Iranian Privatization Organization

In the name of God

decree No.: H/89/2/143, Date: 8/8/2010

the subject of section (4), Clause (B), Article (40)

‘The Divestiture Board’

Parliament, Ministry of Economic Affairs and Finance, Ministry of Justice, President Deputy of Strategic Planning and Control, Iran Chamber of Commerce, Industries and Mines, Islamic Republic of Iran Chamber of Cooperatives.

The Divestiture Board in its sessions of 1/5/2010 and 8/5/2010 based on the Iranian Privatization Organization (IPO) proposal and by virtue of Directive of ‘how to set the divestiture contracts including how determining the powers and obligations of the parties, collaterals and guarantees, the conditions of termination or annulment and how to apply discounts and crimes’ the subject of section (4), Clause B, Article (40) of ‘the Law on Implementation of General Policies of Principle (44) of the Constitution’ and in order to undertaking a good monitoring on the enterprises which control shares or their management will be transferred, has approved the Directive of How to Monitor after Divestiture as follows:

‘Directive of How to Monitor after Divestiture’

Article 1) The Iranian Privatization Organization (IPO) shall, upon the conclusion of contracts and communication of divesture contracts, extract some articles of cited contracts including obligations of buyers, in addition to a copy of this Directive and giving them to customers and CEOs of divested enterprises for implementation and give the buyers a copy of the regulations and related directives, if they wanted.

Article 2) The Iranian Privatization Organization (IPO) is required to do a special monitoring on divested enterprises by using the services of trusted auditing institutions (either the audit organization or each of community members of certified public accountants) or in certain cases, Judicial official experts on the basis of a program that provides itself. The institutions based on the contract signed with the Iranian Privatization Organization (IPO), are required every six months or in a shorter period at the discretion of the Iranian Privatization Organization (IPO) to visit the divested enterprises and hand over their written report within 45 days to the Iranian Privatization Organization (IPO). Such contracts should articulate in such a way that requires the special inspectors, in addition to submit the periodic reports, in urgent cases detected by the Iranian Privatization Organization, write and provide case report if necessary.

Note 1- Reports of the special inspectors of the companies’ subject of this Directive are confidential and this matter must be mentioned in the Iranian Privatization Organization (IPO) contracts with special inspectors.

Note 2– In exceptional cases and in order to continuum inspection, with approval of the Divestiture Board, the Iranian Privatization Organization (IPO) can use the special inspectors as resident inspector in divested enterprises.

Article 3) After the ratification and declaration of divesting contracts, the Iranian Privatization Organization (IPO) has the responsibility to appoint the special inspector or inspectors (subject to article (2) of this Directive) and declare it to the buyer(s) and the divested enterprise.

Article 4) The special inspectors are in case obliged to produce a report about the following matters after receiving the needed documents from the company’s management and if necessary visiting in person of company, and to give it to the Iranian Privatization Organization (IPO):

A: inspectoral matters in order to hindering the buyers from violating their obligations:

1. Changing the shareholders composition

2. Changing the Board of Directors’ members

3. Changing the statute

4. Capital changing

5. Functioning agreeing to the statute

6. Buying and selling of fixed assets

7. Leasing or transferring of the usufruct of company’s property

8. Choosing the auditor and legal inspector

9. Financial statements and the auditor and the legal inspector reports

10. Minutes of board and general meetings and board of directors reports to the general assembly

11. Attending to the public meetings as an observer without voting rights in order to monitor the negotiation proceedings

12. Timely payment of salaries and wages

13. In what way to pay company’s debt to banks, Iranian National Tax Administration (INTA), Iranian Social Security Organization and....

14. Obtaining finance facilities or mortgaging and providing collateral property to obtain financial facilities or any other similar action

15. Company’s guarantees and commitments

16. Litigation for and against the company

17. Monitoring the implementation of the approved budget of the company (if any) and investigating the causes of the deviation (if any)

18. Transactions with related party

19. Unusual transactions

20. Other issues at the discretion of the Iranian Privatization Organization (IPO)

B: The regulatory cases and granting discounts to encourage buyers

1. Continuing of production and providing services

2. Keeping up employment levels into divesting time and its changes after divesture

3. Teaching the personnel

4. Upholding Technology and using new technologies in the production process and products

5. Improving the productivity of factors of production

6. Company’s new investments

7. Other subjects at the discretion of the Iranian Privatization Organization (IPO).

Note- The Iranian Privatization Organization (IPO) determines the framework of reports and how they should submit and the responsibility for the accuracy of the reports is on the special inspectors.

Article 5) The managers of divested enterprises are required to give the needed information to the specially designated inspector or inspectors.

Article 6) The scope of the provisions of this directive includes all enterprises whose control or management shares have been transferred and is as follows:

1. Those enterprises whose shares have been transferred in block control mode are subject to all the provisions of Article (4) of this directive.

2. Those enterprises whose shares have been transferred in block management mode are just under provisions (1), (4), (9), (10) and (11) (a) of Article (4) of this regulation. Other provisions of Article (4) of this directive on these buyers are depended on the Iranian Privatization Organization (IPO)’s request.

Note 1- Enterprises that their transferring has been done on block mode but with multiple contracts, in terms of inspecting will be divided based on the per cent of transferred block.

Note 2- The provisions of this directive will be run about the enterprises whose shares are to be transferred in cash and instalments for a maximum duration of the contract and at least for five years and for enterprises whose shares are to be transferred in cash for a maximum duration of five years. In certain cases that the obligations of the purchaser(s) are more than the duration of the contract period, the Divestiture Board, by proposal of the Iranian Privatization Organization (IPO), can extend the duration of running the provisions of this Directive until the end of implementing the cited obligations.

Article 7) In order to grant financial incentives referred to in the Note of Article (10) of Directive of Article (25) of the Law on Implementation of General Policies of Principle (44) of the Constitution, the Iranian Privatization Organization (IPO) is authorized to propose to the Divestiture Board to give some discounts to the buyers who cooperate in implementing this directive according to the degree of their cooperation.

Article 8) In line with the punishments stipulated in Note (1) of Article (10) of the directives on how to formulate the divesting contracts referred to in subparagraph (4) of Note (B) of Article (40) of implementing the Law on Implementation of General Policies of Principle (44) of the Constitution, the Iranian Privatization Organization (IPO) is authorized to propose to the Divestiture Board some punishments - provided for in Article (9) of this directive, depending on the type, cause and extent of the violation, frequency and repeat, customer status and other circumstances - for buyer(s) who have violated the provisions of this directive.

Article 9) Committing any of the following actions by buyers or managers of divested enterprises, granted under this Directive, will be considered violation and would be subject to punitive measures as follows:

A: violations:

1. Decreasing of company’s activities so that continuation of its activities in the future is threatened.

2. Collateral, Mortgaging, leasing, sale and transfer of property and fixed assets of the company without obtaining the written permission of the Iranian Privatization Organization (IPO).

3. Any change in the statute of the company without obtaining the written permission from the Iranian Privatization Organization (IPO).

4. Borrowing money and other facilities without obtaining the transcribed permission from the Iranian Privatization Organization (IPO).

5. Failing to submit the financial statements and minutes of general meetings and board of directors within 15 days from the date of approval.

6. Performing unconventional activities outside the scope of activities of the company.

7. More than two-month delay in the payment of salaries of employees in a way, that will hinder the company's activity.

8. Reducing the number of employees out of the authorization stipulated in the contract.

9. Disobedience with the Iranian Privatization Organization (IPO)’s inspectors.

B: Damages and punitive measures:

1. Imposing fines up to the equivalent of 5% of the transaction price subject to Note (1) Article (10) of the ‘how to formulate the divesting contracts directive’.

2. Increasing the interest on remaining installments up to the profit of installment sale in the Iran banking system.

3. Cancelling giving discounts of up to the equivalent of 3% of the transaction price subject to provisions under Article (10) of Directive of article (25) of the Law on Implementation of General Policies of Principle (44) of the Constitution.

4. Not paying of other allowances even if entitled to a certain period (stopping discounts)

5. Not issuing of shares pledged as a security up to a certain period.

6. Limiting or prohibiting to purchase the shares from the Iranian Privatization Organization (IPO) (rejecting the Buyer’s competency)

Article 10) In implementing article (48) of the Public Audit Act, adopted in 1988, the Iranian Privatization Organization (IPO) is authorized to achieve the outstanding claims of state for vested shares by sending the necessary documents to the Iranian National Tax Administration (INTA) in order to collect the intended amount according to executive regulations of direct taxes.

Article 11) The Iranian Privatization Organization (IPO) is bound to declare the list of divested companies covered by this Directive to the State Organization for Registration of Deeds and Properties and the mentioned organization will hinge on any transfer of ownership documents of these companies in the commitment period, subject to obtaining license from the Iranian Privatization Organization (IPO).

Article 12) The Iranian Privatization Organization (IPO) is bound to declare the list of divested companies subject to the Direction to the State Organization for Registration of Deeds and Properties (General Office for Registration of Companies and Industrial Property) and the mentioned organization will hinge on any changes in the articles of the company’s statute subject to the approval of the Iranian Privatization Organization (IPO).

Article 13) In accordance with the provisions of this directive, the Iranian Privatization Organization (IPO) is required to prepare and report the inspection measures to the Divestiture Board every six months.

Article 14) After the adoption of this directive, the Iranian Privatization Organization (IPO) is bound to identify all the instructions and procedures which are contrary to the provisions of this directive and propose their amendment to the competent authorities for approval and if necessary, to produce and propose the adoption of new regulations.

Article 15) This Directive will be a supplied and an integral part of the contract of sale of shares.

Article 16) The Iranian Privatization Organization (IPO) is in charge of implementing this Directive and has the responsibility to notify, as appropriate and in particular, the purchasers and managers of divested companies about this Directive and will inform the public.

Seyyed Shamseddin Hosseini

Minister of Economic Affairs and Finance and the chief of the Board.