Iranian Privatization Organization

In His Name

“Divesting Board Legislations”

Ministry of Economic Affairs and Finance (MEAF) - Presidential Deputy of Strategic Planning and Oversight- Ministry of Justice Administration- Islamic Consultative Assembly- Cooperative Chamber of the Islamic Republic of Iran- Chamber of Commerce, Industries and Mines of the IRI

In view of the recommendation of the MEAF and on the strength of the Subparagraph 4 of the Paragraph B of Article 40, of the “Law on Implementation of General Policies of Article 44” in its meeting on February 17, 2009, the Board of Divesting approved the “Manner of Drafting Contracts for Divesting, including the Determination of Authorities, and Obligations of the Contracting Parties, Mortgages and Guarantees, Conditions of Termination or rescission, and Manner of Application of Allowances and Fines” as detailed hereunder:

Directive for the Manner of Drafting Contracts for Divesting, including the Determination of Authorities, and Obligations of the Contracting Parties, Mortgages and Guarantees, Conditions of Termination or rescission, and Manner of Application of Allowances and Fines

Chapter 1: Generalities

Article 1) Terms and expressions used in this Legislation have the following meanings:

1) IPO: Iranian Privatization Organization;

2) Law: Law on Implementation of General Policies of Article 44;

3) Divestible Items: Shares, partner share, and preference right resulting from shares, partner share and ownership rights of the State in governmental and nongovernmental companies and enterprises; and

4) Divesting of Shares and Managerial Rights: Selling a part of shares, partner share, and preference right resulting from shares, partner share and ownership rights of the divestible SOE, whose buyer(s) have any authority or powers in the determination of the minimum one member in the Board of Directors of the divestible SOE, or obtain the aforementioned right.

5) Divesting of Shares and Controlling Right: Selling a part of shares, partner share, and preference right resulting from shares, partner share and ownership rights of the divestible SOE, whose buyer(s) have any authority or powers in the determination of the maximum number of members in the Board of Directors of the divestible SOE, or obtain the aforementioned right.

6) SOE Managers: members of Board of Directors, managing director, and individuals with similar title or any other person, who has been delegated the responsibility of decision making in the SOE, in view of the Law and or the Articles of Association or in view of the Court Decree and or the legal competent authorities.

7) Board of Arbitrators: Board of Arbitrators subject of Article 20 of the 3^rd Economic, Social, and Cultural Plan of the IRI.

Article 2) Where the divesting results in drafting, conclusion and exchange of the Divesting Contract between the IPO and the Buyer(s), the IPO as the Seller shall be required to make direct reference to the provisions of this Directive in the Contract.

Note 1: Divesting through methods of hire purchase, divesting of management (renting, general contracting, and managerial contracting activities) and transfer for the reimbursement of debts to the creditor entities and the transfer of justice shares to those entitled to the distribution plan of the justice share shall not be subject to this Directive.

Note 2: Models of Divesting Contract and Official Power of Attorney attached to it, shall be approved by the Managing Board of the IPO.

Chapter 2: Provisions of the Contract

Article 3) Generalities of the Contract, including:

A) Legal documentations for divesting;

B) Details of the supply Notice of the IPO; and

C) Method of divesting through stock exchange, tenders and negotiations.

Article 4) Details of the Contracting Parties

A) Details of the seller or buyer or their legal representatives, accompanied by the related documentations, for the carrying out of transactions;

B) Full address of the place of residence, national code, postcode and telephone numbers of the contracting parties and their legal representatives;

C) Referring to the fact that each Contracting Party shall be required to inform the other party of the change of its place of residence and before the written notification of the newly changed address, all the correspondents, information and papers shall be sent to the address provided in the Contract and this process shall be deemed as the legal notification.

Article 5) Date of Conclusion and Duration of the Contract

A) Date of Carrying out the Transaction (Date of winning in the stock market, tenders or negotiations);

B) Date of Conclusion the Contract and its duration;

Article 6) Subject of the Transaction

A) Name of the divestible SOE and No., date and its registration reference;

B) Size of divesting, in number and percent from the total ownership of SOEs and detailed determination of the buyer’s ownership share.

Article 7) Price of the Contract

A. Total Price of the divesting and its separation based on the cash and installment portions related to each buyer;

B. Interest on the installment based selling related installment portion of the transaction in installment based selling;

C. Price and date of maturity of each installment related to each one of the buyers in installment based selling (subject of Paragraph B of Article 14 of this Directive);

Article 8) Manner of Reimbursement of the Price of Contract and Guaranteeing its Payment

A) Amount settled by the buyer(s) to the IPO account, for the cash portion of the transaction, including the payment documentations;

B) Amount settled by the buyer(s) to the IPO account, for the deposit for participation in the bids or tenders;

C) Details of acceptable commercial documentations as the payment instruments and for installment, which is signed by the buyer(s).

D) Details of the note or other valid documentations, subject of Bylaw of Subparagraph 2 of Paragraph A of Article 40 of the Law, for payment of debts resulting from installments and for the amount of 50 percent of the installment portion of the transaction, which is signed by the buyer(s).

E) Undertaking by the buyer to give guarantees or assurances to the IPO, with the charges of the buyer, waiving all their rights of interference and possession, and changing the divested item during the provisions period, without the consent of the IPO.

Article 9) IPO Obligations

A) Regarding the contracts of cash divesting, the IPO undertakes that following the collection of all the price of the transaction, conclude the contract, exchange the contract, and if necessary, collect the Power of Attorney or the acceptable commercial documentations, subject of this Directive and sign all the books of transfer of ownership, and transfer the legal ownership documents to the name of the buyer(s), with the date of their winning in the tender transactions and or with the date of their winning in the stock market transactions and or with the date of their winning in the negotiations-based transactions.

B) In installment-based divesting, the IPO undertakes that following the collection of the cash portion of the transaction and collection of the acceptable commercial documentations, mortgage the divestible SOE, or guarantee the price of the divestible SOE and collect the Power of Attorney in regard to the conclusion of the contract subject of this Directive, sign all the books of transfer of ownership, and transfer the legal ownership documents to the name of the buyer(s), with the date of their winning in the tender transactions and or with the date of their winning in the stock market transactions and or with the date of their winning in the negotiations-based transactions.

Note: In negotiations-based transactions, subject of Paragraphs B and C of this Article, date of winning the buyer(s) in the tender transactions, shall be the date of announcement in written of winning in the negotiations by the IPO.

C) If in view of the finalized decision made by the Board of Arbitration or judicial authorities, it is discovered that all or part of the shares, partner shares, ownership rights, and or other divested rights belong to a third party, in view of the mutual contract, the IPO undertakes to receive the legal compensation from the related authority and pay the same to the buyer(s) and third parties.

D) Payment of all types of compensations, indemnities and the like in relation to the national or confiscated items, which are related to the pre-divesting era shall be made by the government.

E) If the finalized decrees of the Board of Arbitrators or juridical authorities, as a result of transgressions of the IPO members of the Board of Directors (BD), managing director and other managers of the divestible SOEs as a result of reservation of financial events or publication of false financial reports for concealing the real status of the SOE, the IPO undertakes to pay the due losses to the buyer(s).

F) Settlement of accounts before the due date of the installments of the Divesting Contract or payment of the same in a lump sum by the buyer(s) shall be authorized. The IPO undertakes to deduct the interest on the installment-based selling for the part of the debt, which is settled before the due dates. However, the obligation by the buyer(s) to preserve the employment level for five (5) years after divesting in view of the provisions of this Directive shall remain in force. Moreover, the IPO is required to directly refer to the issue of mortgages and guarantees in the Divesting Contract.

Article 10) Obligations of the Buyer(s)

A) Explicitly attesting the fact that they are fully and significantly informed of the former and current financial, economic and technical information of the divestible items at the time of buying, and conclusion of the Contract and waiving all their claims against the IPO for lacking necessary information regarding the financial statements and the last status of accounts regarding the SOEs and other related information.

B) Undertaking to pay the collateral, for the late payment of the installment(s) of transaction in view of the legislations of the Money and Credit Council (Central Bank of the IRI);

C) Waiving the right of transfer of any obligations resulting from the Contract to third persons, wholly or partially, without the consent and necessary coordination with the IPO until the complete carrying out of the obligations;

D) Submission of the Official Irrevocable Power of Attorney as detailed in the attached sample as the inseparable part of the Divesting Contract to the IPO for the materialization of different contractual obligations;

E) Delegations of authorities toe the IPO for requesting and collection of its claims out of the pledges and financial documents received, in case of nonpayment of four installments as a result of the divesting of the “object of transaction” or the non-fulfillment of obligations detailed in the Contract;

F) Obligation of the buyer(s) in the installment-based method, to immediately send a copy of the financial statements approved and the notes attached thereto, minutes of meeting of the Board of Directors and legislations of the public assemblies of the divested SOE to the IPO. Moreover, obligations in the cash divesting shall be borne by the established buyer until five (5) years after the date of divesting.

In order to create satisfactory conditions for the oversight of the IPO in the proper administration of the SOE after divesting, both in the installment-based selling during the application of the Contract and in the cash method of selling during the aforementioned five (5) years, the buyer undertakes to provide facilities for reviewing the necessary documentations and visit by the IPO representatives to the SOE, in view of the written request of the IPO.

G) In divesting the controlling shares and rights, the buyer(s) undertakes to submit to the IPO their written plan for preserving the employment level of the divestible SOE, at the time of the conclusion of the Contract.

H) In divesting the controlling shares and rights, the buyer(s) undertakes to preserve the annual average of the number of employees of the divested SOE, during five (5) years after divesting, taking into account the number of substituted individuals for retired and service repurchased employees during the years after divesting at the same level of the number of employees sated in the Divesting Contract, provided that no reduction, exceeding ten (10) percent is made in the number of employees during the concerned period;

I) In divesting the controlling shares and rights, the buyer(s) undertakes that until they have completely settled their accounts with the IPO, in installment-based selling, during the application of the Contract, and in cash divesting, until maximum five (5) years after divesting for any change in the Articles of Association of the SOE, including the change of its capital and in selling the fixed assets, valued more than one (1) percent of the book value of all these assets during the divesting, inform of the IPO of the issue and receive the written request (1% of the total value of the transferable fixed assets of the SOE, shall be authorized without the written request of the IPO) and during this period, the legal inspector and auditor of the SOE, shall be elected from among the institutions and auditors trustable fro Securities and Stock Exchange Organization.

Note 1: The IPO shall be authorized to collected indemnities from the buyer(s), who violate the provisions of Paragraphs H and I, with the approval of the Board of Divesting, not exceeding five (5) percent of the principal price of the transaction or the value of assets losses.

The order of this note includes buyer/buyers who does not cooperate with the Privatization Organization (IPO) inspectors and do not submit their information.

Note 2: In divesting managerial shares and rights, the buyer(s) undertake that the SOE managers, who are appointed by him, duly respect the obligations subject of this Article.

J) The buyer(s) undertake to provide for necessary conditions for the continuous enjoying of the SOE employees, who are interested in the entitlement to the facilities stated in Article 31 of the Law for preserving of their contributions to the retirement fund related to themselves.

K) If in view of the finalized decision made by the Board of Arbitration or judicial authorities, it is discovered that all or part of the shares, partner shares, ownership rights, and or other divested rights belong to a third party, in view of the mutual contract, the buyer(s) undertake to only collect the legal compensation from the related authority.

Article 11) Options

Fully informed of the conditions and location of the divestible SOE and the financial, economic and technical status and all the current and future obligations of the SOE, the buyer(s) signs the Divesting Contract and signing it, waives all the options, particularly the option of gross fraud.

Note: Cases subject of Paragraphs “a”, “d” and “f” of Article 9 of this Directive, related to the concealing of financial facts or distribution of unreal financial reports by the members of the Board of Directors, Managing Director and other managers of the divestible SOEs, shall be exceptions from the application of provisions of this Article, in view of the decision of the Board of Arbitration or judicial authorities.

Article 12) Settlement of Disputes

It shall be confirmed in the Contract that all the differences and disputes between the Contracting Parties as a result of the interpretation, and application of the Divesting Contract and examination, commenting and decision making in regard to the complaint of legal and real persons against any of the decisions regarding the divesting in view of Articles 20 and 23 of the 3^rdEconomic, Social, and Cultural Plan of the IRI, provisioned in Article 30 of the Law, shall be settled by the Board of Arbitration.

Article 13) Termination of the Contract

In case the buyer(s) fails to apply wholly or partially the provisions of the Contract and or does not fulfill their obligations in the due dated, the IPO shall be entitled to unilaterally terminate the Contract through the Board of Arbitration. In case of the unilateral termination of the Divesting Contract, the buyer(s) shall bear all the losses incurred and the return of the profits raised.

In all the cases of the return to the State ownership of the divestible SOE in view of this legislation, the IPO shall be authorized to calculate and claim for inflicted losses, which shall be born by the buyer(s).

Article 14) Other Cases

A) The Contract shall be drawn up in three copies, which shall be equally valid and signed by the Contracting Parties and duly exchanged between them.

B) The Table attached to the Contract, includes number of installments, maturing date and the amount of each installment, which shall be concurrently signed by the Contracting Parties and shall be deemed as an inseparable part of the Contract.

C) If in the divesting cases, the foreign bidder(s) is elected as the buyer(s), in addition to the drawing up of the Contract in Persian, three copies of Contract shall be drawn up in English, exactly compatible with the Persian Contract, which shall be signed by the Contracting Parties and duly exchanged between them. In the Introduction of the English Contract, a summary of the information related to the Foreign Investment Permit, shall be provisioned, in case the buyer would have received the aforementioned Permit.

Article 15) Gradual divesting of the SOEs shares through the Stock Exchange shall be performed in view of the regulations and rules of Securities and Stock Exchange Organization. Moreover, the IPO is required to separately draft, approve and accordingly use the sample for divesting of the preferential part of the divestible SOEs to the employees and managers, subject of Note 3 to Article 20 of the Law and the divesting of the Justice Shares, subject of Chapter 6 of the Law and divesting of the SOEs in the framework of services of assuring the subscription or undertaking the purchase of the shares or credit enterprises or companies, subject of Article 22 of the law in the framework of the executive regulations of each of the stated cases and the Power of Attorney attached to it.

Article 16) The buyer(s) undertake that they are not among the persons, who are directly referred to in Article 24 of the Law and Note 2 of it. Otherwise, any type of transactions of the aforementioned persons shall be nullified and if it is proved by the Board of Arbitration or judicial authorities, the Contracting Party shall be required to return to the State ownership the divested item, with all the interests thereto and duly compensate the losses from this process.

Article 17) In cases of divesting the shares of State owned banks, the buyer(s) undertakes that they are not covered by the limitations stated in Article 5 of the Law and its Note 1 and through the buying of shares shall not be subject of the aforementioned limitation.

In case of the violation of buyer(s) is proved and it becomes clear that their undertaking in regard to being free from the aforementioned limitations is unrealistic, the transaction made and the Contract concluded in this concern shall be deemed null and void and the Contracting Party shall be required to compensate all the losses inflicted by the State, return the divested item and the interests thereto to the State Ownership.

Note: Provisions of this Article regarding divesting to the nongovernmental public institutions shall be extended to the limitations provisioned in Article 6.

Article 18) IPO supply and transfer of divestible items and SOEs in the application of the Law, shall be exempted from the tax on transfer. This exemption shall be duly provisioned in the Divesting Contract.

Article 19) In case of divesting controlling shares and rights of SOEs in view of the Executive Bylaws of Articles 16 and 25 of Law, the IPO shall be authorized to provide the buyer(s) with allowances, which shall be duly provisioned in the Divesting Contract and the IPO shall examine and supervise the process through the collection of full information from the buyer(s). In case of meeting the required conditions by the buyer(s), IPO shall provide the necessary recommendation to the Board of Divesting.

Article 20) Rescission of the Divesting Contract in special cases depends on the special auditing of the buyer(s) efforts, and the compensation and reimbursement of the losses inflicted to the buyer(s) shall be authorized, which shall be duly provisioned in the Divesting Contract.

Article 21) It shall be explicated in the Contract that in all the cases in installment-based selling, where in order to settle disputes between the Contracting Parties, Board of Arbitrators or other judicial competent authorities, open the examination file, all the obligations of the buyer(s) to the IPO shall be duly preserved and the buyer(s) shall not be entitled to refrain from payment of installments or fulfill their other obligations, subject of the Contract during the examination.

Seyed Shamseddin Hosseini

Minister of Economic Affairs and Finance