of the IRS’s receipt of QI’s response. At the end of this latter 30-day period, or, to the extent QI failed to reply to the IRS’s rejection or counter-proposal within 30 days, at the end of the earlier 30 day period, the IRS may terminate this Agreement in accordance with section 13.02 of this Agreement. If QI receives a notice of termination from the IRS, it may appeal the determination to terminate this Agreement by sending a written notice to the Director, International District, OP:IN:D, 950, L’Enfant Plaza South, SW, Washington DC, 20024.

Sec. 13.06. Renewal. If QI intends to renew this Agreement, it shall submit an application for renewal to the IRS no earlier than one year and no later than six months prior to the expiration of this Agreement. Any such application for renewal must contain an update of the information provided by QI to the IRS in connection with the application to enter into this Agreement, and any other information the IRS may request in connection with the renewal process. This Agreement shall be renewed only upon the signatures of both QI and the IRS. Either the IRS or QI may seek to negotiate a new qualified intermediary agreement rather than renew this Agreement.