SECTION 8. EXTERNAL AUDIT

PROCEDURES

Sec. 8.01. In General . Unless WP requests an IRS audit in lieu of an external audit, the IRS agrees not to conduct an on-site audit of WP with respect to withholding and reporting obligations covered by this Agreement provided that an external auditor designated in Appendix A of this Agreement conducts an audit of WP in accordance with this section 8. WP shall permit the external auditor to have access to all relevant records of WP for purposes of performing the external audit, including information regarding specific partners. WP shall permit the IRS to communicate directly with the external auditor and to review the audit procedures followed by the external auditor. WP represents that there are no legal prohibitions that prevent the external auditor from examining any information relevant to the external audit to be performed under this section 8 and that there are no legal prohibitions that prevent the IRS from communicating directly with the auditor. WP shall permit the IRS to examine the external auditor’s work papers and reports.

Sec. 8.02. Designation of External Auditor . WP’s external auditor must be one of the auditors listed in Appendix A of this Agreement, unless WP and the IRS agree, prior to the audit, to substitute another auditor. WP shall not propose an external auditor unless it has a reasonable belief that the auditor is subject to laws, regulations, or rules that impose sanctions

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course of the audit it has not discovered any significant change in circumstances, as described in section 9.05 (A) or (D) of this Agreement.

Sec. 8.06. External Auditor’s Report . Upon completion of the audit of WP, the external auditor shall issue a report, or reports, of audit findings directly to the IRS by sending the original report to the IRS at the address set forth in section 10.06 of this Agreement. This report is due by December 31 following the calendar year being audited, or if that date falls on a Saturday or Sunday, the next U.S. business day. The IRS may, however, upon request by the external auditor, extend the due date of the audit report upon good cause. The report must be in writing, in English, and currency amounts must be stated in U.S. dollars. The report must fully describe the scope of the audit, the methodologies (including sampling techniques) used to determine whether WP is in compliance with the provisions of this Agreement, and the result of each such determination. The report must also specifically address each of the items in section 8.05 of this Agreement.

Sec. 8.07. Expanding Scope and Timing of External Audit . Upon review of the external auditor’s report, the IRS may request, and WP must permit, the external auditor to perform additional audit procedures.

SECTION 9. EXPIRATION, TERMINATION AND DEFAULT

Sec. 9.01. Term of Agreement: Gen- eral Rule . If WP has not made a PR election, this Agreement shall be in effect on

and shall continue in force until terminated under 9.03 or 9.04 of this Agreement.

Sec. 9.02. Term of Agreement: Spe- cial Rule for PR Election . If WP has made a PR election, this Agreement shall be in effect on and shall expire on December 31 of the fifth full calendar year after the year in which this Agreement first takes effect. This Agreement may be renewed for additional terms as provided in section 9.08 of this Agreement.

Sec. 9.03. Termination of Agreement . This Agreement may be terminated by either the IRS or WP prior to the end of

for failure to exercise its independence and to perform the audit competently. The IRS has the right to reject a proposed external auditor, or to revoke its acceptance of an external auditor, if the IRS, in its sole discretion, reasonably believes that the auditor is not independent or cannot perform an effective audit under this Agreement.

Sec. 8.03. Timing External Audits: General Rule . Unless WP has made a PR election, WP shall have the external auditor conduct an external audit only at such time and only for such calendar years as the IRS directs.

Sec. 8.04. Timing External Audits: Special Rule for PR Election . If WP has made a PR election, WP shall have the external auditor conduct an audit after the close of every other calendar year that this Agreement is in effect. The auditor shall examine the two previous calendar years. For example, the first audit will occur in the third calendar year that the agreement is in effect and the external auditor will examine calendar years one and two.

Sec. 8.05. Scope of External Audit . The external auditor shall verify whether WP is in compliance with this Agreement by conducting an audit that meets the requirements of this section 8.05. The report, described in section 8.06 of this Agreement, must disclose that the external auditor has, at a minimum, performed the following checks listed in this section 8.05, and set forth how each of those checks was performed and the results of the checks. WP’s external auditor is encouraged to contact the IRS at the address set forth in section 10.06 of this Agreement and submit an audit plan (which includes, if relevant, the extent to which the external auditor proposes to rely on WP’s internal audit procedures) prior to performing the audit so that the audit may be conducted in the most efficient and least costly manner possible.

( A ) Documentation . The external auditor must review information contained in partner files to determine whether the documentation requirements of section 4 of this Agreement are being met.

( B ) Withholding Responsibilities . The external auditor must—

( 1 ) Perform test checks of direct partners, to verify that WP is withholding the proper amounts.

( 2 ) Verify that amounts withheld were timely deposited in accordance with section 3.03 of this Agreement.

( C ) Return Filing and Information Reporting . The external auditor must—

( 1 ) Obtain copies of original and amended Forms 1042, and any schedules, statements, or attachments required to be filed with those forms, and determine whether the amounts of income, taxes, and other information reported on those forms are accurate by—

( i ) Reviewing work papers; ( ii ) Reviewing Forms W-8IMY, together with the associated withholding statements, that WP has provided to withholding agents;

( iii ) Reviewing copies of Forms 1042-S that withholding agents have provided WP;

( iv ) Reviewing account statements from withholding agents;

( v ) Reviewing correspondence between WP and withholding agents; and

( vi ) Interviewing personnel responsible for preparing the Form 1042 and the work papers used to prepare those forms.

( 2 ) Obtain copies of original and corrected Forms 1042-S and Schedules K-1 together with the work papers used to prepare those forms and determine whether the amounts reported on those forms are accurate by—

( i ) Reviewing the Forms 1042-S received from withholding agents;

( ii ) Reviewing the Form 1065, if required;

( iii ) Reviewing a valid sample of earnings statements issued by WP to direct partners, if any.

( 3 ) Thoroughly review the statements attached to amended Forms 1042 filed to claim a refund, ascertain their veracity, and determine the causes of any overwithholding reported and ensure WP did not issue Forms 1042-S to persons whom it included as part of its collective credit or refund.

( 4 ) Determine, in the case of collective credits or refunds, that WP repaid the appropriate partners prior to requesting a collective refund or credit.

( E ) Change in Circumstances . The external auditor must verify that in the

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its term by delivery of a notice of termination to the other party in accordance with section 10.06 of this Agreement. The IRS, however, shall not terminate the Agreement unless there has been a significant change in circumstances, as defined in section 9.05 of this Agreement, or an event of default has occurred, as defined in section 9.06 of this Agreement, and the IRS determines, in its sole discretion, that the significant change in 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 WP 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 WP, in accordance with section 9.07 of this Agreement, that an event of default has occurred and that the IRS intends to terminate the Agreement unless WP cures the default. A notice of termination sent by either party shall take effect on the date specified in the notice.

Sec 9.04. Automatic Termination of Agreement . Notwithstanding Section 9.03 of this Agreement, this Agreement will terminate automatically in the event that the external auditor or the IRS on audit discovers that WP was not in possession of Forms W-8 or W-9, as applicable, for any direct partner at any time that withholding or reporting was required under section 3.02 of this Agreement. The automatic termination will be effective as of December 31 of the year in which the external auditor or the IRS makes that discovery. This Agreement will be reinstated, effective the same date it was automatically terminated, if WP obtains appropriate Forms W-8 or W-9 (that relate to the time withholding or reporting was required) for each such partner before January 31 of the year following the year in which the agreement automatically terminated. In the event of automatic termination of this agreement, WP must pay any underwithholding of tax, interest, and penalties that the IRS determines is attributable to each undocumented direct partner for the period during which the partner was undocumented, and, if WP has made a PR election, WP must file partner specific Forms 1042-S for every foreign direct partner from the earliest time the Forms W-8 or W-9 were

required for any undocumented direct partner through the date of termination. After the date of automatic termination of this agreement, WP may not act as a withholding foreign partnership, and must so notify any persons to which WP has furnished a withholding foreign partnership certificate. After the date of automatic termination of this agreement, the IRS may reinstate this agreement (or the IRS may require WP to enter into a new withholding foreign partnership agreement) on such terms and conditions and with such modifications as the IRS may determine.

Sec. 9.05. Significant Change in Cir- cumstances . For purposes of this Agreement, a significant change in circumstances includes, but is not limited to—

( A ) any merger, consolidation or division of WP or any change in circumstances that would result in a termination of WP under section 708 of the Code;

( B ) A change in U.S. federal law or policy, or applicable foreign law or policy, that affects the validity of any provision of this Agreement, materially affects the procedures contained in this Agreement, or affects WP’s ability to perform its obligations under this Agreement;

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

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

Sec. 9.06. Events of Default . For purposes of this Agreement, an event of default occurs if WP 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 ) WP fails to implement adequate procedures, accounting systems, and internal controls to ensure compliance with this Agreement;

( B ) WP underwithholds an amount that WP is required to withhold under chapter 3 of the Code and fails to correct the underwithholding or to file an amended Form 1042 reporting, and paying, the appropriate tax;

( C ) WP makes excessive refund claims;

( D ) WP fails to file Forms 1042, 1042-S, 1065 (if required), or Schedules

K-1 (if required) by the due date specified on such forms or files forms that are materially incorrect or fraudulent;

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

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

( G ) WP fails to cure a default identified by the IRS or by an external auditor;

( H ) WP makes any fraudulent statement or a misrepresentation of material fact with regard to this Agreement to the IRS, a withholding agent, or WP’s external auditor;

(I) The IRS determines that WP’s external auditor is not sufficiently independent to adequately perform its audit function or the external auditor fails to provide an audit report that complies with section 8 of this Agreement;

( J ) WP is prohibited by any law from disclosing the identity of a partner or partner information to WP’s external auditor;

( K ) WP fails to make deposits in the time and manner required by section 3.03 of this Agreement or fails to make adequate deposits, taking into account the procedures of 7.05 of this Agreement; or

( L ) WP fails to permit the external auditor to perform additional audit procedures under the provisions of section 8.07 of this Agreement.

Sec. 9.07. Notice and Cure . Upon the occurrence of an event of default, the IRS may deliver to WP a notice of default specifying the event of default that has occurred. WP shall respond to the notice of default within 60 days (60-day response) from the date of the notice of default. The 60-day 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 WP does not agree that an event of default has occurred. If WP does not provide a 60-day response, the IRS may deliver a notice of termination as provided in section 9.03 of this Agreement. If WP provides a 60-day response, the

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IRS shall either accept or reject WP’s statement that no default has occurred or accept or reject WP’s proposal to cure an event of default. If the IRS rejects WP’s contention that no default has occurred or rejects WP’s proposal to cure a default, the IRS will offer a counter-proposal to cure the event of default. Within 30 days of receiving the IRS’s counter-proposal, WP shall notify the IRS (30-day response) whether it continues to maintain that no default has occurred or whether it rejects the IRS’s counterproposal to cure an event of default. If WP’s 30-day response states that no default has occurred or it rejects the IRS’s counter-proposal to cure, the parties shall seek to resolve their disagreement within 30 days of the IRS’s receipt of WP’s 30-day response. If a satisfactory resolution has not been achieved at the end of this latter 30-day period, or if WP fails to provide a 30-day response, the IRS may terminate this Agreement by providing a notice of termination in accordance with section 9.03 of this Agreement. If WP receives a notice of termination from the IRS, it may appeal the determination within 30 days of the date of the notice of termination by sending a written notice to the address specified in section 10.06 of this Agreement. If WP appeals the notice of termination, this Agreement shall not terminate until the appeal has been decided. If an event of default is discovered in the course of an external audit, the WP may cure the default, without following the procedures of this section 9.07, if the external auditor’s report describes the default and the actions that WP took to cure the default and the IRS determines that the cure procedures followed by WP were sufficient. If the IRS determines that WP’s actions to cure the default were not sufficient, the IRS shall issue a notice of default and the procedures described in this section 9.07 shall be followed.

Sec. 9.08. Renewal . If WP has made the PR election under section 6.03 of this agreement and intends to renew this Agreement for an additional term, 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 WP 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 WP and the IRS. Either the IRS or WP may seek to negotiate a new withholding foreign partnership agreement rather than renew this Agreement.