LAW OF THE REPUBLIC OF ARMENIA

of July 28, 2000 No. ZR-82

On regulation of the security market

Accepted by National assembly of the Republic of Armenia on July 6, 2000

CHAPTER I. GENERAL PROVISIONS

Article 1. Subject of regulation of the Law

This Law governs the relations arising in connection with regulation of activities in the security market and establishes:

a) procedure for issue, placement and public purchase and sale of securities in the territory of the Republic of Armenia;

b) procedure for activities, publication of reports of the accountable issuer, submission of reports by heads and large owners of equity securities of the accountable issuer;

c) procedure of specialized activities in the security market;

d) procedure for creation and activities of self-regulatory organizations;

e) procedure for forming and activities of the Commission on securities of the Republic of Armenia, and also its competence and obligations in the field of regulation of the security market;

e) responsibility of persons performing activities in the security market for violation of the law and other legal acts.

Article 2. Purpose of regulation of the security market

The purpose of regulation of the security market is:

a) investor protection;

b) ensuring transparency of activities of members of the security market;

c) providing, enhancement and development of effective activities of the security market, payment and settlement system of security transactions;

d) forming and protection of system of reliable pricing of securities;

e) safety of use of the money and credit system provided for securities and the transactions performed with them.

Article 3. The legislation regulating the security market

1. In the Republic of Armenia the security market is regulated by this Law, other laws and other regulatory legal acts following from them which set makes the legislation on the security market.

2. The security market of the Republic of Armenia (further also – the security market) includes the stock exchanges operating in the territory of the Republic of Armenia, the sphere of curb trading by securities and persons performing specialized activities.

Article 4. The basic concepts used in the Law

1. In the context of this Law: The prospectus any message – the statement, the notice, the relation, the publication, the circular message, advertizing or the notification (written, oral, on radio, television or by means of other communication) which contains the invitation to the offer on sale or purchase of securities is considered. Is not considered the prospectus the above-stated message which:

a) it was this after registration of a statement on registration of this security if to person who received the message together with the message or before it was transferred or the prospectus in printed form meeting the requirements, the stipulated in Clause 10 these Laws was published or

b) only determines at whom it is possible to acquire the prospectus in printed form which is meeting the stipulated in Clause 10 these Laws the requirements and including data on type of security and other signs necessary for its identification, on its price, on person accepting requests for its purchase and also on other questions, the allowed resolution (regulatory legal act) of the Commission of the Republic of Armenia on securities.

The security certifying the rights or obligations of the investor on urgent implementation (execution) of the right or the obligation is considered the derivative security.

Person – any physical person or legal entity.

Person addressed to whom in the register of owners of personalized securities, in the Central depositary or at depositary without transfer of property the personalized securities belonging to other persons on the property rights are registered is considered the nominee holder. Only the broker, the dealer, depositary and the trustee can be nominee holders. The relations between the nominee holder and the owner are regulated by the law, the resolution of the Commission on securities of the Republic of Armenia and the agreement.

Security any investment, payment or title security provided by the Civil code of the Republic of Armenia and other laws of the Republic of Armenia on securities and also the agreement on profit distribution, participation or the document testimonial of participation in such agreement, the option, the future or other derivative security, the right of preferable acquisition of security, the deposit certificate or the receipt irrespective of their form (documentary or paperless), and also any investment agreement fully or partially containing signs of the above-stated securities, any other document used for the purpose of attraction of the capital (means) irrespective of its form (documentary or paperless), and also the right concerning security or the certificate, the certificate is considered, the receipt or other similar document on such right or participation or share in it irrespective of the document form (documentary or paperless) if implementation or transfer of the rights provided by these documents are possible only in case of their presentation or their fixing in the special register (ordinary or computer). Security is also the document which irrespective of the form is considered that according to the rules of business conduct accepted in practice.

Securities of one class include all those securities of this issuer which have in essence identical nature and which owners are granted in essence the identical rights and privileges.

Issue of securities – the direct or mediated sale by the issuer of security to the first investor. Issuer is the person issuing (issued) security, or offering security issue.

Security sale – any paid transaction on purchase and sale, exchange or alienation of this security.

The sphere of curb trading includes security transactions out of stock exchange in the cases established by this Law and resolutions (regulatory legal acts) following from it.

The equity security the share, other security granting the right to share, membership or other similar participation in the authorized capital of the legal entity is considered, and also the security converted into it, the option or other agreement it (is right) concerning subscription to such security or its purchases. Equity securities happen only nominal.

The considerable owner of equity securities is each person who directly or indirectly belongs 10 and more percent of the equity securities of any class of the accountable issuer registered or which are subject to registration according to Chapter III of this Law.

The large owner of equity securities is each person who directly or indirectly belongs 20 and more percent of the equity securities of any class of the accountable issuer registered or which are subject to registration according to Chapter III of this Law.

Any organization or group of persons which will organize is considered the exchange, provides, uses and provides the place or means of meeting for buyers and sellers (or for the demand and supply) securities or performs usually made transactions on the organization of security sale. Concept the exchange includes also the place or means which is used by the exchange with the above-stated purpose.

The registration application (further also – the statement) – the registration application of securities established by Chapters II and III of this Law, and also any document constituting its part or appendix and any amendment to the registration application.

The registered owner or the nominee holder is the owner or the nominee holder of security who is registered in the register of owners of personalized securities.

Misstatement or omission of essential fact provision of the untrue data of rather this fact or non-inclusion in any provision (statement) of essential fact which inclusion is required by the law or other legal act adopted according to it and which availability at the time of inclusion (execution of the statement) of this provision (statement) is necessary for prevention of disorientation of this provision (statement) is considered.

The size of rate of minimum wage established by the Law of the Republic of Armenia "About the minimum monthly salary" is considered minimum wage.

Investor protection is protection of the rights and legitimate interests of the persons investing in securities arising in connection with their investments into securities.

The fact or the data are considered essential if they are important in case of decision making about purchase or security sale.

Documents are defective if they do not conform to requirements, the established this Law and legal acts adopted according to it.

The institutional investor is considered:

a) bank, insurance company, investment companies, funds and other similar organizations;

b) person recognized as the institutional investor the law or the resolution of the Commission on securities of the Republic of Armenia based on knowledge and experience of this person in the financial sphere, capability of involvement of specialists with the same knowledge and experience, sizes of its net assets or size of the assets which are in its management and other similar criteria.

The commission - the Commission on securities of the Republic of Armenia.

The issuer is considered the accountable issuer:

a) which any security is registered on any stock exchange;

b) which security of one class (except the securities constituting exception according to article 6 of this Law) has fifty and more registered owners and which net assets exceed the size established by the Commission.

Public offer the public offer to security sale or the public invitation to the offer on security purchase or any other offer to sale or acquisition of securities of one class made to more than 100 persons is considered. In case of determination of number of persons provided by this Item, institutional investors are not considered.

The security sale by the issuer or the placing person performed by means of public offer is considered public placement.

The publication distribution of data on television, radio, through means of public electronic communication or printing method is considered.

Monitoring or supervision is availability of opportunity to predetermine solutions of any face owing to the prevailing participation in its authorized capital or according to the agreement signed with it.

Person who acquires at the issuer securities for the purpose of their placement is considered the placing person (person performing subscription), offers, sells securities of the issuer for the purpose of their placement or participates in the agreement or the agreement on the organization or implementation of such case with the exceptions established by the resolution of the Commission. In this paragraph the issuer also person who directly or indirectly controls the issuer is considered, it is controlled by the issuer or together with the issuer is under general control.

Any non-public placement of securities is considered the closed placement. Placement is considered closed if in its limits the proposal was made no more than 100 persons and if it was not published. In case of determination of number of the above-stated persons institutional investors are not considered.

Two and more persons are considered as affiliated if:

a) one of them by the right of the direct or mediated vote owns twenty and more percent of equity securities of other person (other persons) granting voting power;

b) more than a half of board members, the director or other official of one of them having such competences at the same time is the board member, the director or other official of other person (other persons) having the same competences;

c) one of them has the actual or fixed by the agreement opportunity to influence essentially solutions of another, one of them controls other person or they are under general control;

d) they are members of one family or in this case were effective in coordination, proceeding from common economic interests.

The currency, the bank (standardized) ingots of precious metals and coin, and also credit resources is considered share goods.

The exchange registered according to this Law in the Commission as stock exchange is considered stock exchange.

2. Established by this Article and other provisions of this Law of concept are applied only in compliance with the purposes of this Law and other laws and legal acts accepted according to it, and also containing the direct reference to it. Their value can make other sense in other laws and legal acts.

CHAPTER II. SECURITY SALE

Article 5. The requirement of the prospectus in case of security sale

1. Security sale by means of the prospectus or otherwise, sending security by mail or different way for the purpose of its sale or delivery to the buyer, delivery or transfer of security to the buyer from hand to hand, electronic or otherwise is forbidden if the registration application of this security is not registered in the procedure established by this Law.

2. The offer to security sale or the invitation to the offer on security purchase by means of the prospectus or otherwise is forbidden until the registration application containing such prospectus is provided to the Commission according to article 8 of this Law, and also if the registration application is rejected it (is suspended) according to article 11 of this Law.

3. The publication of the prospectus, its distribution or sending by mail or different way, delivery or transfer to the buyer from hand to hand, electronic or otherwise is forbidden if:

a) it does not conform to requirements, the stipulated in Clause 10 these Laws;

b) the registration application including the prospectus is not provided to the Commission or is rejected suspended) by it according to this Law.

4. Security sale, its provision with sales objective is forbidden to the buyer or any other person without provision to the buyer of the copy of the prospectus meeting the requirements, the stipulated in Clause 10 these Laws. The prospectus is considered provided to the buyer from hand to hand, electronic or otherwise from the moment of its obtaining by the buyer.

The transaction on security sale upon the demand of the buyer can be acknowledged invalid if the prospectus was provided to him within 24 hours preceding the moment of security sale or after its sale. The term of limitation period according to this requirement constitutes one year.

5. In the context of this Article the place of sale in case of security sale by means of electronic communication the place of introduction in system of electronic communication of the offer on sale is considered.

Article 6. The securities constituting exception

The stipulated in Clause 5 these Laws of the requirement do not extend to transactions which are made:

a) with the securities issued (issued) or guaranteed by the Republic of Armenia or municipalities in the procedure established by the law;

b) with the securities issued (issued) or guaranteed by the Central bank of the Republic of Armenia;

c) with the securities issued (issued) banks operating in the territory of the Republic of Armenia (except for equity securities);

d) with the insurance agreements issued (issued) insurance companies operating in the territory of the Republic of Armenia;

e) with the bill of exchange, the payment order, the check or other similar payment security issued for the committed current transaction within activities of this person, or person whose means are used (are provided for use) for making of such transaction if the term of their repayment does not exceed nine months, apart from the preferential term (during which the overdue security nevertheless is accepted to execution), prolongation of term or suspension of current of term which also shall not exceed nine months;

e) with the securities issued (issued) religious, educational, charitable and other non-profit organizations in the religious, educational or charitable purposes;

g) with lottery tickets or tickets of games with prize or with other similar documents if they do not perform loan of means;

h) with securities which subject is only the currency (currency securities, options, spots, futures, etc.);

i) with securities which subject are only the goods determined by high-quality signs including title securities.

Article 7. The transactions constituting exception

The stipulated in Clause 5 these Laws of the requirement are not applied to the following transactions with any security:

a) to the made issuer with security to the transactions representing the closed placement of securities;

b) to exchange of the securities issued by the issuer on issued (issued) it other securities or to provision of additional securities by it if it is for this purpose not provided or the additional fare is not collected directly or indirectly;

c) to sale (to the offer to sale) securities to exclusively institutional investors if the issuer, either for him, or from his name did not publish any prospectus according to this transaction, and the issuer in the procedure established by the Commission informs the last on application of this exception;

d) to security transactions, belonging to person on the property rights (constituting part of its assets) if it is not the face placing these securities. This exception does not include:

1) security transactions which are made by the issuer or the placing person within forty days since first day of public placement of these securities or in shorter time established by the resolution of the Commission;

2) security transactions which constitute part of the securities provided to person participating in placement of securities or on which the last was signed;

e) to the transactions made by the broker at any exchange at the request of the client if according to this Law transactions at this exchange are not forbidden.

Article 8. Submission of the registration application of securities

1. The registration application of securities is submitted in the Commission in triplicate which shall be signed by most of board members (or other body with the same powers), the chief executive, the chief accountant of the issuer (if in structure of the issuer the management or other executive body – all his members is provided). If issuer is the foreign person, the application on securities is signed also by his authorized representative in the Republic of Armenia.

If issuer is the foreign state, department or other state body of foreign state, the registration application of securities is signed only by the placing person whose participation in case of such issue is obligatory.

2. In case of submission of the registration application the applicant shall pay the state fee established by the law.

3. The registration application (as well as the subsequent amendments to it) is considered provided to the Commission from the moment of its obtaining by the last.

4. The commission shall publish the data containing in the statement in the procedure established by it and to provide the copy of the application upon the demand of any person, having collected expenses on photocopying (printing).

Article 9. The data required for the registration application of securities. Signing of the statement

1. The registration application shall include the data required in the prospectus, expenses on the issue and placement requested by the resolution of the Commission, concerning issue of the resolution and the agreements or their copies having prescriptive limit no more than three years, and also written consent of the affiliates who are not considered as accountable issuers on provision of the data concerning them according to Item 1 of article 10 of this Law.

2. In case of use in the statement of professional opinion of the accountant, appraiser, consultant or any other expert or obtaining from them for this purpose such opinion, this opinion shall be signed by them and is fully or partially included in the statement only from written consent of the prepared his face which shall be enclosed to the application.

Availability of the written consent established in part one of this Item is not obligatory if its obtaining is impossible on reasonable excuse. In this case the statement shall contain specifying on impossibility of receipt of written consent.

Article 10. The data required for the prospectus

1. For the purpose of investor protection the prospectus shall include the Commissions of the data established by the resolution which concern:

a) the issuer, affiliates, system of its management, bodies and persons participating in management, considerable owners of equity securities;

b) the securities which are earlier issued by the issuer;

c) financial position of the issuer;

d) activities of the issuer, its forthcoming activities, market of these activities of the issuer;

e) issued securities.

2. The data containing in the prospectus used within more than nine months from the date of registration of a statement cannot have prescription more, than sixteen months, considering from the date of registration, except for data, stipulated in Item 3 these Articles, and those cases when updating of such data is impossible owing to uncertainty of the fact of their change.

3. The financial statements included in the avenue shall be submitted according to the following procedure:

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