SECTION 4. PRIVATE

ARRANGEMENT INTERMEDIARIES

Sec. 4.01. In General. QI may enter into a private arrangement with another intermediary under which the other intermediary agrees to perform all of the obligations of QI under this Agreement, except as provided in section 4.02 of this Agreement. Such agreement shall be between the QI and all the offices of the other intermediary located in a specified country. The specified country must be one for which this Agreement is available. Such an intermediary is referred to in this Agreement as a private arrangement intermediary (“PAI”). By entering into a PAI agreement, QI is not assigning its liability for the performance of any of its obligations under this Agreement. Therefore, QI shall remain liable for any tax, penalties, interest, and any other sanction that may result from the failure of the PAI to meet any of the obligations imposed by its agreement with QI. QI agrees not to assert any defenses against the IRS for the failures of the PAI or any defenses that the PAI may assert against QI. For purposes of this Agreement, the PAI’s actual knowledge or reason to know of facts relevant to withholding or reporting shall be imputed to QI. QI’s liability for the failures of the PAI shall apply even though

the PAI is itself a withholding agent under chapter 3 of the Code and a payor under chapter 61 and section 3406 and is itself separately liable for its failure to meet its obligations under the Internal Revenue Code. Notwithstanding the foregoing, QI shall not be liable for tax, interest, or penalties for failure to withhold and report under chapters 3, 61, and section 3406 of the Code unless the underwithholding or the failure to report amounts correctly on Forms 945, 1042, 1042-S or 1099 are due to QI’s or its PAI’s failure to properly perform its obligations under this Agreement. The PAI is not required to enter into an agreement with the IRS. The IRS may, however, in its sole discretion, refuse to permit an intermediary to operate as a PAI by providing notice to QI at the address provided in section 12.06 of this Agreement. QI may, however, appeal the IRS’s determination by following the notice and cure provisions in section 11.05 of this Agreement. For purposes of this Agreement, an intermediary shall be considered a PAI only if the following conditions are met: (A) The PAI is, pursuant to a written agreement between QI and the PAI, subject to all the obligations of QI under this Agreement, except to the extent modified by section 4.02 of this Agreement; (B) QI files a notice with the Commissioner, or his delegate, at the address set forth in section 12.06 of this Agreement, before the first payment for which the intermediary acts as a PAI giving the name, address, taxpayer identification number of the intermediary, if any, and the name of the country or countries in which the offices of the intermediary that are subject to the PAI agreement are located; (C) The PAI is subject to the identical external audit procedures that apply to QI under this Agreement and the PAI uses an external auditor designated in Appendix B of this Agreement, or another auditor approved by the IRS for that PAI; and (D) The PAI furnishes QI with a Form W8IMY described in section 6 of this Agreement as modified by this section 4.01(D). The PAI is required to provide QI with the Forms W-9 (or, in absence of the form, the name, address and TIN, if available) of the PAI’s U.S. non-exempt recipient account holders and the withholding rate pool information for those account holders as required by section

6.03 of this Agreement. In addition, the PAI is required to disclose to QI the account holders of a nonqualified intermediary, or interest holders in a flow-through entity, which has an account with the PAI and all of the information relating to those account holders that is required for the QI, or another withholding agent, to report the payments made to those account holders as required by sections 8.02(B) and 8.04 of this Agreement. The PAI is not required to disclose to QI, or another withholding agent, its direct account holders that are foreign persons. Sec. 4.02. Modification of Obligations for PAI Agreements. The agreement between QI and a PAI must provide that QI shall include all reportable payments made by the PAI in QI’s Forms 945 and 1099 and all payments of amounts subject to NRA withholding made by the PAI in QI’s Forms 1042 and 1042-S as if QI had made the payments directly to the PAI’s account holders. Therefore, QI shall report payments made to a PAI’s direct foreign account holders (other than intermediaries, custodians, nominees, agents or flow-through entities) using the reporting pools as described in section 8.03 of this Agreement and shall report payments made to indirect foreign account holders of the PAI by reporting the payments as made to specific recipients under the rules of section 8.02 of this Agreement. QI shall also file Forms 1099 and, if required, backup withhold on reportable payments made to U.S. non-exempt recipient direct or indirect account holders of a PAI in accordance with the terms of this Agreement. QI shall require a PAI to provide QI with all the information necessary for QI to meet its obligations under this Agreement. No provisions shall be contained in the agreement between QI and a PAI that preclude, and no provisions of this Agreement shall be construed to preclude, the PAI’s joint and several liability for tax, penalties, and interest under chapters 3, 61, and section 3406 of the Code to the extent that underwithholding, penalties, and interest have not been collected from QI and the underwithholding or failure to report amounts correctly on Forms 945, 1042, 1042-S or 1099 are due to a PAI’s failure to properly perform its obligations under its agreement with QI. QI’s agreement with a PAI must require the PAI to disclose information regarding

January 24, 2000 396 2000–4 I.R.B.

U.S. non-exempt recipients to the same extent that QI is required to disclose such information to the IRS or another payor under this Agreement. Nothing in the agreement between QI and a PAI shall permit the PAI to assume primary NRA withholding responsibility or primary Form 1099 reporting and backup withholding responsibility. Sec. 4.03. Termination of Arrange- ment. QI shall cease to treat an intermediary as a PAI within 90 days from the day QI knows that the PAI is in default of its agreement with QI unless the PAI has cured the event of default prior to the expiration of such 90 day period. QI must provide the IRS with notice of any PAI agreement that has been terminated within 30 days of the termination.