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SHAREHOLDERS’ AGREEMENT

 

 

 

 

between

 

 

 

 

PERFORMANCE CHEMICALS HOLDING COMPANY

 

 

and

 

 

DOW SAUDI ARABIA HOLDING B.V.

 

 

relating to the

 

 

SADARA PROJECT

 

 

 

 

dated as of October 8, 2011

 

TABLE OF CONTENTS

 

Page

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This SHAREHOLDERS’ AGREEMENT (this “ Shareholders’ Agreement ”) is entered into this 10th day of the month of Dhu Al-Qa’dah, 1432 H. corresponding to the 8th day of October, 2011 G., by and between:

 

PERFORMANCE CHEMICALS HOLDING COMPANY ,   a limited liability company duly organized and existing under the laws of The Kingdom of Saudi Arabia (“ The Kingdom ”) having its head office in Dhahran, The Kingdom (“ Saudi Aramco Holdco ”) and a wholly-owned subsidiary of Saudi Arabian Oil Company, a company with limited liability duly organized and existing under the laws of The Kingdom and established by Royal Decree No. M/8 dated 4/4/1409 H. (corresponding to November 13, 1988 G.) (“ Saudi Aramco ”); and

 

DOW SAUDI ARABIA HOLDING B.V. , a private company with limited liability duly organized and existing under the laws of The Netherlands (“ Dow Holdco ”) and an indirect wholly-owned subsidiary of The Dow Chemical Company,   a corporation duly organized and existing under the laws of the State of Delaware, United States of America (“ Dow ”).

 

RECITALS

 

WHEREAS, Saudi Aramco and Dow entered into an Amended and Restated Memorandum of Understanding, dated as of September 30, 2010, amending and restating the Memorandum of Understanding, dated as of May 12, 2007 (as amended and restated, the   “ MOU ”), with respect to a project (the “ Project ”) to design, engineer, construct, own, and operate a world-scale integrated chemicals complex (the “ Complex ”) within the Royal Commission for Jubail & Yanbu’s (the “ RCJY ”) Al Jubail Industrial City II on the east coast of The Kingdom for the purpose of manufacturing chemical and petrochemical products and marketing such products inside and outside of The Kingdom and for the purpose of promoting downstream conversion industries within Al Jubail Industrial City II and The Kingdom;

 

WHEREAS, Saudi Aramco and Dow and their respective Affiliates commenced activities with respect to the Project prior to the date hereof under the MOU and intend to assign and transfer responsibility for these activities to a limited liability company organized under the laws of The Kingdom (the “ Company ”), which will implement the Project;

 

[***]

 

 

 

 

 

 

WHEREAS, this Shareholders’ Agreement sets out the rights and obligations of the Shareholders in connection with the formation, governance, and management of the Company.

 

 

 

NOW, THEREFORE, in consideration of the mutual covenants and undertakings hereinafter contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by each of the Shareholders, the Shareholders hereby agree as follows:

 

1.

DEFINITIONS AND USAGE

 

Capitalized terms used herein and not otherwise defined shall have the meanings set forth in Section 1.1 ( Definitions ) for all purposes hereof. All rules as to usage shall apply as set forth in Section 1.2 ( Usage ).

 

1.1

Definitions

 

“ Accession Agreement ” shall mean an agreement in substantially the form attached hereto as Annex B ( Form of Accession Agreement ).

 

“ Accounting Policy ” shall have the meaning set forth in Section 15.7 ( Accounting and Retention Policies ).

 

“ Acquisition ” shall have the meaning set forth in Annex D ( Acquisition of Ownership Interests ).

 

“ Acquisition Closing Date ” shall mean where a Non-Transferring Shareholder delivers an Acquisition Exercise Notice, where a Non-Defaulting Shareholder delivers a Call Exercise Notice, or where the Dow Founding Shareholder delivers a Put Exercise Notice, the forty-fifth (45th) day after the delivery of such Notice, in each case, in accordance with Annex D ( Acquisition of Ownership Interests ).

 

“ Acquisition Exercise Notice ” shall have the meaning set forth in Annex D ( Acquisition of Ownership Interests ).

 

“ Acquisition Notice ” shall have the meaning set forth in Section 19.3(c) ( Transfers to Third Parties ).

 

“ Acquisition Period ” shall have the meaning set forth in Annex D ( Acquisition of Ownership Interests ).

 

“ Advance ” shall have the meaning set forth in the Shareholder Advance Agreement

 

“ Affiliate ” shall mean, in respect of a Person, any legal entity controlling, under common control with, or controlled by such Person, and “ control ” shall mean ownership, directly or indirectly, of more than fifty percent (50%) of the shares conferring the right to vote at a general meeting (or its equivalent) of such entity or otherwise to appoint the majority of the directors or other governing body of such entity. Notwithstanding the foregoing, no Governmental Entity (other than a commercial entity acting in a commercial capacity) and no sovereign or political subdivision of any sovereign shall be considered an Affiliate of any such Person, and, for the purposes of this Shareholders’ Agreement only, the Company shall not be

considered an Affiliate of either Saudi Aramco or Dow or any of their respective Affiliates.

 

“ Applicable Law ” shall mean any Law (including Shari’a ) enacted, issued, or promulgated in The Kingdom, or any interpretation thereof, by a Governmental Entity having jurisdiction over the matter in question.

 

“ Approved Operating Plan ” shall have the meaning set forth in Section 13.2(b) ( Operating Plan ).

 

“ Approved Strategic Business Plan ” shall have the meaning set forth in Section 13.1(b) ( Strategic Business Plan ).

 

“ Articles of Association ” shall mean the articles of association of the Company,   as amended from time to time.

 

“ ASC ” shall mean Aramco Services Company, a corporation organized and existing under the laws of the State of Delaware, United States of America.

 

“ ASC Services Agreement ” shall mean the Amended and Restated Services Agreement to be entered into as soon as is practicable following the Formation Date by and among Saudi Aramco, Dow Europe, ASC, and the Company.

 

“ Assistant Board Secretary ” shall have the meaning set forth in Section 8.1(e) ( The Board of Directors ).

 

“ Audit Committee ” shall have the meaning set forth in Section 11.3(a) ( The Audit Committee ).

 

“ Authorized Capital ” shall mean the authorized capital of the Company, as specified in the then-applicable Articles of Association.

 

“ BEPDA ” shall mean the Basic Engineering Package Development Agreement, by and between Dow Engineering and ASC, dated as of November 3, 2008, as amended on July 7, 2009, as further amended on March 23, 2010, as further amended on June 3, 2010, as further amended on September 30, 2010, and as to be further amended as soon as is practicable following the date hereof.

 

“ BEPDA Costs ” shall mean “Costs” as defined in the BEPDA.

 

“ Board ” shall have the meaning set forth in Section 8.1(a) ( The Board of Directors ).

 

“ Board Chairman ” shall have the meaning set forth in Section 8.1(e) ( The Board of Directors ).

 

“ Board Committee ” shall mean any of: the Project Execution Committee; the Audit Committee; the Finance Committee; the Compensation Committee; the Health, Safety, Environmental, and Security Committee; the Ethics and Compliance Committee; and each other

committee of the Board established in accordance with Section 8.6(g) ( Board Action in General ) and Section 11.1(a) ( Creation of Board Committees ).

 

“ Board Secretary ” shall have the meaning set forth in Section ‎8.1(e) ( The Board of Directors ).

 

“ Bridge Financing Agreements ” shall mean:

 

(a)

any facility or other agreement to be entered into by the Company for the purposes of documenting a Bridge Loan; and

 

(b)

any corporate guarantee to be issued by Saudi Aramco, Dow Europe, or Dow for the benefit of the relevant lender in connection with the agreements referred to in Paragraph (a) above.

 

“ Bridge Loan ” shall have the meaning set forth in Section 6.4(a) ( Funding Before Financial Closing ).

 

“ Business ” shall have the meaning set forth in Section 3.1(c) ( General Business Objectives ).

 

“ ButanolCo ” shall mean the owner of the the project to build, own, and operate facilities to supply butanol to the Complex.

 

“ Call Exercise Notice ” shall have the meaning set forth in Annex D ( Acquisition of Ownership Interests ).

 

“ Call Notice ” shall mean a Dow Call Notice or a PublicCo Call Notice.

 

“ Capital Contribution ” shall mean any contribution by a Shareholder to Authorized Capital of:

 

(a)

cash; and

 

(b)

goods and services (whether tangible or intangible) that may be converted into an Ownership Interest in accordance with IFRS and Applicable Law and that are transferred to the Company in accordance with this Shareholders’ Agreement, including pursuant to Section 6.3(a) ( Contribution of Development Costs );

 

in each case, made in accordance with the applicable provisions of Section 6 ( Capital Contributions; Financing ).

 

“ Centre ” shall have the meaning set forth in Annex A ( Dispute and Expert Resolution Procedures ).

 

“ CEO ” shall have the meaning set forth in Section 12.1(a) ( The Management Team and Senior Officers ).

 

 

“ Certificate of Commercial Registration ” shall mean the certificate of commercial registration of the Company issued by the Ministry of Commerce and Industry of The Kingdom.

 

“ CFO ” shall have the meaning set forth in Section 12.1(a) ( The Management Team and Senior Officers ).

 

“ Change in Control ” shall mean, [***], whether accomplished through a single transaction or a series of related transactions and whether accomplished directly or indirectly:

 

(a)

the acquisition by a Person or group of Persons that are Affiliates of each other of [***] or more of the direct or indirect voting or economic interests [***];

 

(b)

the acquisition by a Person or group of Persons acting in concert of the power directly or indirectly to direct or cause the direction of management and policy of [***], whether through ownership of voting securities, by contract, management agreement, or common directors, officers, or trustees, or otherwise (other than with respect to significant enumerated matters requiring enhanced approval); or

 

(c)

any merger, consolidation, or amalgamation of any Person into [***] or the merger, consolidation, or amalgamation of [***] into any other Person unless the Persons that are shareholders of [***] immediately prior to the completion of such merger, consolidation, or amalgamation in aggregate own more than [***] of the direct or indirect voting or economic interests in [***] or in the company into which [***] is merged, consolidated, or amalgamated (as applicable) immediately after giving effect to the completion of such merger, consolidation, or amalgamation.

 

“ CIT ” shall have the meaning set forth in Section 14.2(a)(iii) ( Reports; Tax Returns ).

 

“ CMA ” shall mean the Capital Market Authority of The Kingdom.

 

“ Common Party ” shall have the meaning set forth in Annex A ( Dispute and Expert Resolution Procedures ).

 

“ Companies Law ” shall mean The Regulations for Companies of The Kingdom of Saudi Arabia, issued under Royal Decree No. M/6, dated 22/03/1385 H. (corresponding to July 20, 1965 G.).

 

“ Company ” shall have the meaning set forth in the Recitals.

 

“ Company’s Draft Marketing Plan ” shall mean a draft plan setting out, in respect of a Contract Year, the Marketing Council’s proposal for the Company’s marketing activities within The Kingdom and the Middle East Zone.

 

“ Company’s Marketing Plan ” shall mean the Company’s Draft Marketing Plan for a Contract Year as amended and approved by the Board in accordance with Sections 8.6(d)(ii)(A) ( Board Action in General ) and 13.3(b)(i) ( Marketing Plans ).

 

“ Compensation Committee ” shall have the meaning set forth in Section 11.5(a) ( The Compensation Committee ).

 

“ Complete Transfer ” shall mean a Transfer of all of a Shareholder’s Ownership Interest or Shareholder Equity to another Person.

 

“ Complex ” shall have the meaning set forth in the Recitals.

 

“ Constitutive Documents ” shall mean the Articles of Association, the Foreign Investment License, the Certificate of Commercial Registration, and this Shareholders’ Agreement.

 

“ Continuing Default Notice ” shall have the meaning set forth in Section 18.2(a) ( Consequences of Events of Default ).

 

“ Contract Month ” shall have the meaning set forth in each PMLA.

 

“ Contract Year ” shall have the meaning set forth in each PMLA.

 

“ Contribution Agreement ” shall mean the Contribution Agreement between each of the Founding Shareholders and the Company pursuant to which the Founding Shareholders shall transfer Development Costs incurred under the Cost Sharing Agreements to the Company pursuant to Section 6.3(a)(i) ( Contribution of Development Costs ).

 

“Conversion Industries ” shall have the meaning set forth in Section 3.2(a) ( Development of Conversion Industries ).

 

“Conversion Industry Development Plan ” shall have the meaning set forth in Section 3.2(b) ( Development of Conversion Industries ).

 

“Conversion Industry Projects ” shall have the meaning set forth in Section 3.2(a) ( Development of Conversion Industries ).

 

“ Cost Sharing Agreements ” shall mean:

 

(a)

the BEPDA;

 

(b)

the CSRA;

 

(c)

the ASC Services Agreement; and

 

(d)

the PMSA.

 

“ CSRA ” shall mean the Second Amended and Restated Cost Sharing and Reimbursement Agreement, to be entered into as soon as is practicable following the Formation

Date by and among Saudi Aramco, Dow Europe, and the Company.

 

[***]

 

 

 

 

 

 

 

“ Deadlock Committee ” shall have the meaning set forth in Section 10.2(a) ( Effect of Deadlock ).

 

“ Defaulting Shareholder ” shall have the meaning set forth in Section 18.2(a) ( Consequences of Events of Default ).

 

“ Default Operating Plan ” shall have the meaning set forth in Section 13.4(b)(ii) ( Default Plans ).

 

“ Default Strategic Business Plan ” shall have the meaning set forth in Section 13.4(a)(ii) ( Default Plans ).

 

“ Deputy Board Chairman ” shall have the meaning set forth in Section 8.1(e) ( The Board of Directors ).

 

“ Development Costs ” shall mean:

 

(a)

Qualified Pre-MOU Costs;

 

(b)

BEPDA Costs;

 

(c)

Shared Costs;

 

(d)

Qualified Separate Costs;

 

(e)

Capital Contributions; and

 

(f)

any costs and expenses of the Company, including any financing costs payable by the Company under the Bridge Financing Agreements, set forth in the Approved Operating Plan and not constituting any of (a) to (d) above,

 

in each case, paid or funded by the Founding Shareholders or their Affiliates in accordance with the Cost Sharing Agreements, the Shareholder Advance Agreement, and this Shareholders’ Agreement prior to the Financial Closing Date.

 

“ Director ” shall have the meaning set forth in Section 8.1(b) ( The Board of Directors ).

 

“ Director Eligibility Criteria ” shall have the meaning set forth in Section 8.1(c) ( The Board of Directors ).

 

“ Direct Transfer ” shall mean a transfer, assignment, or other disposal of all or any part of an Ownership Interest.

 

“ Disallowed Development Costs ” shall have the meaning set forth in Section 5.2(d) ( Sale of PublicCo Acquisition Interest; Initial Public Offering ).

 

“ Dispute ” shall have the meaning set forth in Annex A ( Dispute and Expert Resolution Procedures ).

 

“ Dispute Committee ” shall have the meaning set forth in Annex A ( Dispute and Expert Resolution Procedures ).

 

“ Dispute Resolution Procedures ” shall mean the dispute and expert resolution procedures set forth in Annex A ( Dispute and Expert Resolution Procedures ).

 

“ Dissolution Event ” shall have the meaning set forth in Section 20.1 ( Dissolution ).

 

[***]

 

 

“ Dividend Policy ” shall have the meaning set forth in Section 15.3 ( Dividend and Shareholder Loan Repayment Policy ).

 

“ Dow ” shall have the meaning set forth in the Preamble.

 

“ Dow Call Notice ” shall mean a Notice delivered by the Saudi Aramco Founding Shareholder and / or the PublicCo Shareholder, where the Dow Founding Shareholder is the Defaulting Shareholder, requiring the determination of [***] in accordance with Annex D ( Acquisition of Ownership Interests ).

 

“ Dow Catalyst Supply Agreements ” shall have the meaning set forth in Annex E ( Key Project Agreements ).

 

“ Dow Default Price ” shall mean the price payable to the Dow Founding Shareholder for the Dow Founding Shareholder’s entire Ownership Interest pursuant to Section 18.2(b)(i) ( Consequences of Events of Default ) and shall be calculated as follows:

 

 

 

 

 

 

 

 

“ Dow Engineering ” shall mean Dow Engineering Company, a corporation organized and existing under the laws of the State of Delaware, United States of America.

 

[***]

 

“ Dow Founding Shareholder ” shall mean:

 

(a)

Dow Holdco or any Qualifying Affiliate to which Dow Holdco transfers its Ownership Interest in accordance with Section 19.2 ( Permitted Transfers to PublicCo and Qualifying Affiliates ); or

 

(b)

any third party that purchases the entire Ownership Interest of Dow Holdco or its Qualifying Affiliate, and all of its direct and indirect rights and interests therein, in accordance with Section 19.3 ( Transfers to Third Parties ), or any Qualifying Affiliate of such third party to which such third party transfers its Ownership Interest in accordance with Section 19.2 ( Permitted Transfers to PublicCo and Qualifying Affiliates ).

 

 

“ Dow Technical Services Agreements ” shall have the meaning set forth in Annex E ( Key Project Agreements ).

 

“ Dow Technology Agreements ” shall have the meaning set forth in Annex E ( Key Project Agreements ).

 

“ Dow Technology License Agreements ” shall have the meaning set forth in Annex E ( Key Project Agreements ).

 

“ Draft Articles of Association ” shall mean the draft articles of association of the Company, as agreed between the Founding Shareholders and submitted for approval to the Ministry of Commerce and Industry of The Kingdom on October 1, 2011, in the form set forth in Annex G ( Draft Articles of Association ).

 

“ DZIT ” shall have the meaning set forth in Section 14.3(b) ( Taxes ).

 

“ EBITDA ” shall mean, for any period, the net income of the Company determined in accordance with IFRS for such period (without giving effect to any extraordinary gains or losses), plus, without duplication:

 

(a)

interest expense;

 

(b)

income tax expense; and

 

(c)

depreciation and amortization expense.

 

“ Equity Rebalancing Period ” shall mean the period:

 

(a)

commencing when the aggregate amount of Development Costs paid or funded by the Dow Founding Shareholder or its Affiliates in accordance

(i)

the aggregate amount of Development Costs paid or funded by the Saudi Aramco Founding Shareholder (or its Affiliates) equals [***]; and

 

(ii)

the aggregate amount of Development Costs paid or funded by the Dow Founding Shareholder (or its Affiliates) equals [***],

 

 

in each case, of the aggregate amount of all Development Costs paid or funded by both Founding Shareholders (and their Affiliates).

 

“ Ethics and Compliance Committee ” shall have the meaning set forth in Section 11.7(a) ( The Ethics and Compliance Committee ).

 

“ Event of Default ” shall have the meaning set forth in Section 18.1 ( Events of Default ).

 

“ Expansion Feasibility Study ” shall have the meaning set forth in Section 7(b) ( Material Expansions of the Project ).

 

“ Expert ” shall have the meaning set forth in Annex A ( Dispute and Expert Resolution Procedures ).

 

“ Feedstock Supply Agreements ” shall have the meaning set forth in Annex E ( Key Project Agreements ).

 

“ Finance Committee ” shall have the meaning set forth in Section 11.4(a) ( The Finance Committee ).

 

“ Financial Closing Date ” shall have the meaning set forth in Section 6.4(a) ( Funding Before Financial Closing ).

 

“ Financial Closing Long Stop Date ” shall mean the earlier of:

 

(a)

the date on which the repayment of any Bridge Loan is accelerated in accordance with its terms as a result of Dow (or its Affiliate) committing a default under any agreement or instrument relating to any indebtedness of Dow (or that Affiliate); and

 

(b)

the date that is [***] after the Formation Date.

 

“ Financial Statements ” shall have the meaning set forth in Section 14.1(a)(ii)

 

 

( Books and Records ).

 

“ Fiscal Year ” shall mean the period commencing on January 1st and ending on December 31st of each calendar year, provided that the first Fiscal Year shall be the period commencing on the Formation Date and ending on December 31, 2012.

 

 

 

 

 

“ Foreign Investment License ” shall mean the foreign investment license in respect of Dow’s investment in the Company issued by the Saudi Arabian General Investment Authority pursuant to the Foreign Investment Regulations, promulgated under Royal Decree No. M/1, dated 5/01/1421 H. (corresponding to April 10, 2000 G.), as amended from time to time.

 

“ Formation Date ” shall mean the date on which the Certificate of Commercial Registration is issued.

 

“ Founding Shareholder ” shall mean each of the Dow Founding Shareholder and the Saudi Aramco Founding Shareholder.

 

“ Freight and Deductibles ” shall have the meaning set forth in each PMLA.

 

“ General Assembly ” shall have the meaning set forth in Section 9.1(a) ( The General Assembly ).

 

“ General Auditor ” shall have the meaning set forth in Section 12.1(i) ( The Management Team and Senior Officers ).

 

“ General Counsel ” shall have the meaning set forth in Section 12.1(a) ( The Management Team and Senior Officers ).

 

“ Governmental Entity ” shall mean the government of The Kingdom and any ministry, agency, court, judicial committee, regulatory, or other authority of the government of The Kingdom.

 

“ Head Office ” shall have the meaning set forth in Section 2.2 ( Name and Head Office of the Company ).

 

“ Health, Safety, Environmental, and Security Committee ” shall have the meaning set forth in Section 11.6(a) ( The Health, Safety, Environmental, and Security Committee ).

 

“ HSES Policies ” shall have the meaning set forth in Section 15.2 ( Health, Safety, Environmental, and Security Policy ).

 

“ Hydrogen PeroxideCo ” shall mean the owner of the the project to build, own, and operate facilities to supply hydrogen peroxide to the Complex.

 

“ IAASB ”   shall mean the International Auditing and Assurance Standards Board.

 

“ ICC ” shall mean the International Chamber of Commerce.

 

“ ICC Court ” shall mean the International Court of Arbitration of the ICC.

 

“ ICC Rules ” shall mean the Rules of Arbitration of the ICC.

 

“ IFRS ” shall mean the International Financial Reporting Standards issued by the International Accounting Standards Board.

 

“ Impermissible Change in Control ” shall mean a Change in Control following which [***] is directly or indirectly owned or controlled by an Impermissible Shareholder.

 

“ Impermissible Shareholder ” shall mean:

 

(a)

any national government, or any political sub-division, of:

 

(i)

a country subject to sanctions levied by the United Nations (or the Security Council thereof) pursuant to the authority derived from Article 41 of Chapter 7 of the United Nations Charter (a “ Sanctioned Country ”); or

 

(ii)

a country with which The Kingdom does not maintain official diplomatic relations (an “ Unfriendly Country ”);

 

(b)

any ministry, department, authority, or statutory corporation of, or any corporation or other entity (including a trust), owned or controlled directly or indirectly by the national government, or any political sub-division, of any Sanctioned Country or Unfriendly Country; or

 

(c)

any Person whose primary residence is in or who is incorporated or organized under the laws of any Sanctioned Country or Unfriendly Country.

 

“ Independent Auditor ”   shall have the meaning set forth in Section 14.1(f) ( Books and Records ).

 

“ Insolvency Event ” shall mean, in respect of a Person:

 

(a)

the commencement by such Person of a voluntary case, administration, or other proceedings seeking liquidation, reorganization, dissolution or winding-up, or other relief with respect to itself or its debts under bankruptcy, insolvency, reorganization, liquidation, moratorium, winding-up, composition or readjustment of debts, or other similar law of any jurisdiction now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian, or other similar official of it or any substantial part of its property, or consenting to or failing to controvert in an appropriate manner any such relief, or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or making a general assignment for the benefit of its creditors, or failing generally to pay its debts as they become due, or taking any corporate action in any jurisdiction to authorize any of the foregoing;

 

(b)

the commencement of an involuntary case, administration, or other proceedings seeking liquidation, reorganization, dissolution or winding-up, or other relief with respect to such Person or its debts under any bankruptcy, insolvency, reorganization, liquidation, moratorium, winding-up, composition or readjustment of debts, or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian, or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding remaining undismissed and unstayed for a period of sixty (60) days;

 

(c)

an order for relief entered against such Person under the bankruptcy laws of any jurisdiction as now or hereafter in effect; or

 

(d)

any event, circumstance, or proceedings analogous to any of the foregoing in any relevant jurisdiction.

 

“ IPO ” shall have the meaning set forth in Section 5.2(a) ( Sale of PublicCo Acquisition Interest; Initial Public Offering ).

 

“ Law ” shall mean any decree, law, regulation, ministerial resolution or order, implementing regulation, statute, act, ordinance, directive (to the extent having the force of law), order, treaty, code, or rule, as enacted, issued, or promulgated, or any interpretation thereof, by any government or any governmental entity, ministry, agency, court, judicial committee, or regulatory or other authority of such government having jurisdiction over the matter in question.

 

“ Lifting Schedule ” shall have the meaning set forth in each PMLA.

 

“ Liquidator ” shall have the meaning set forth in Section 20.3 ( Liquidator ).

 

“ Local Content Policy ” shall have the meaning set forth in Section 15.5 ( Local Content ).

 

“ Losses ” shall mean, with respect to any Person, any damages, losses, liabilities,

 

 

claims of any kind, interest, commission, or expenses (including reasonable attorneys’ fees and expenses in defending against such liabilities and claims), suffered, incurred or paid, directly or indirectly, by such Person.

 

“ Management Team ” shall have the meaning set forth in Section 12.1(a) ( The Management Team and Senior Officers ).

 

“ Marketer ” shall have the meaning set forth in each PMLA.

 

“ Marketer’s Annual Report ” shall have the meaning set forth in each PMLA.

 

“ Marketer’s Draft Marketing Plan ” shall mean, with respect to any PMLA, the draft marketing plan for a Contract Year to be provided by the Marketer under such PMLA.

 

“ Marketer’s Marketing Plan ” shall mean, with respect to any PMLA, the Marketer’s Draft Marketing Plan for a Contract Year as amended and approved by the Board in accordance with Sections 8.6(d)(ii)(A) ( Board Action in General ) and 13.3 ( Marketing Plans ).

 

“ Marketer’s Semi-Annual Report ” shall have the meaning set forth in each PMLA.

 

“ Marketer Standard Sales Contract ” shall mean, with respect to any PMLA, each standard form sales contract applicable to such PMLA.

 

“ Marketing Council ” shall have the meaning set forth in Section 12.3(a) ( The Marketing Council ).

 

“ Middle East Zone ”   shall mean the Federal Republic of Iraq, the Lebanese Republic, the Syrian Arab Republic, the Hashemite Kingdom of Jordan, the Arab Republic of Egypt, Palestine, and the Islamic Republic of Iran, subject in each case to any restrictions on marketing any Products in, with, or to any such jurisdiction or any Person associated with such jurisdiction as set forth in any PMLA with respect to such Product.

 

“ Minimum Interest ” shall mean, prior to the expiration of the Minimum Retention Period and:

 

(a)

prior to the sale to the PublicCo Shareholder of the PublicCo Acquisition Interest, an interest of [***] in respect of the Parent Company of the Saudi Aramco Founding Shareholder and an interest of [***] in respect of the Parent Company of the Dow Founding Shareholder; or

 

(b)

following the sale to the PublicCo Shareholder of the PublicCo Acquisition Interest, an interest of [***] in respect of each Parent Company of the Founding Shareholders.

 

“ Minimum Period ”   shall mean, with respect to any Product marketed and lifted by Dow under a Dow PMLA, the minimum period set forth opposite that Product in [***]

 

[***].

 

“ Minimum Retention Period ”   shall have the meaning set forth in Section 19.1(b) ( Restrictions on Transfer ).

 

“ MinPet ” shall mean the Ministry of Petroleum and Mineral Resources of The Kingdom.

 

“ MOU ” shall have the meaning set forth in the Recitals.

 

“ Net Sales Proceeds ” shall mean, with respect to any Product, “Net Sales Proceeds” as defined in the PMLA for that Product.

 

“ Non-Defaulting Founding Shareholder ” shall mean a Non-Defaulting Shareholder who is also a Founding Shareholder.

 

“ Non-Defaulting Shareholder ” shall have the meaning set forth in Section 18.2(a) ( Consequences of Events of Default ).

 

“ Non-Transferring Shareholder ” shall mean a Shareholder who is not, in respect of a particular Transfer, the Transferor.

 

“ Notice ” shall have the meaning set forth in Section 26.3(a) ( Notices ).

 

“ Offered Interest ” shall mean the Ownership Interest (or Permitted Part thereof) specified in a Transfer Notice.

 

“ Omnibus Confidentiality Agreement ” shall mean the Omnibus Confidentiality Agreement, dated as of April 27, 2007, entered into by and between, among others, Saudi Aramco and Dow in connection with the Project.

 

“ Ownership Interest ” shall mean, in respect of a Shareholder at any time:

 

(a)

all rights and interests under the Constitutive Documents and Applicable Law associated with the aggregate Authorized Capital contributed by such Shareholder at such time; or

 

(b)

if the context so requires, the aggregate Authorized Capital contributed by such Shareholder at such time expressed as a percentage of the aggregate Authorized Capital contributed by all Shareholders at such time.

 

“ Parent Company ” shall mean:

 

(a)

Saudi Aramco, Dow, and PublicCo;

 

(b)

the ultimate parent of any Person to whom a Founding Shareholder has validly effected a Complete Transfer in accordance with Sections 19.3 ( Transfers to Third Parties ); and

 

(c)

any Person or group of Persons who have acquired, obtained control of, merged with, been merged into, consolidated with, been consolidated into, amalgamated with, or been amalgamated into, any Person listed in subparts (a) or (b) of this definition (or their permitted successors or assigns).

 

“ Parent Company Interest ” shall mean, in respect of a Parent Company at any time:

 

(a)

the aggregate Ownership Interest of such Parent Company (or the aggregate Ownership Interest of its Qualifying Affiliate that is a Founding Shareholder) at such time; or

 

(b)

if the context so requires, the aggregate Ownership Interest of such Parent Company (or the aggregate Ownership Interest of its Qualifying Affiliate that is a Founding Shareholder) at such time expressed as a percentage of the aggregate Ownership Interest of all Parent Companies (or the aggregate Ownership Interest of their respective Qualifying Affiliates) at such time.

 

“ Parent Guarantee ” means a guarantee issued by a Parent Company [***] in respect of the payment and performance obligations of its Qualifying Affiliate who is:

 

(a)

a Shareholder under this Shareholders’ Agreement; or

 

(b)

a party to any Principal Agreement,

 

in each case, in the form of Annex F-1 ( Form of Parent Guarantee ).

 

“ Partial Transfer ” shall mean a Transfer of the Permitted Part of a Shareholder’s Ownership Interest or Shareholder Equity to another Person.

 

“ Participating Shareholders ” shall have the meaning set forth in Annex A ( Disputes and Expert Resolution Procedures ).

 

[***]

 

“ PCAOB ” shall mean the Public Company Accounting Oversight Board (United States of America).

 

“ Permitted Part ” means part of an Ownership Interest, or any part of Shareholder Equity, equal to a direct or indirect ownership of [***] of the Ownership Interest of all Shareholders at the time of a Transfer of such part.

 

“ Permitted Transferee ” shall mean, in respect of a Transfer, a Person (other than another Shareholder or a Qualifying Affiliate of the Transferor) who:

 

(a)

is not an Impermissible Shareholder; and

 

(b)

in the case of a Complete Transfer by a Founding Shareholder, [***].

 

“ Person ” shall mean any individual, corporation, joint stock company, limited liability company, partnership, joint venture, association, trust, unincorporated organization, Governmental Entity, or other entity.

 

“ PMLAs ” shall mean:

 

(a)

the Dow PMLAs; and

 

(b)

any product marketing and lifting agreement entered into between the Company and Saudi Aramco (and / or its Qualifying Affiliates) in accordance with Section Error! Reference source not found. ( Marketing and Lifting of Products by the Founding Shareholders ).

 

“ PMSA ” shall mean the Contract for Project Management Services, dated as of October 12, 2009, entered into by and between Dow Engineering and ASC, as amended on September 10, 2010, and as to be further amended as soon as is practicable following the Formation Date.

 

“ PMSA Costs ” shall mean “Allowed Costs” as defined in the PMSA.

 

“ Principal Agreements ” shall mean:

 

(a)

this Shareholders’ Agreement;

 

(b)

the agreements listed in Appendix E ( Key Project Agreements ); and

 

(c)

each other agreement related to the Project entered into from time to time between or among the Company and a Founding Shareholder (and / or its Qualifying Affiliate) that the Founding Shareholders agree shall be a Principal Agreement.

 

“ Product ” shall mean each of the products manufactured by the Company at the Complex.

 

[***]

 

 

 

“ Project ” shall have the meaning set forth in the Recitals.

 

“ Project Agreements ” shall mean:

 

(a)

the Principal Agreements;

 

(b)

the Third Party Agreements; and

 

(c)

each other agreement or contract related to the design, construction, ownership, or operation of the Project, including engineering, procurement, and construction contracts, feedstock supply contracts, operating services contracts, and utilities contracts.

 

“ Project Completion Date ” shall have the meaning set forth in the Project Financing Agreements.

 

“ Project Debt ” shall have the meaning set forth in Section 6.6(a) ( Project Financing ).

 

“ Project Execution Committee ” shall have the meaning set forth in Section 11.2(a) ( The Project Execution Committee ).

 

“ Project Financing Agreements ” shall mean those financing agreements and documents that are entered into or provided by the Company, its Shareholders, and the Parent Companies or their Affiliates, as the case may be, with or to lenders to the Company or their agents or trustees in connection with the financing of the Project with the Project Debt.

 

“ Project Operations Date ” shall mean 06:00 on the day following the day on which the Complex has been fully constructed, tested, and commissioned and is determined by the Board to be prepared for the first delivery of Products.

 

“ Project Standards ” shall have the meaning set forth in Section 15.1 ( Project Standards ).

 

“ Proposed Operating Plan ” shall have the meaning set forth in Section 13.2(a) ( Operating Plan ).

 

“ Proposed Strategic Business Plan ” shall have the meaning set forth in Section 13.1(a)(i) ( Strategic Business Plan ).

 

“ Proxy ” shall have the meaning set forth in Section 8.2(c) ( Meetings; Notice; Proxy ).

 

“ PublicCo ” shall mean a company that is formed in accordance with Applicable Law to hold, directly or indirectly, the PublicCo Acquisition Interest following the purchase of the PublicCo Acquisition Interest by the PublicCo Shareholder from the Saudi Aramco Founding Shareholder in accordance with Sections 5.2(a) ( Sale of PublicCo Acquisition Interest; Initial Public Offering ) and 19.2(a) ( Permitted Transfers to PublicCo and Qualifying Affiliates ).

 

 

“ PublicCo Acquisition Interest ” shall mean:

 

(a)

the PublicCo Ownership Interest; and

 

(b)

the corresponding aggregate amount of Subordinated Shareholder Loans to be purchased by the PublicCo Shareholder in proportion to the PublicCo Ownership Interest,

 

in each case, in accordance with Sections 5.2(a) ( Sale of PublicCo Acquisition Interest; Initial Public Offering ) and 19.2(a) ( Permitted Transfers to PublicCo and Qualifying Affiliates ).

 

“ PublicCo Call Notice ” shall mean a Notice delivered by the Saudi Aramco Founding Shareholder and / or the Dow Founding Shareholder, where the PublicCo Shareholder is the Defaulting Shareholder, requiring the determination of [***] in accordance with Annex D ( Acquisition of Ownership Interests ).

 

“ PublicCo Default Price ” shall mean the price payable to the PublicCo Shareholder for the PublicCo Shareholder’s entire Ownership Interest pursuant to Section 18.2(b)(iii) ( Consequences of Events of Default ) and shall be calculated as follows:

 

[***]

 

 

 

 

 

 

“ PublicCo Ownership Interest ” shall mean an Ownership Interest equal to thirty percent (30%) of the Authorized Capital to be purchased by the PublicCo Shareholder from the Saudi Aramco Founding Shareholder in accordance with Sections 5.2(a) ( Sale of PublicCo Acquisition Interest; Initial Public Offering ) and 19.2(a) ( Permitted Transfers to PublicCo and Qualifying Affiliates ).

 

“ PublicCo Shareholder ” shall mean PublicCo (or, if applicable, its Qualifying Affiliate that holds the PublicCo Ownership Interest), which in each case shall be formed in accordance with Applicable Law to hold the PublicCo Acquisition Interest to be purchased by it from the Saudi Aramco Founding Shareholder in accordance with Sections 5.2(a) ( Sale of PublicCo Acquisition Interest; Initial Public Offering ) and 19.2(a) ( Permitted Transfers to

 

 

PublicCo and Qualifying Affiliates ).

 

“ Put Exercise Notice ” shall have the meaning set forth in Annex D ( Acquisition of Ownership Interests ).

 

“ Put Notice ” shall mean a Notice delivered by the Dow Founding Shareholder, where the Saudi Aramco Founding Shareholder is the Defaulting Shareholder, requiring the determination of [***] in accordance with Annex D ( Acquisition of Ownership Interests ).

 

“ Qualified Pre-MOU Costs ” shall have the meaning set forth in the CSRA.

 

“ Qualified Separate Costs ” shall have the meaning set forth in the CSRA.

 

“ Qualifying Affiliate ” shall mean, in respect of a Parent Company, a legal entity with respect to which:

 

(a)

the Parent Company, directly or indirectly, owns one hundred percent (100%) of the equity interests thereof, except to the extent that there has been a Partial Transfer by way of an Upstream Transfer in accordance with Section 19.3 ( Transfers to Third Parties );

 

(b)

the Parent Company, directly or indirectly, has the right or ability to direct and manage the affairs thereof; and

 

 

 

 

 

 

“ RCJY ” shall have the meaning set forth in the Recitals.

 

“ Records Retention Policy ” shall have the meaning set forth in Section 15.7 ( Accounting and Retention Policies ).

 

“ Related Agreement ” shall mean any Project Agreement to which any Shareholder (and / or any of its Affiliates) is a party that relates directly or indirectly to the Project (or any part thereof).

 

“ Related Dispute ” shall have the meaning set forth in Annex A ( Dispute and Expert Resolution Procedures ).

 

“ Related Entity Resolution ” shall have the meaning set forth in Section 8.7(a) ( Voting With Respect to Related Entity Transactions ).

 

“ Related Entity Transaction ” shall mean any transaction or agreement (including any Project Agreement) between:

 

(a)

the Company; and

 

(b)

any Shareholder or any of its Related Persons.

 

“ Related Person ” shall mean, in relation to a Shareholder, any Person in respect of which the Shareholder or one of its Affiliates has the power directly or indirectly to direct or cause the direction of its management and policies and / or in which the Shareholder or one of its Affiliates owns directly or indirectly [***] or more of the equity (but excluding the Company).

 

“ Related Shareholder ” shall have the meaning set forth in Section 17.1(a) ( Related Entity Transactions Generally ).

 

“ Remaining Volumes ” shall have the meaning set forth in Section 0 ( Marketing and Lifting of Products by the Founding Shareholders ).

 

“ Sanctioned Country ”   shall have the meaning set forth in the definition of “ Impermissible Shareholder ”.

 

“ Saudi Aramco ” shall have the meaning set forth in the Preamble.

 

“ Saudi Aramco Default Price ” shall mean the price payable to the Dow Founding Shareholder for the Dow Founding Shareholder’s entire Ownership Interest pursuant to Section 18.2(b)(ii) ( Consequences of Events of Default ) and shall be calculated as follows:

 

[***]

 

 

 

 

 

 

 

 

[***]

 

 

 

 

 

“ Saudi Aramco Founding Shareholder ” shall mean:

 

(a)

Saudi Aramco Holdco or any Qualifying Affiliate to which Saudi Aramco Holdco transfers its Ownership Interest in accordance with Section 19.2(b) ( Permitted Transfers to PublicCo and Qualifying Affiliates ); or

 

(b)

any third party that purchases the entire Ownership Interest of Saudi Aramco Holdco or its Qualifying Affiliate, and all of its direct and indirect rights and interests therein, in accordance with Section 19.3 ( Transfers to Third Parties ), or any Qualifying Affiliate of such third party to which such third party transfers its Ownership Interest in accordance with Section 19.2(b) ( Permitted Transfers to PublicCo and Qualifying Affiliates ).

 

“ Saudi Aramco Holdco ” shall have the meaning set forth in the Preamble.

 

“ Saudi Aramco Release Date ” shall mean the date on which the Project Debt provided pursuant to the Project Financing Agreements has been irrevocably and unconditionally discharged and satisfied in full.

 

“ Saudi Riyals ” shall mean the lawful currency of The Kingdom.

 

“ Secondees ” shall have the meaning set forth in Section 12.2(b) ( Employees of and Secondees to the Company ).

 

“ Secondary Guarantee ” means a guarantee in the form of Annex F-2 ( Form of Secondary Guarantee ) issued by [***] in respect of the payment and performance obligations of [***] under any Parent Guarantee issued by [***].

 

“ Secondment Agreement ” shall mean the Secondment Agreement, to be entered into by and among each of the Founding Shareholders and the Company with respect to the secondment of employees to the Company in accordance with Section 12.2 ( Employees of and Secondees to the Company ).

 

“ Senior Officer ” shall have the meaning set forth in Section 12.1(a) ( The Management Team and Senior Officers ).

 

“ Shared Costs ” shall have the meaning set forth in the CSRA and shall include, subject to the terms and conditions thereof, all costs incurred pursuant to Section 4.7(b) thereof and all PMSA Costs.

 

“ Shareholder ” shall mean each of the Founding Shareholders and any other Person (including the PublicCo Shareholder) that becomes a shareholder in the Company in accordance with Sections 18 ( Events of Default ) or 19 ( Transfer and Exit Provisions ).

 

“ Shareholder Advance Agreement ” shall mean the Shareholder Advance Agreement, to be entered into as soon as is practicable following the Formation Date by and among Saudi Aramco Holdco, Dow Holdco, and the Company.

 

“ Shareholder Equity ” shall mean all or any part of the share capital in a Shareholder.

 

“ Shareholders’ Agreement ” shall have the meaning set forth in the Preamble.

 

“ Shareholder Undertaking Agreement ” shall mean the Shareholder Undertaking Agreement, to be entered into on or about the Financial Closing Date by and among each of the Founding Shareholders and the Company.

 

“ SPA ” shall have the meaning set forth in Annex D ( Acquisition of Ownership Interests ).

 

“ Subordinated Shareholder Loan Agreement ” shall mean each loan agreement, to be entered into between the Founding Shareholders and the Company, pursuant to which the Founding Shareholders shall make Subordinated Shareholder Loans to the Company in accordance with Section 6.3(a)(ii) ( Contribution of Development Costs ) and Section 6.5(c) ( Additional Shareholder Funding ).

 

“ Subordinated Shareholder Loans ” shall mean all loans provided by the Shareholders or their Qualifying Affiliates to the Company, including the accounts payable owing to the Founding Shareholders pursuant to Section 6.3(a)(i) ( Contribution of Development Costs ), and any Advances made by a Founding Shareholder under the Shareholder Advance Agreement, which shall be, from and after the Financial Closing Date, subordinated in all respects to the Project Debt.

 

“ Substantial Project Impairment ” shall mean a decrease of twenty percent (20%) or more in the Company’s actual EBITDA during any period as compared to the Company’s projected EBITDA for the twelve (12) month period following the occurrence of a Trigger Event or deadlock pursuant to Section 10.1 ( Deadlock ). The Company’s projected EBITDA shall be calculated based on the Approved Operating Plan applicable as of the date that the Trigger Event or deadlock occurred and, to the extent the twelve (12) month period following the occurrence of the Trigger Event or deadlock extends into the next Fiscal Year, based on the Strategic Business Plan applicable as of the date that the Trigger Event or deadlock occurred.

 

“ Taxes ” shall mean all taxes that relate to the Company and / or the Project, including income tax, zakat , duties, levies, and assessments, including withholding tax, customs duties, sales tax, value added tax, consumption tax, and stamp duty, together with any interest, surcharges, fines, or penalties thereon or in addition thereto and regardless of whether any of the same are chargeable directly or indirectly against, or attributable directly or indirectly to, any Person.

 

 

“ Term ” shall have the meaning set forth in Section 4.2 ( Term and Termination of Shareholders’ Agreement; Survival ).

 

“ The Kingdom ” shall have the meaning set forth in the Preamble.

 

“ Third Party Agreements ” shall mean each agreement related to the supply of feedstock, industrial gases or utilities, or other goods or services to the Project entered into from time to time between or among the Company and any Person that is not a Founding Shareholder (or its Affiliate).

 

“ Transfer ” shall mean a Direct Transfer or an Upstream Transfer, provided that (subject to Section 19.6(b) ( Impermissible Change in Control )), a transfer, assignment, or other disposal of any share capital in a Parent Company shall not constitute a Transfer. “ Transferred ” shall be construed accordingly.

 

“ Transfer Notice ” shall have the meaning set forth in Section 19.3(b) ( Transfers to Third Parties ).

 

“ Transferor ” shall mean a Shareholder proposing to effect or permit a Transfer in accordance with Section 19.3 ( Transfers to Third Parties ) or effecting a Transfer pursuant to Section 18.2(b) ( Consequences of Events of Default ).

 

“ Transfer Period ” shall mean a period of one hundred and eighty (180) days from the date that any of the conditions set forth in Paragraphs (i)-(v) of Section 19.3(d) ( Transfers to Third Parties ) has been fulfilled, provided that if the Transferor provides a Notice to the Non-Transferring Shareholders identifying a preferred bidder that has been confirmed to be a Permitted Transferee prior to the date on which the one hundred and eighty (180)-day period expires, the period shall be extended for an additional period of one hundred and eighty (180) days.

 

“ Tribunal ” shall have the meaning set forth in Annex A ( Dispute and Expert Resolution Procedures ).

 

“ Trigger Event ” shall mean:

 

 

 

 

 

 

 

 

“ Unfriendly Country ” shall have the meaning set forth in the definition of “ Impermissible Shareholder ”.

 

[***]

 

“ United States Dollars ” or “ U.S.$ ” shall mean the lawful currency of the United States of America.

 

“ Upstream Transfer ” shall mean a transfer, assignment, or other disposal of any Shareholder Equity.

 

“ US GAAP ” shall mean generally accepted accounting principles in the United States of America.

 

“ Valuation Expert ” shall mean an independent financial firm not affiliated or associated with any Shareholder, with an internationally-recognized accounting or investment banking practice having expert knowledge with respect to the valuation of companies in the chemical and petrochemical production and product marketing business.

 

“ Valuation Notice ” shall have the meaning set forth in Annex D ( Acquisition of Ownership Interests ).

 

“ Valued Interest ” shall have the meaning set forth in Annex D ( Acquisition of Ownership Interests ).

 

“ VP – Business and Services ” shall have the meaning set forth in Section 12.1(a) ( The Management Team and Senior Officers ).

 

“ VP – Industrial Relations ” shall have the meaning set forth in Section 12.1(a) ( The Management Team and Senior Officers ).

 

“ VP – Manufacturing and Engineering ” shall have the meaning set forth in Section 12.1(a) ( The Management Team and Senior Officers ).

 

“ Willful Misconduct ” shall mean any willful act or omission of a Person (including the willful breach of this Agreement) that is intended to cause, or is in reckless

 

disregard of or wanton indifference to, the consequences that such act or omission would have on the rights, business, operations, health, or safety of another Person.

 

1.2

Usage

 

In this Shareholders’ Agreement, the recitals and headings are for convenience only and shall not affect its interpretation and except where the context otherwise requires:

 

(a)           a reference to an enactment or regulation shall include a reference to any subordinate law, decree, resolution, order, or the like made under the relevant enactment or regulation and is a reference to that enactment, regulation or subordinate law, decree, resolution, order, or the like, as amended, consolidated, modified, re-enacted, or replaced from time to time;

 

(b)           words in the singular shall include the plural and vice versa and references to one gender shall include other genders;

 

(c)           unless otherwise expressly stated, a reference to an Annex, Part, Section, or Paragraph shall be a reference to an annex, part, section, or paragraph (as the case may be) of or to this Shareholders’ Agreement;

 

(d)           if a period of time is specified as from a given day, or from the day of an act or event, it shall be calculated inclusive of that day;

 

(e)           references to years, quarters, months, days, and the passage of time shall be construed in accordance with the Gregorian calendar and, unless otherwise specified, references to time refer to the time in The Kingdom;

 

(f)           a reference to “ includes ” or “ including ” shall mean “includes without limitation” or “including without limitation”, as applicable;

 

(g)           references to writing shall include any mode of reproducing words in any legible form, but shall exclude e-mail except where expressly stated;

 

(h)           the Annexes form part of this Shareholders’ Agreement and reference to this Shareholders’ Agreement shall include such Annexes;

 

(i)           references to any agreement or contract, including this Shareholders’ Agreement, shall be interpreted to mean such agreement or contract, as amended, supplemented, restated, and / or otherwise modified in accordance with its terms from time to time;

 

(j)           references to any Governmental Entity or any governmental department, commission, board, bureau, agency, regulatory authority, instrumentality, or judicial or administrative body, in any jurisdiction shall include any successor to such entity; and

 

(k)           a reference to a party or to any other person includes a reference to its successors and permitted transferees and assigns.

 

 

2.

EFFECTIVENESS AND FORMATION

 

2.1

Effectiveness

 

(a)           This Section 2.1 and Sections 1 ( Definitions and Usage ), 21   ( Confidential Information ), 24 ( Dispute Resolution Procedures ), 25 ( Assignment ), and 26 ( Miscellaneous ) shall become effective upon the date hereof. The other provisions of this Shareholders’ Agreement shall become effective upon the Formation Date.

 

(b)           As soon as practicable following the date hereof, the Founding Shareholders shall cause the Company to be established as a limited liability company duly organized and existing under the laws of The Kingdom, provided that, for the avoidance of doubt, neither Founding Shareholder shall be obliged to sign any form of articles of association approved for the Company by the Ministry of Commerce and Industry of The Kingdom and the relevant notary public in The Kingdom, nor to take any step to cause the Formation Date to occur, if such articles of association are, in the reasonable opinion of that Founding Shareholder, in any material respect, inconsistent with the Draft Articles of Association.

 

(c)           Subject to Section 15.6(a) ( Non-Breach of Law ), each Shareholder undertakes to observe and comply fully and promptly with this Shareholders’ Agreement such that its terms and conditions shall be enforceable by the Shareholders amongst themselves (in whatever capacity), notwithstanding the fact that they may not be enforceable under Applicable Law or may be inconsistent with the other Constitutive Documents. The Shareholders shall refrain from filing any claim or lawsuit so as to challenge, or which includes a challenge to, the above principle.

 

2.2

Name and Head Office of the Company

 

The name of the Company shall be Sadara Chemical Company. The head office of the Company (the “ Head Office ”) shall be located in the Eastern Province at Jubail, The Kingdom, or such other place within The Kingdom as the Shareholders may decide. In addition, the Company may establish branches, offices, or agencies in such other places inside or outside The Kingdom as the Shareholders approve to carry out the Business of the Company.

 

 

3.1

General Business Objectives

 

 

(i)

the design, construction, ownership, and operation of the Complex;

 

(ii)

the manufacturing of hydrocarbon products and any other chemical and petrochemical products (including any products produced as a consequence of expansions of the Project);

 

(iii)

the marketing and sale of Products;

 

 

(iv)

the promotion and development of conversion industries as further described in Section 3.2 ( Development of Conversion Industries );

 

(v)

engaging in research and development;

 

(vi)

investigating and pursuing suitable opportunities for expansion of the Project; and

 

(vii)

all other lawful activities related to the exploitation of the Project for the benefit of the Shareholders.

 

The Constitutive Documents shall be construed accordingly. The Complex shall be operated and maintained, at all times, in a commercially prudent manner designed to maximize the Company’s value and achieve high levels of efficiency, productivity, profitability, and health, safety, and environmental practices.

 

(b)           The Company shall be authorized to create affiliated or subsidiary companies as required to implement the Project, including:

 

(i)

in connection with the financing of the engineering, procurement, and construction of the Project;

 

(ii)

the operation of the Complex; and

 

(iii)

for such other purposes as the General Assembly may decide, in each case, in furtherance of the objectives of the Company.

 

(c)           The activities set forth in this Section 3, as may be amended from time to time, shall together constitute the “ Business ” of the Company.

 

3.2

Development of Conversion Industries

 

(a)           The Shareholders acknowledge and agree that one of the leading objectives of the Company is to promote self-sustaining, export-oriented downstream conversion industries generally within The Kingdom and specifically within Al Jubail Industrial City II (“ Conversion Industries ”). It is intended that the Company will achieve this objective by developing and implementing directly and in collaboration with third parties, and by offering a unique slate of Products and services to, specific projects in The Kingdom for the downstream conversion of the Company’s Products into end-use products (the “ Conversion Industry Projects ”). It is also intended that the Conversion Industry Projects will be developed and implemented under a self-sustaining business model that provides value-enhancing opportunities for the Company and other participants in each step of the value chain of those Conversion Industry Projects, including value-added uses of the Company’s smaller intermediate streams, savings in logistics costs, low cost-to-serve economics, base-load opportunities, and product grade enhancement.

 

Entities, including the RCJY and the National Industrial Clusters Development Program, to create favorable conditions and establish a commercially enabling environment to promote the development of Conversion Industries and to identify appropriate opportunities for the Company’s participation in the Conversion Industry Projects. The Shareholders (and / or their Affiliates) accordingly have completed, and shall transfer to the Company in accordance with Section 6.3 ( Contribution of Development Costs ), a project scoping study setting out principles, methodologies, plans, and parameters for the Company’s promotion of Conversion Industries and participation in the Conversion Industry Projects (as further developed by the Company, the “ Conversion Industry Development Plan ”).

 

(c)           The Founding Shareholders shall cause the Company to commit to fund the development and implementation of the Conversion Industry Projects in accordance with the Conversion Industry Development Plan and in consultation with MinPet, provided that the aggregate financial commitment of the Founding Shareholders and the Company in connection with the promotion of Conversion Industries, including by way of direct participation in the form of equity investments in the Conversion Industry Projects, shall be capped at [***], including any Development Costs paid or funded by the Founding Shareholders in this respect prior to the Formation Date.

 

3.3

Conversion Industry Customers and Markets

 

(a)           The Shareholders recognize that Dow and its Affiliates have expertise in the development of downstream conversion industry customers for products marketed by Dow and its Affiliates and their respective joint ventures. The Dow Founding Shareholder shall use (or procure that its Affiliates use) commercially reasonable efforts to provide the following services to the Company in connection with the promotion of Conversion Industries and the development and implementation of the Conversion Industry Projects:

 

(i)

leveraging existing business and customer relationships to encourage current and future customers of Dow and its Affiliates and others to develop and implement directly and in collaboration with the Company the Conversion Industry Projects;

 

(ii)

providing research and development (including product and application development support), technical services support, and training and development of technical support staff of key strategic customers in Conversion Industries, including the Conversion Industry Projects, who represent a significant value-added opportunity for the Company; and

 

(iii)

supporting and actively participating in initiatives undertaken by Governmental Entities for the promotion of Conversion Industries by sharing experiences and knowledge of similar initiatives supported by Dow and its Affiliates outside of The Kingdom.

 

(b)           The Company and the Dow Founding Shareholder (or its Affiliates) shall agree on which services will be provided by the Dow Founding Shareholder (or its Affiliates) to

 

 

the Company pursuant to this Section 3.3 on a complimentary basis and which services shall be provided for a fee.

 

3.4

Conversion Industry Standards and Documentation

 

Without limiting the generality of Sections 3.2 ( Development of Conversion Industries ) or 3.3 ( Conversion Industry Customers and Markets ), the Shareholders will, prior to the Project Operations Date, use their commercially reasonable efforts in coordination with appropriate Governmental Entities to develop standards and relevant documentation to support the growth of Conversion Industries into an integrated network of raw materials suppliers, downstream manufacturers, strategic customers, and service providers, including standards pertaining to service and feedstock supply agreements with predictable and enabling pricing arrangements and operational and planning assistance procedures designed, in each case, to attract potential new industries to The Kingdom.

 

3.5

Domestic Sales

 

(a)           The Shareholders agree to support the Company in developing and maximizing annual sales of Products within The Kingdom, provided that the Company is able to do so at prices and on terms and conditions that are no less profitable and favorable than other sales opportunities available to the Company outside of The Kingdom.

 

(b)           Subject to Section 3.5(a), the Shareholders agree that the prices of Products sold by the Company to customers in Conversion Industries, including the Conversion Industry Projects, shall be [***].

 

 

4.

DURATION; TERM; TERMINATION

 

4.1

Duration of the Company

 

No later than the date that is ten (10) years prior to the expiration of the duration of the Company pursuant to the Articles of Association, the Shareholders shall, or shall cause the Company to, amend the Articles of Association such that the duration of the Company shall end on the date that is ninety-nine (99) years after the Project Completion Date.

 

4.2

Term and Termination of Shareholders’ Agreement; Survival

 

The term of this Shareholders’ Agreement (the “ Term ”) shall commence upon the date hereof and shall end upon expiration of the duration of the Company as set forth in the Articles of Association unless terminated earlier in accordance with its terms and conditions. At the end of the Term, this Shareholders’ Agreement shall have no further force and effect, provided that, except as otherwise provided herein or as may be agreed by the Shareholders, no termination of this Shareholders’ Agreement shall release any Shareholder from any liability to any other Shareholder, or prejudice any of the rights or remedies that the Shareholders may have in respect of any such liability, that at the time of such termination has already accrued, nor

 

 

affect in any way the survival of any right, duty, or obligation of any Shareholder that is expressly stated elsewhere in this Shareholders’ Agreement to survive the termination hereof. Section 1 ( Definitions and Usage ), this Section 4.2, Sections 15.6 ( Non-Breach of Law ), 17.5(a) ( Principal Agreements ), 20.4 ( Equity Rebalancing True-Up ), 21 ( Confidential Information ), 22 ( Indemnification and Liability ), 24 ( Dispute Resolution Procedures ), 25 ( Assignment ), and 26 ( Miscellaneous ), and Annex A ( Dispute and Expert Resolution Procedures ) shall continue in force after such termination.

 

5.

INITIAL OWNERSHIP INTEREST; SALE TO PUBLICCO

 

5.1

Initial Ownership Interest

 

In exchange for the initial Capital Contributions set forth in Section 6.1 ( Initial Authorized Capital ):

 

(a)

the Saudi Aramco Founding Shareholder shall have an Ownership Interest equal to sixty-five percent (65%); and

 

(b)

the Dow Founding Shareholder shall have an Ownership Interest equal to thirty-five percent (35%),

 

of the aggregate Ownership Interests of all Shareholders.

 

5.2

Sale of PublicCo Acquisition Interest; Initial Public Offering

 

(a)           The Saudi Aramco Founding Shareholder, taking into account market conditions and applicable legal requirements, shall sell to the PublicCo Shareholder the PublicCo Acquisition Interest, concurrently with an initial public offering of PublicCo on the Saudi Stock Market, Tadawul (the “ IPO ”), as soon as practicable following the Financial Closing Date.

 

(b)           Immediately prior to the IPO, the Founding Shareholders shall, or shall cause the Company or their respective Qualifying Affiliates to, modify, amend, and supplement this Shareholders’ Agreement, the other Constitutive Documents, and any relevant Project Agreements solely to the extent required to accommodate the PublicCo Shareholder’s admission as a Shareholder in the Company and the implementation of the IPO, provided that no such modifications, amendments, or supplements shall adversely affect the rights or increase the obligations of a Founding Shareholder, its Qualifying Affiliates, or the Company and, unless otherwise agreed between the Founding Shareholders in writing, the agreed terms of the Company’s governance set forth in this Shareholders’ Agreement shall not be changed as a result of any such adjustment.

 

(c)           The indirect participation in the Company to be purchased by the Saudi public through PublicCo during the IPO shall be priced [***]. Subject to Applicable Law, the Saudi Aramco Founding Shareholder shall use its commercially reasonable efforts to maximize the recovery of Development Costs through the IPO.

 

(d)           The proceeds of the IPO shall be for the account of the Saudi Aramco

 

 

Founding Shareholder. If such proceeds do not include Development Costs that:

 

(i)

were paid prior to the end of the Equity Rebalancing Period;

 

(ii)

were transferred to the Company in accordance with Section 6.3(a) ( Contribution of Development Costs ); and

 

(iii)

remain unreimbursed by the Company,

 

as a result of such Development Costs not being permitted by the CMA or MinPet to be included in the price of the indirect participation of the Saudi public through PublicCo in the IPO (the “ Disallowed Development Costs ”), then the Dow Founding Shareholder shall reimburse to the Saudi Aramco Founding Shareholder [***] of such Disallowed Development Costs.

 

(e)           Prior to, and as a condition of, the sale of the PublicCo Acquisition Interest to the PublicCo Shareholder, the Founding Shareholders agree that the PublicCo Shareholder shall execute and deliver to the Founding Shareholders and the Company an Accession Agreement, in the form attached to this Shareholders’ Agreement as Annex B ( Form of Accession Agreement ), confirming the PublicCo Shareholder’s admission as a Shareholder and its agreement to be bound by the terms of this Shareholders’ Agreement and any obligations of confidentiality and such other documents and agreements as shall be reasonably requested by the Founding Shareholders and the Company in connection with the Project.

 

5.3

Reduction of Saudi Aramco’s Initial Ownership Interest

 

Upon the sale to the PublicCo Shareholder of the PublicCo Ownership Interest, the Saudi Aramco Founding Shareholder’s Ownership Interest shall be reduced by the Ownership Interest acquired by the PublicCo Shareholder.

 

6.

CAPITAL CONTRIBUTIONS; FINANCING

 

6.1

Initial Authorized Capital

 

The initial Authorized Capital shall be as set out in the Articles of Association on the Formation Date. On or prior to the Formation Date, each Founding Shareholder shall make an initial Capital Contribution to the Company and receive an Ownership Interest in accordance with Section 5.1 ( Initial Ownership Interest ).

 

6.2

Equity Rebalancing Period

 

(a)           During the Equity Rebalancing Period, all Development Costs shall be funded by the Saudi Aramco Founding Shareholder (or its Affiliates) pursuant to the Cost Sharing Agreements and the Shareholder Advance Agreement.

 

(b)           The Shareholders shall cause the Company to create a reserve of [***] from Advances made under the Shareholder Advance Agreement to fund financing costs projected to be payable by the Company under the

 

Bridge Financing Agreements (that are not permitted to be funded by the Bridge Loans) during the period following the Equity Rebalancing Period until the Financial Closing Date.

 

6.3

Contribution of Development Costs

 

(a)           As soon as practicable after the Equity Rebalancing Period, and consistent with Applicable Law:

 

(i)

all Development Costs incurred under the Cost Sharing Agreements shall be transferred to the Company by the Founding Shareholders in accordance with the Contribution Agreement in return for accounts payable from the Company; and

 

(ii)

thereafter, but in any event prior to the Financial Closing Date, and in accordance with IFRS, the Founding Shareholders shall cause the Company to convert the accounts payable and the Advances provided under the Shareholder Advance Agreement into Capital Contributions or Subordinated Shareholder Loans under the Subordinated Shareholder Loan Agreement in such proportion as the General Assembly determines consistent with the Project Financing Agreements.

 

(b)           The Shareholders agree that:

 

(i)

no Founding Shareholder (nor any of its Affiliates) shall be liable to any other Shareholder (or any of its Affiliates) or to the Company (or any of its Affiliates) for; and

 

(ii)

they shall cause the Company to indemnify, defend, and hold harmless each Founding Shareholder and its Affiliates (and its and their employees, agents, consultants, contractors, and subcontractors) from and against,

 

any Losses in connection with the contribution or provision to the Company by a Founding Shareholder, and use by or on behalf of the Company or a Founding Shareholder in connection with the Project, of any goods and services (whether tangible or intangible) and information (including information such as safety-related information, loss-prevention information, layers of protection analysis, reactive chemical data, and any other business or technical information provided to support the Joint Activities (as defined in the MOU)), constituting the subject matter of Development Costs and / or provided in connection with the Joint Activities except for any Losses resulting from the Willful Misconduct of a Founding Shareholder (or any of its Affiliates).

 

(c)           The Shareholders agree that they shall take no action with respect to the Company, nor permit the Company to take any action, inconsistent with this Section 6.3, provided that nothing in this Section 6.3 shall affect any rights of a Shareholder (or any of its

 

 

Affiliates) or the Company arising under any of the other Principal Agreements.

 

6.4

Funding Before Financial Closing

 

(a)           Following the Equity Rebalancing Period until the date on which the conditions to initial disbursement of the Project Debt under the Project Financing Agreements have been fulfilled (the “ Financial Closing Date ”), the Founding Shareholders intend to fund all expenditures of the Company authorized by the Approved Operating Plan by loans to be provided by banks or other financial institutions (each a “ Bridge Loan ”). Each Founding Shareholder shall procure the provision of several (and neither joint nor joint and several) guarantees in respect of the Bridge Loans proportionate to its Ownership Interest from its Parent Company [***].

 

(b)           If all Bridge Loans are fully utilized prior to the Financial Closing Date and the Board has requested that the Founding Shareholders make available additional funds in order to implement the Approved Operating Plan until the Financial Closing Date, then, the Founding Shareholders shall, subject to Section 6.4(c), if the Company is unable to obtain financing from another source on acceptable terms, provide such funds to the Company in proportion to their respective Ownership Interests in accordance with Section 6.5(a) ( Additional Shareholder Funding ).

 

(c)           A Founding Shareholder shall only be required to provide any funds pursuant to Section 6.4(b) if it is satisfied that the Financial Closing Date is reasonably imminent and that the ratio of:

 

(i)

the aggregate amount of Project Debt to be available to the Company under the Project Financing Agreements; to

 

(ii)

the aggregate amount of all Capital Contributions and principal (including capitalized interest) outstanding on any Subordinated Shareholder Loans advanced by the Founding Shareholders,

 

will be [***].

 

(d)           The Founding Shareholders intend that the Bridge Loans will be repaid by the Project Debt in accordance with Section 6.6 ( Project Financing ) on the Financial Closing Date.

 

6.5

Additional Shareholder Funding

 

(a)           Subject to Sections 6.2 ( Equity Rebalancing Period ) and 6.4 ( Funding Before Financial Closing ) and at all times from and after the initial Authorized Capital of the Company has been fully paid up pursuant to Section 6.1 ( Initial Authorized Capital ), any additional funding from the Shareholders required in order for the Company to meet its anticipated operational and capital requirements as set forth in the Approved Strategic Business Plan and the Approved Operating Plan, shall be funded by Project Debt in accordance with Section 6.6 ( Project Financing ), or if approved by the Shareholders in accordance with Section

 

9.3 ( Powers of the General Assembly ), through:

 

(i)

making Capital Contributions to the Company;

 

(ii)

extending, or causing their Qualifying Affiliates to extend, Subordinated Shareholder Loans to the Company; or

 

(iii)

such other mechanism as the Shareholders may agree, consistent with Applicable Law.

 

(b)           If a Shareholder fails to:

 

(i)

make any Capital Contributions that are approved in accordance with Section 9.3(b)(ii) ( Powers of the General Assembly ); or

 

(ii)

extend any Subordinated Shareholder Loans that are approved in accordance with Section 9.3(a)(vi) ( Powers of the General Assembly ),

 

in either case, in an amount in proportion to its Ownership Interest of such increase in the Authorized Capital or extensions of Subordinated Shareholder Loans, as the case may be, then, subject to Section Error! Reference source not found. ( Shareholder Credit Support ):

 

(A)

the other Shareholders may elect to fund the resulting deficiency on a pro rata basis as between themselves; and

 

(B)

in the case of Capital Contributions, each Shareholder’s Ownership Interest shall be adjusted (upward or downward, as applicable) to reflect the proportionate amount of Capital Contributions made by each Shareholder.

 

(c)           All Subordinated Shareholder Loans shall be identical for all Shareholders (other than in respect of the lender thereunder and the principal amount but including a requirement that such Subordinated Shareholder Loans be drawn on a pro rata basis) and shall:

 

(i)

bear interest at a market rate consistent with Applicable Laws;

 

(ii)

have no fixed maturity date; and

 

(iii)

not be subject to repayment on demand by any Shareholder.

 

(d)           Contributions of goods and services by any Shareholder to the Company after the contribution of Development Costs pursuant to Section 6.3 ( Contribution of Development Costs ) may be:

 

(i)

transferred to the Company and converted into Capital Contributions; or

 

 

(ii)

invoiced to the Company,

 

in either case, in accordance with Applicable Law and IFRS, and solely to the extent approved by the General Assembly in accordance with Section 9.3 ( Powers of the General Assembly ).

 

(e)           With respect to Article 180 of the Companies Law:

 

(i)

if, at any time during the Term, the Company’s accumulated losses are within five percent (5%) of the percentage of accumulated losses that would cause liability to attach to the Shareholders pursuant to Article 180 of the Companies Law, the Shareholders shall cause the General Assembly to meet within fifteen (15) days from such time to consider what, if any, action to take (including the conversion of Subordinated Shareholder Loans to Authorized Capital and offsetting the Company’s statutory reserve against such losses) in order to avoid the Company’s accumulated losses equaling or exceeding such percentage of accumulated losses that would cause liability attaching to the Shareholders pursuant to Article 180 of the Companies Law; and

 

(ii)

subject to the preceding Paragraph (i), each Shareholder (in its capacity as shareholder in the Company and in each other capacity, including as a party to any contracts entered into with the Company or another Shareholder, as the case may be) hereby irrevocably and unconditionally agrees to waive and waives, and shall cause each of its Affiliates that are parties to a Project Agreement to waive, to the maximum extent permitted by Applicable Law, all rights it has or may have under or pursuant to Article 180 of the Companies Law against any other Shareholder in its capacity as shareholder in the Company and against the Company, including any rights to contribution or payment of any sum under or pursuant to Article 180 of the Companies Law or rights to bring or pursue proceedings to enforce or pursue any rights or claims in each case arising under or pursuant to Article 180 of the Companies Law.

 

6.6

Project Financing

 

(a)           In order to pursue an efficient and cost-effective financing plan that allows the financial strength of Saudi Aramco and Dow to be appropriately utilized, the Founding Shareholders shall assess various options and develop a debt financing plan and structure for the Project that shall optimize debt financing terms for the Company, with due regard to the Founding Shareholders’ respective interests (the “ Project Debt ”). The Shareholders and the Management Team shall work together to achieve a targeted [***] ratio of the Project Debt to the aggregate of Capital Contributions and Subordinated Shareholder Loans. Notwithstanding the foregoing and subject to the Project Financing Agreements:

 

(i)

as a general principle, the Shareholders intend to maximize Project Debt to the extent consistent with schedule, cost, and operational considerations; and

 

(ii)

to the extent practicable, the provision by the Shareholders of any Capital Contributions or Subordinated Shareholder Loans shall occur pro rata with the proceeds of the Project Debt or be back-ended.

 

(b)           Taking into consideration the impact on the Shareholders and subject to Section 6.7 ( Shareholder Credit Support ), the Project Debt shall:

 

(i)

be of a non-recourse nature; and

 

(ii)

involve regionally and globally competitive overall costs, commission rates, and tenors consistent with the objectives of the Shareholders, as agreed by the Founding Shareholders.

 

(c)           The Founding Shareholders shall cause the Company to use its commercially reasonable efforts to maximize the benefit to itself of all available grants, insurance programs, and any other benefits offered by governmental, quasi-governmental bodies, and any export credit agencies to projects in The Kingdom to the extent practicable. The Founding Shareholders intend that the Company shall utilize such local (in-Kingdom), regional, Islamic, and other international financing sources as may be required to optimize the financial attractiveness of the Project. The Company shall engage internationally recognized financial arrangers to assist with the financing of the Project.

 

6.7

Shareholder Credit Support

 

(a)           To the extent required by the senior lenders providing the Project Debt pursuant to the Project Financing Agreements, and subject to the agreement of the Founding Shareholders, each Founding Shareholder shall procure the provision of several (and neither joint nor joint and several) completion guarantees in respect of the Project Debt provided under the Project Financing Agreements proportionate to its Ownership Interest from its Parent Company [***], provided that, [***] upon the sale to the PublicCo Shareholder of the PublicCo Acquisition Interest, the amount of the Saudi Aramco Founding Shareholder’s completion guarantee shall be reduced to an amount proportionate to the Saudi Aramco Founding Shareholder’s resulting Ownership Interest.

 

[***]

 

 

[***]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[***]

 

 

7.

MATERIAL EXPANSIONS OF THE PROJECT

 

(a)           The Shareholders agree that they are committed to the long-term growth and expansion of the Project into one of the world’s leading integrated chemicals projects and that the Company shall continually search for and exploit new, attractive business opportunities as it sees fit in order that the Project may so develop. The Shareholders also acknowledge and agree that the Company may collaborate in the development of technology with Dow, which may provide the basis to add value to the Project through its expansion and growth.

 

(b)           Any Shareholder or Shareholders may propose a material expansion of the Project and request that the Company conducts a feasibility study (an “ Expansion Feasibility Study ”) in respect of such proposed material expansion, provided that the Company shall only be required to conduct an Expansion Feasibility Study if such proposing Shareholder or Shareholders agree to underwrite any costs and expenses incurred by the Company in doing so if the Shareholders do not subsequently agree that the Company should proceed with such material expansion in accordance with Section 7(d) on substantially the same basis as originally proposed by such proposing Shareholder or Shareholders.

 

(c)           Any Expansion Feasibility Study conducted by the Company shall, in respect of a proposed material expansion of the Project, inter alia :

 

(i)

analyze its scope and its technical, financial, commercial, and economic feasibility;

 

(ii)

determine its feedstock and technology requirements and the availability of such feedstocks and technologies;

 

(iii)

calculate its total estimated construction costs and the time period required to complete its construction;

 

(iv)

assess how to integrate it into the Project and the overall impact on the Project;

 

(v)

assess the extent of any construction and operational risks that it creates that are incremental or additional to those already present in the Project;

 

(vi)

assess the extent of any liabilities and risks that it creates that are incremental or additional to those already existing for the Company and the Shareholders;

 

(vii)

determine what (if any) additional permits, licenses, and consents or variations to existing permits, licenses, and consents will be required;

 

(viii)

assess financing options;

 

(ix)

propose a strategic business plan, operating plan, and marketing plan in respect of it and the products it will manufacture; and

 

(x)

assess whether it can be developed, constructed, financed, operated, and maintained successfully other than by the Company and separate from the Project.

 

(d)           If, following the receipt of an Expansion Feasibility Study, each Shareholder approves such proposed material expansion, then the Company shall proceed with the development, construction, financing, operation, and maintenance of such material expansion and it shall be integrated fully into the Project. The Shareholders agree that if the Company undertakes a material expansion of the Project, then the Shareholders shall support the Company’s application to the appropriate regulatory agency within The Kingdom for allocation of required regulated feedstock, including ethane.

 

(e)           If, following the receipt of an Expansion Feasibility Study, one or more, but not all, of the Shareholders approves such proposed material expansion, then:

 

(i)

such approving Shareholder or Shareholders may proceed with the development, construction, financing, operation, and maintenance of such material expansion through an entity other than the Company, provided that:

 

(A)

the Shareholder or Shareholders proceeding with the material expansion shall indemnify, defend, and hold harmless the Company and any Shareholders not proceeding with such material expansion from and against any Losses arising as a consequence of such material expansion and any adverse effects it may have on any aspect of the existing Project and the existing and projected revenue and cash flow of the Company and

 

(B)

provided further that the financing arrangements for such material expansion do not impact in any way the terms and conditions of the existing Project Financing Agreements; and

 

(ii)

any Shareholders not participating in such material expansion shall act reasonably and in good faith, and shall use their commercially reasonable efforts to ensure that the Company does the same, to support the development, construction, and operation of such material expansion and in respect of all other reasonable requests

 

8.

THE BOARD OF DIRECTORS

 

8.1

The Board of Directors

 

(a)           Except as reserved for determination by the Shareholders pursuant to Section 9.3 ( Powers of the General Assembly ), the overall management and control of the Company shall be managed by a board of directors (the “ Board ”).

 

(b)           The Board shall consist of eight (8) members (each a “ Director ”). Prior to the sale to the PublicCo Shareholder of the PublicCo Acquisition Interest in accordance with Sections 5.2 ( Sale of PublicCo Acquisition Interest; Initial Public Offering ) and 19.2(a) ( Permitted Transfers to PublicCo and Qualifying Affiliates ), each Founding Shareholder shall have the right to nominate four (4) Directors. Upon the sale to the PublicCo Shareholder of the PublicCo Acquisition Interest in accordance with Sections 5.2 ( Sale of PublicCo Acquisition Interest; Initial Public Offering ) and 19.2(a) ( Permitted Transfers to PublicCo and Qualifying Affiliates ), each Founding Shareholder shall cause [***] of its Directors to resign, and thereafter the PublicCo Shareholder shall have the right to nominate [***] Directors and each Founding Shareholder shall have the right to nominate [***] Directors. Each Shareholder shall vote for the appointment of the individuals nominated by the Founding Shareholders and the PublicCo Shareholder to be Directors in accordance with this Section 8.1(b), provided that each such individual satisfies the Director Eligibility Criteria.

 

(c)           To be eligible to serve as a Director, any individual nominated by either Founding Shareholder or the PublicCo Shareholder must satisfy the following criteria (the “ Director Eligibility Criteria ”):

 

(i)

be of sound mind and health and capable of managing his or her affairs and the affairs of the Company;

 

(ii)

not be the subject of any criminal conviction relevant to the governance or affairs of the Company, or otherwise of a serious nature;

 

(iii)

not be bankrupt or insolvent or not have made or entered into any arrangement or composition with his or her creditors generally;

 

(iv)

not be a current employee, officer, director, or contractor of, or currently hold a similar position in or with:

 

(A)

any competitor of either Founding Shareholder or their respective Qualifying Affiliates (other than the Dow Founding Shareholder or the Saudi Aramco Founding Shareholder or their respective Qualifying Affiliates); or

 

(B)

any Person to whom a Partial Transfer has been effected by way of an Upstream Transfer in accordance with Section 19.3 ( Transfers to Third Parties ); and

 

(v)

not have a material economic or voting interest in:

 

(A)

any competitor of either Founding Shareholder or their respective Qualifying Affiliates (other than the Dow Founding Shareholder or the Saudi Aramco Founding Shareholder or their respective Qualifying Affiliates); or

 

(B)

any Person to whom a Partial Transfer has been effected by way of an Upstream Transfer in accordance with Section 19.3 ( Transfers to Third Parties ).

 

(d)           If at any time a Director ceases to satisfy the Director Eligibility Criteria, then the Shareholder that nominated such Director shall procure the immediate resignation of such Director and nominate a replacement Director who satisfies the Director Eligibility Criteria.

 

(e)           Meetings of the Board shall be presided over by a chairman (the “ Board Chairman ”). In addition, a deputy chairman (the “ Deputy Board Chairman ”), a secretary (the “ Board Secretary ”), and an assistant secretary (the “ Assistant Board Secretary ”) shall be appointed as provided in this Section 8.1(e). The Board Chairman shall be nominated by the Saudi Aramco Founding Shareholder and the Deputy Board Chairman shall be nominated by the Dow Founding Shareholder. Both the Board Chairman and the Deputy Board Chairman shall be nominated from amongst the Directors then appointed to the Board. Neither the Board Chairman nor the Deputy Board Chairman shall have a tie-breaking vote in the event of a tie in a Board vote or any other corporate governance powers or rights other than their single votes in their capacities as Directors. The Board Secretary shall be appointed by the Saudi Aramco Founding Shareholder and the Assistant Board Secretary shall be appointed by the Dow Founding Shareholder for, in each case, such periods of time as the Board shall determine in accordance with Section 8.6(f) ( Board Action in General ). The Board Secretary and the Assistant Board Secretary shall not be Directors. Each Shareholder shall cause the Directors appointed by it to vote in favor of the appointment of such nominees to these positions in accordance with this Section 8.1(e).

 

(f)           Other than the initial Directors, who shall serve for a term of five (5) years, each Director shall serve for a term of three (3) years following his or her appointment to the Board, unless:

 

(i)

the Director resigns or is removed and a successor is appointed by the Shareholder that nominated such Director in accordance with Section 8.1(g); or

 

 

(ii)

the Shareholder that nominated such Director ceases to be a Shareholder.

 

For the avoidance of doubt, the Shareholders may reappoint individuals for successive terms as Directors.

 

(g)           Directors may be removed by the Shareholder that nominated them, at any time (with or without cause), upon Notice to each other Shareholder and the Board Secretary. Additionally, any Director may resign at any time upon Notice to the Shareholder represented by such Director and the Board Secretary. In either case, the Shareholder that nominated such Director may nominate a replacement Director to fulfill the remaining term of the Director who has been removed or has resigned and each Shareholder shall vote in favor of the appointment of such replacement, provided that such individual satisfies the Director Eligibility Criteria.

 

(h)           All Directors shall have equal voting rights, with each Director having one (1) vote.

 

(i)           Each Shareholder shall cause the Directors it has nominated to discharge their duties in compliance with Applicable Law and the Constitutive Documents.

 

8.2

Meetings; Notice; Proxy

 

(a)           The Board shall meet at least four (4) times in each Fiscal Year (but if the first Fiscal Year is nine (9) months or less, the number of Board meetings shall equal at least the number of full calendar quarters in such Fiscal Year plus one (1)) and a majority of meetings shall be held in The Kingdom, unless otherwise agreed by a resolution of the Board. Any two (2) Directors may convene additional Board meetings by delivering a Notice to the Board Chairman or the Board Secretary, for good cause or a substantial reason related to the Project or the Company, the resolution of which cannot be reasonably deferred to a scheduled meeting of the Board.

 

(b)           The Board Secretary (or, in the Board Secretary’s absence, the Assistant Board Secretary) shall convene any meeting of the Board by delivering to each Director a Notice (including the agenda for such meeting) at least fourteen (14) days prior to the proposed date therefor. The agenda of each meeting shall include any matter submitted to the Board Secretary by any two (2) Directors at least two (2) days prior to the delivery of the Notice for such meeting. A Director may waive (with respect to that Director), in writing, any requirement for advance notice of any meeting. A written retrospective waiver of notice, signed by a Director, shall be deemed equivalent to proper delivery of a Notice to that Director. A Director’s attendance at a Board meeting shall constitute a waiver of notice (with respect to that Director) of that meeting, unless such attendance was solely for the purpose of protesting the inadequacy of the Notice.

 

(c)           A Director may be represented at any Board meeting by any other Director, provided that the latter has been duly appointed as a proxy (“ Proxy ”) by the former in writing and Notice of such appointment is delivered to the Board Secretary prior to such Board meeting.

 

 

(d)           Minutes of Board meetings shall be taken by the Board Secretary or, in the Board Secretary’s absence, the Assistant Board Secretary, recorded in the English language, circulated to the Directors, and, if agreed, signed by the Board Chairman and Deputy Board Chairman. The documents evidencing the adoption of resolutions shall be filed by the Board Secretary or, in the Board Secretary’s absence, the Assistant Board Secretary, in the minute book of the Company to be kept at the Head Office.

 

(e)           Any Director may abstain from a vote on any matter, provided that if any Director so abstains, then, notwithstanding anything to the contrary in this Shareholders’ Agreement, the relevant voting threshold set out in Section 8.6 ( Board Action in General ) shall remain unchanged.

 

8.3

Quorum, Telephonic Meetings

 

(a)           Subject to Section 8.7(b) ( Voting With Respect to Related Entity Transactions ):

 

(i)

the quorum for any duly convened Board meeting shall be six (6) Directors attending in person or by Proxy; and

 

(ii)

no meeting of the Board shall be valid and properly convened (and no business conducted at a meeting of the Board shall be valid) unless at least six (6) Directors attend such meeting in person or by Proxy.

 

(b)           A Director may participate in any regularly-scheduled Board meeting by telephone, by video conference, or by any other similar electronic means through which all Directors may communicate simultaneously. Such participation shall constitute presence at such Board meeting.

 

8.4

Written Consent

 

Any resolution of the Board may be taken without a meeting of the Board if such resolution is sent to each of the Directors in the manner specified in Section 26.3 ( Notices ) and the requisite number of Directors, as set out in Section 8.6 ( Board Action in General ), sign such resolution or counterparts thereof to indicate their approval. The written consents of the Directors to such resolutions shall be forwarded to the Board Secretary for inclusion in the minute book of the Company.

 

8.5

Remuneration of Directors

 

The Company shall be responsible for the payment of remuneration (if any) of Directors and the reimbursement of out-of-pocket and travel-related expenses payable to any Directors and their Proxies in accordance with the policies of the Company approved by the General Assembly pursuant to Sections 9.3(a)(i) and 9.3(a)(ii) ( Powers of the General Assembly ), respectively.

 

 

8.6

Board Action in General

 

Except as otherwise expressly provided in this Shareholders’ Agreement, no decision of the Board shall be valid unless adopted by written resolution with the affirmative vote of at least [***] Directors. Without limiting the authority of the Board granted by Section 8.1(a) ( The Board of Directors ), the following matters shall be determined by the Board and may not be delegated by the Board for determination by a Board Committee or the Management Team, provided that the Board may delegate such matters for determination by the Project Execution Committee in accordance with Section 11.2 ( The Project Execution Committee ):

 

(a)

approval of and modification to the guidelines and instructions to be given by the CEO:

 

(i)

to the Management Team in respect of the preparation of the Proposed Strategic Business Plan and the annual enterprise risk management report pursuant to Section 13.1(a) ( Strategic Business Plan ); and

 

(ii)

in respect of the Proposed Operating Plan pursuant to Section 13.2(a) ( Operating Plan );

 

(b)

approving the Proposed Strategic Business Plan and any subsequent modifications to the Approved Strategic Business Plan;

 

(c)

approving the Proposed Operating Plan and any subsequent modifications to the Approved Operating Plan;

 

(d)

in respect of:

 

(i)

the design, engineering, and construction of the Complex, resolving any disagreements within the Project Execution Committee referred to the Board pursuant to Section 11.2(b) ( The Project Execution Committee ); and

 

(ii)

the marketing and lifting of Products:

 

(A)

approving the Company’s Draft Marketing Plan and each Marketer’s Draft Marketing Plan and any subsequent modifications to those marketing plans;

 

(B)

exercising any discretion or rights of the Company under the PMLAs;

 

(C)

approving any modifications to any Marketer Standard Sales Contract; and

 

(D)

resolving any disagreements within the Marketing Council referred to the Board pursuant to Section 12.3 ( The Marketing Council );

 

(e)

subject to the requirements of Section 15 ( Policies of the Company ), adopting, amending, altering, or adding to the Project Standards, and defining the responsibilities of and delegating powers and authority to the Management Team;

 

(f)

subject to the requirements of Section 8.1(e) ( The Board of Directors ), determining the time periods of appointment of the Board Chairman, the Deputy Board Chairman, the Board Secretary, and the Assistant Board Secretary;

 

(g)

subject to the requirements of this Section 8.6 and Section 11 ( Board Committees ), creating or dissolving Board Committees and / or approving the delegation of authority or responsibility to such Board Committees, and any amendments thereto;

 

(h)

adopting resolutions in respect of recommendations to the General Assembly for approval pursuant to Section 9.3 ( Powers of the General Assembly );

 

(i)

approving the agenda of the General Assembly;

 

(j)

creating, designating, changing, or eliminating the positions of Senior Officers and / or the organizational structure of the Company and / or appointing or removing and determining the compensation and terms and conditions of employment of any of the Senior Officers and the General Auditor;

 

(k)

approving the insurance strategy to be implemented and the principal policies to be arranged by the Company in accordance with Section 23 ( Insurance );

 

(l)

initiation or settlement, waiver, or other disposition of any claims, lawsuits, or other proceedings involving the Company where the amount in dispute is in excess of the equivalent of [***];

 

(m)

approval of the execution of the Project Agreements by the Company and any material amendments, variations, or waivers thereto;

 

(n)

approval of the execution of the Bridge Financing Agreements and the Project Financing Agreements by the Company and any material amendments, variations, or waivers in relation thereto;

 

(o)

except as otherwise specified in this Shareholders’ Agreement, approving

(p)

incurring any indebtedness for borrowed funds (including issuing guarantees, sureties, or indemnities to third parties, finance leases, and other similar obligations) except:

 

(i)

the Bridge Loans and the Project Debt;

 

(ii)

in the ordinary course of business; or

 

(iii)

as provided in the Approved Strategic Business Plan or the Approved Operating Plan;

 

(q)

the creation or granting of any pledge, lien, charge, encumbrance, mortgage, sale, lease, transfer right, or other security interest whatsoever upon any of the assets, business, undertakings, shares, or other ownership interests of the Company except:

 

(i)

pursuant to the Project Financing Agreements;

 

(ii)

if arising under the retention of title clauses in the ordinary course of business; or

 

(iii)

as provided in the Approved Strategic Business Plan or the Approved Operating Plan;

 

(r)

prior to the Project Completion Date, implementing modifications to the Project so long as the aggregate effect of such modifications, individually or when added to all previous modifications approved by the Board in accordance with this Section 8.6(r), would not:

 

(i)

result in an increase of more than [***] in the total construction costs;

 

(ii)

delay the Project Completion Date by more than [***]; or

 

(iii)

materially change the targeted capacity of any plant that manufactures Products;

 

(s)

incurring any proposed capital expenditure in excess of the equivalent of [***] except as may be provided in the Approved Operating Plan in connection with the construction, testing, and commissioning of any part of the Project;

 

(t)

writing-off of any accounts receivable except in accordance with the Accounting Policy;

 

(u)

establishing or closing deposit and other accounts of the Company in accordance with Section 15.12 ( Accounts ) and altering any mandate for the operation of those accounts (other than the substitution of any Person nominated as a signatory by the Person entitled to make such nomination);

 

(v)

subject to Section 8.7 ( Voting With Respect to Related Entity Transactions ), executing, modifying, or amending any Related Entity Transaction; and

 

(w)

recommending to the General Assembly a change in the jurisdiction of organization or tax residence of the Company.

 

8.7

Voting With Respect to Related Entity Transactions

 

(a)           Notwithstanding anything to the contrary in this Shareholders’ Agreement, no action shall be taken by the Company with respect to the Company’s entry into, termination, exercise, amendment, modification, variation, waiver, compromise, assertion, or enforcement of any material claim, right, term, or obligation under, or with respect to any Related Entity Transaction (other than:

 

(i)

in connection with the undertakings set out in Section 7(e)(ii) ( Material Expansions of the Project );

 

(ii)

in connection with any claim or potential claim concerning a matter which is the subject of the releases and indemnities in Section 6.3(b) ( Contribution of Development Costs ); and

 

(iii)

in respect of a Related Entity Transaction for which both Founding Shareholders are Related Shareholders),

 

without the approval of the Board in accordance with this Section 8.7 (a “ Related Entity Resolution ”).

 

(b)           Prior to voting on any Related Entity Resolution, the Directors nominated by the relevant Related Shareholder shall identify themselves to the other Directors. If a Related Entity Resolution is not approved by the Board pursuant to the initial vote of the Board in accordance with Section 8.6 ( Board Action in General ), then after a period of at least fourteen (14) days from such initial vote, the Directors nominated by the Founding Shareholder that is not the Related Shareholder may convene a further Board meeting to resolve such matter. The Directors nominated by the relevant Related Shareholder may attend such further Board meeting but shall not be entitled to vote on the Related Entity Resolution. However, the unanimous vote of the Directors entitled to vote on such matter shall be required for the Related Entity Resolution to be approved and, notwithstanding Sections 8.3(a) ( Quorum, Telephonic Meetings ) and 8.6 ( Board Action in General ), the participation in person or by Proxy of each of the Directors nominated by each Shareholder other than the Related Shareholder shall constitute a quorum for any vote with respect to such action.

 

 

9.

THE GENERAL ASSEMBLY OF THE COMPANY

 

9.1

The General Assembly

 

(a)           Meetings of the Shareholders (the “ General Assembly ”) shall be held annually or upon the written request of any Founding Shareholder, Shareholders whose cumulative Ownership Interests equal or exceed fifty percent (50%) of the Ownership Interests of all Shareholders, the Board, or the Independent Auditor. Meetings of the General Assembly shall be chaired by the Board Chairman, who shall be assisted by the Deputy Board Chairman. The Board Secretary shall be in charge of delivering Notice of meetings, recording all minutes, deliberations, and resolutions and distributing copies of the same to all Shareholders.

 

(b)           Each Shareholder shall have voting rights equal to its Ownership Interest as a proportion of the Ownership Interests of all Shareholders.

 

(c)           All meetings of the General Assembly shall be held in The Kingdom or such other place as shall be agreed by the Shareholders in accordance with Section 9.3(a) ( Powers of the General Assembly ).

 

(d)           The quorum for any meeting of the General Assembly shall consist of representatives of Shareholders whose cumulative Ownership Interest equals or exceeds sixty-seven percent (67%) of the Ownership Interests of all Shareholders. No meeting of the General Assembly shall be valid and properly convened (and no business conducted at a meeting of the General Assembly shall be valid) unless representatives of Shareholders whose cumulative Ownership Interest equals or exceeds sixty-seven percent (67%) of the Ownership Interests of all Shareholders attend such meeting in person. Each Shareholder agrees to ensure that at least one of its representatives attends each meeting of the General Assembly.

 

(e)           Except as otherwise specifically provided in this Section 9, all conditions and procedures for voting by written consent and telephonic, video, or electronic meetings of the Board shall apply, mutatis mutandis , to the General Assembly. It is expressly agreed that a representative of a Shareholder may be a Director.

 

9.2

Notice; Conduct of Meetings

 

(a)           In the case of:

 

(i)

an annual meeting of the General Assembly, Notice thereof must be delivered to all Shareholders at least thirty (30) days prior to such annual meeting; or

 

(ii)

any other meeting of the General Assembly, Notice thereof must be delivered to all Shareholders at least ten (10) days prior to the date of such meeting.

 

A Notice required under this Section 9.2(a) shall contain a reasonably detailed agenda setting forth, among other things, those subjects that any of the Shareholders, the Board, or the Independent Auditor may have proposed for discussion or to be voted on at such

 

 

meeting. Matters not included on the agenda for a General Assembly meeting may only be discussed at the meeting if the Shareholders’ representatives at the meeting unanimously agree to do so.

 

(b)           A written retrospective waiver of notice, signed by a Shareholder, shall be deemed equivalent to proper delivery of a Notice required under Section 9.2(a) to that Shareholder. A Shareholder’s representative’s attendance at a General Assembly meeting shall constitute a waiver of the Notice required under Section 9.2(a) to that Shareholder of that meeting, unless such attendance was solely for the purposes of protesting the inadequacy of such Notice.

 

(c)           Minutes of meetings of the General Assembly shall be taken by the Board Secretary or, in his or her absence, the Assistant Board Secretary, recorded in the English language, circulated to the Shareholders, and, if agreed, signed by each attending Shareholder. The agreed record of meetings, including any documents evidencing the adoption of resolutions, shall be filed by the Board Secretary in the minute book of the Company kept at the Head Office.

 

9.3

Powers of the General Assembly

 

(a)           Except as provided in Sections 9.3(b) or 9.3(c), no decision of the General Assembly shall be valid unless adopted at a duly constituted meeting of the General Assembly by written resolution with the affirmative vote of the Shareholders whose aggregate Ownership Interest equals or exceeds sixty-seven percent (67%) of the Ownership Interests of all Shareholders, provided that no such decision shall be valid unless adopted by written resolution with the affirmative vote of representatives of the Founding Shareholders, including:

 

(i)

the approval of the remuneration (including pension and other benefits), if any, of Directors;

 

(ii)

the approval of policies relating to the reimbursement of out-of-pocket and travel-related expenses, if any, payable to Directors;

 

(iii)

the approval of the Financial Statements;

 

(iv)

the appointment or removal of the Independent Auditor, the terms of its engagement, and the making of any material amendment thereto;

 

(v)

the modification of the Accounting Policy or Fiscal Year of the Company;

 

(vi)

the approval of any Subordinated Shareholder Loans;

 

(vii)

the Company granting any loan or advance or giving any credit other than in the ordinary course of business;

 

(viii)

the approval of dividend distributions or payment of interest on, or repayment of, principal on Subordinated Shareholder Loans, in

 

(ix)

establishing or closing branches, offices, and agencies of the Company;

 

(x)

the entry into or termination by the Company of any partnership or joint venture;

 

(xi)

prior to the Project Completion Date, implementing any modification to the Project that, individually or when aggregated with all modifications previously approved in accordance with Section 8.6(r) ( Board Action in General ) or this Section 9.3(a)(xi), would:

 

(A)

result in an increase of more than [***] in the total construction costs;

 

(B)

delay the Project Completion Date by more than [***]; or

 

(C)

materially change the targeted capacity of any plant that manufactures Products;

 

(xii)

subject to Section 0 ( Material Expansions of the Project ), the implementation of any material expansion of the Project by the Company;

 

(xiii)

the acquisition, or disposition, other than in the ordinary course of business, of all or any significant portion of the undertakings, assets, or properties of the Company;

 

(xiv)

the formation, acquisition, dissolution, winding up, or disposal of any subsidiary of the Company or the acquisition or disposal of any equity or other ownership interests in any subsidiary of the Company; and

 

(xv)

the purchase, sale, or redemption of any notes, shares of stock, bonds, debentures, partnership interests, limited liability company interests, or any other instruments that evidence indebtedness or an equity interest of the Company.

 

(b)           No decision of the General Assembly in relation to the following matters shall be valid unless adopted at a duly constituted meeting of the General Assembly by written resolution with the affirmative vote of the representatives of the Shareholders whose aggregate Ownership Interests equals or exceeds seventy-five percent (75%) of the Ownership Interests of all Shareholders, provided that no such decision shall be valid unless adopted by written resolution with the affirmative vote of the Founding Shareholders:

 

(i)

any amendment to the Articles of Association, the Foreign Investment License, or the Certificate of Commercial Registration;

 

(ii)

increases or reductions of the Authorized Capital;

 

(iii)

entering into or conducting a line of business significantly different from the Business or ceasing the Business; and

 

(iv)

the withdrawal of the Company from the implementation of the Project at any time.

 

(c)           No decision of the General Assembly in relation to the following matters shall be valid unless adopted at a duly constituted meeting of the General Assembly by written resolution with the affirmative vote of the representatives of all Shareholders:

 

(i)

the merger, consolidation, or amalgamation, other than in the ordinary course of business, of all or any significant portion of the undertakings, assets, or properties of the Company;

 

(ii)

changing the jurisdiction of formation of the Company;

 

(iii)

increasing the financial liability of the Shareholders; and

 

(iv)

any act or thing done to wind-up, dissolve, or liquidate the Company on a voluntary basis.

 

10.

DEADLOCK

 

10.1

Deadlock

 

If:

 

(a)

either the Board or the General Assembly is unable or fails to convene or to reach an agreement on any matter (other than any resolution in respect of a Related Entity Transaction for which the provisions of Section 8.7 ( Voting With Respect to Related Entity Transactions ) shall apply);

 

(b)

such inability or failure persists for a period of at least thirty (30) days; and

 

(c)

any Shareholder reasonably and in good faith believes that such inability or failure to convene or to reach an agreement on such matter has caused or will cause a Substantial Project Impairment,

 

then the Shareholders shall enter into good faith negotiations to resolve such matter. If, after thirty (30) days, the Shareholders have been unable to reach an agreement on such matter, then a Shareholder may submit such matter to the chief executive officers of each Parent Company, or their respective designees, for resolution. Such request shall be in writing and shall be

 

 

accompanied by the requesting Shareholder’s statement of the matter and its position with respect thereto, including the reason for its belief that the inability to convene or failure to make a determination on the matter has caused or will cause a Substantial Project Impairment. Each other Shareholder shall have the right to submit to the chief executive officers of each Parent Company, or their respective designees, its own written statement of the matter and its position with respect thereto and shall do the same within fifteen (15) days of the date of such request.

 

10.2

Effect of Deadlock

 

(a)           If, thirty (30) days after the receipt of all submissions made in accordance with Section 10.1 ( Deadlock ), the chief executive officers of each Parent Company, or their respective designees, are unable to reach an agreement on the matters which are the subject of the submissions, then a Founding Shareholder shall have the right to submit the unresolved matters to a committee designated for the purpose of considering, advising upon, and making recommendations in relation to the unresolved matters (the “ Deadlock Committee ”). The Deadlock Committee shall consist of three (3) members: one (1) designated representative appointed by each Founding Shareholder and an Expert appointed in accordance with the Dispute Resolution Procedures.

 

(b)           The Expert shall have direct and extensive experience in the chemical and petrochemical production and product marketing business, including, as appropriate:

 

(i)

the design, construction, commissioning, and testing of a world-scale integrated chemicals complex;

 

(ii)

the operation and maintenance of a world-scale integrated chemicals complex; and / or

 

(iii)

the marketing of chemical and petrochemical products having similar volumes, characteristics, and destinations as the Products.

 

(c)           Each representative of the Founding Shareholders on the Deadlock Committee shall submit to the Expert and exchange with the representative of the other Founding Shareholder, in accordance with a procedure to be established by the Expert, its position as to the course of action that should be followed by the Company to resolve the matters referred to the Expert. The Expert shall assess the submitted positions and make a recommendation to the representatives of each Founding Shareholder for further discussion within the Deadlock Committee, with a view toward the Deadlock Committee recommending a course of action to the Shareholders. The Expert’s recommendations to the Founding Shareholders’ representatives and the Deadlock Committee’s recommendations, if any, to the Shareholders, shall be purely advisory in nature and shall not be binding on the Company or any Shareholder.

 

(d)           Pending resolution of any unresolved matter referred to in Section 10.1 ( Deadlock ), no action shall be taken by the Company with respect to such matter and, subject to Section 13.4 ( Default Plans ), the status quo shall be maintained in respect of all aspects of the Company and the Project affected thereby.

 

 

11.

BOARD COMMITTEES

 

11.1

Creation of Board Committees

 

(a)           The Board may, pursuant to Section 8.6(g) ( Board Action in General ), create one or more Board Committees to consider any matters that the Board shall, from time to time, assign to each such Board Committee. Unless expressly provided otherwise, the Board may appoint individuals who are not Directors to serve on a Board Committee. The chairperson of each Board Committee shall be appointed by the Founding Shareholder which did not nominate the Senior Officer to whose role and functions such Board Committee most closely relates. The individuals appointed to each Board Committee shall serve at the direction of the Board and perform only such tasks and duties as the Board shall delegate to such Board Committee from time to time. Except as provided in the scope of authority delegated by the Board to the Project Execution Committee, each Board Committee shall make recommendations to the Board on any matter delegated to such Board Committee pursuant to an affirmative vote of the majority of the members of such Board Committee.

 

(b)           The Board shall, promptly after the Formation Date, establish and create the Project Execution Committee, Audit Committee, the Finance Committee, the Compensation Committee, the Health, Safety, Environmental, and Security Committee, and the Ethics and Compliance Committee.

 

11.2

The Project Execution Committee

 

(a)           The Shareholders shall cause the Board to establish and maintain a project execution committee (the “ Project Execution Committee ”) to perform such duties and have such responsibilities as are delegated to it from time to time by the Board to oversee the activities of the Company with respect to the design, engineering, and construction of the Complex during the period commencing on the Formation Date and ending on the Project Completion Date, provided that the Board shall determine any such matter constituting a Related Entity Transaction in accordance with Section 8.7 ( Voting With Respect to Related Entity Transactions ) or a material amendment, variation, or waiver in relation to any of the Project Agreements set out in Annex E ( Key Project Agreements ).

 

(b)           The Project Execution Committee shall consist of four (4) members, with each Founding Shareholder having the right to appoint two (2) representatives as members of the Project Execution Committee, each of whom shall be selected from among the:

 

(i)

Directors;

 

(ii)

employees of, and Secondees to, the Company; and

 

(iii)

employees of the Founding Shareholders or their respective Affiliates.

 

(c)           The quorum for any meeting of the Project Execution Committee shall be met when all members are present in person or by proxy appointed and notified in accordance with 11.8(a) ( Meetings of Board Committees ). No meeting of the Project Execution Committee

 

 

shall be valid and properly convened (and no business conducted at a meeting of the Project Execution Committee shall be valid) unless all members are present in person or by proxy appointed and notified in accordance with 11.8(a) ( Meetings of Board Committees ).

 

(d)           All decisions of the Project Execution Committee shall be taken by the unanimous affirmative vote of all of the members thereof, provided that:

 

(i)

any representative of a Founding Shareholder appointed to the Project Execution Committee may, within a period of five (5) days of a disagreement that has not been resolved by mutual agreement amongst the members of the Project Execution Committee, refer the matter to the Board for resolution pursuant to Section 8.6(d)(i) ( Board Action in General ); and

 

(ii)

such referral is made within ten (10) days of the expiration of the five (5) day period.

 

(e)           The Project Execution Committee shall be dissolved, and any remaining responsibilities of the Project Execution Committee shall be assumed by the Management Team, upon the Project Completion Date.

 

11.3

The Audit Committee

 

(a)           The Shareholders shall cause the Board to establish and maintain an audit committee (the “ Audit Committee ”) to perform such duties and have such responsibilities as are delegated to it from time to time by the Board, including reviewing and ensuring the adequacy and effectiveness of the Accounting Policy and system of internal controls, approving and directing internal audit plans, supervising the preparation of the Financial Statements, recommending external auditors for appointment as the Independent Auditor, and ensuring that the required access to the Company’s books, records, and personnel is provided to the Independent Auditor as well as any auditors appointed by individual Shareholders, whether jointly or separately, to conduct audits on their behalf.

 

(b)           Prior to the admission of the PublicCo Shareholder as a Shareholder, the Audit Committee shall consist of four (4) Directors, with each Founding Shareholder having the right to appoint two (2) of its nominated Directors as members of the Audit Committee. Following the admission of the PublicCo Shareholder as a Shareholder, the Audit Committee shall consist of three (3) Directors, with each Founding Shareholder and the PublicCo Shareholder having the right to appoint one (1) of its nominated Directors as a member of the Audit Committee. No appointees to the Audit Committee may be members of the Management Team.

 

11.4

The Finance Committee

 

(a)           The Shareholders shall cause the Board to establish and maintain a finance committee (the “ Finance Committee ”) to perform such duties and have such responsibilities as are delegated to it from time to time by the Board, including coordinating all elements of the Project Debt and proposing the timing and size of all dividend distributions in accordance with

 

(b)           The Finance Committee shall consist of four (4) members, with each Founding Shareholder having the right to appoint two (2) of its nominated Directors as members of the Finance Committee.

 

11.5

The Compensation Committee

 

(a)           The Shareholders shall cause the Board to establish and maintain a compensation committee (the “ Compensation Committee ”) to perform such duties and have such responsibilities as are delegated to it from time to time by the Board, including developing the general employment, compensation, and benefit policies applicable to the employees of the Company. The employment and compensation policy for the Company shall be fully developed and applied in a manner that aims to be consistent with Applicable Law and shall be independent from, and without reference to, those of the Founding Shareholders.

 

(b)           The Compensation Committee shall consist of four (4) Directors, with each Founding Shareholder having the right to appoint two (2) of its nominated Directors as members of the Compensation Committee.

 

11.6

The Health, Safety, Environmental, and Security Committee

 

(a)           The Shareholders agree that the Board shall establish and maintain a health, safety, environmental, and security committee (the “ Health, Safety, Environmental, and Security Committee ”) to monitor compliance with the HSES Policies and otherwise to perform such duties and have such responsibilities as are delegated to it from time to time by the Board.

 

(b)           The Health, Safety, Environmental, and Security Committee shall consist of four (4) Directors, with each Founding Shareholder having the right to appoint two (2) of its nominated Directors as members of the Health, Safety, Environmental, and Security Committee.

 

11.7

The Ethics and Compliance Committee

 

(a)           The Shareholders agree that the Board shall establish and maintain an ethics and compliance committee (the “ Ethics and Compliance Committee ”) to perform such duties and have such responsibilities as are delegated to it from time to time by the Board.

 

(b)           Prior to the admission of the PublicCo Shareholder as a Shareholder, the Ethics and Compliance Committee shall consist of four (4) members, with each Founding Shareholder having the right to appoint two (2) of its nominated Directors as members of the Ethics and Compliance Committee. Following the admission of the PublicCo Shareholder as a Shareholder, the Ethics and Compliance Committee shall consist of three (3) members, with each Founding Shareholder and the PublicCo Shareholder having the right to appoint one (1) of its nominated Directors as a member of the Ethics and Compliance Committee.

 

 

11.8

Meetings of Board Committees

 

(a)           A member of a Board Committee may be represented at any meeting of such Board Committee by any other individual (except in the case of:

 

(i)

a member of a Board Committee (other than the Project Execution Committee) serving in such member’s capacity as a Director, in which case, such Director may only be represented by another Director; or

 

(ii)

a member of the Project Execution Committee, in which case, such member may only be represented by another:

 

(A)

Director;

 

(B)

the employee of, or Secondees to, the Company; or

 

(C)

employee of the Founding Shareholders or their respective Affiliates),

 

provided that the latter has been duly appointed as a proxy by the former in writing and Notice of such appointment is delivered to the secretary of the relevant Board Committee prior to such meeting

 

(b)           Subject to the provisions of Section 11.2 ( The Project Execution Committee ) with respect to the Project Execution Committee:

 

(i)

the quorum for any meeting of a Board Committee shall be met when at least one (1) individual designated by each of the Founding Shareholders is present in person or by proxy appointed and notified in accordance with (a) ( Meetings of Board Committees ); and

 

(ii)

no meeting of a Board Committee shall be valid and properly convened (and no business conducted at a meeting of a Board Committee shall be valid) unless at least one (1) individual designated by each Founding Shareholder is present in person or by proxy appointed and notified in accordance with (a) ( Meetings of Board Committees ).

 

(c)           Each Board Committee shall meet as regularly as it shall determine, but not less than once in each Fiscal Year and whenever so requested by Notice from any of its members not less than fourteen (14) days in advance of the meeting.

 

(d)           Meetings of Board Committees may be conducted by telephone or video conference, if so agreed among the members thereof, provided that the members of each Board Committee shall meet in person at least once in each Fiscal Year. The members of each such

 

 

Board Committee may record the proceedings of meetings of such Board Committee in such manner as they deem appropriate.

 

12.

MANAGEMENT, EMPLOYEES, AND MARKETING COUNCIL

 

12.1

The Management Team and Senior Officers

 

(a)           The chief executive officer of the Company (the “ CEO ”) and the senior officers who functionally report directly to the CEO (each and the CEO, a “ Senior Officer ” and together, the “ Management Team ”) shall conduct the Business and operations of the Company in accordance with the Approved Operating Plan and the Approved Strategic Business Plan. The initial Management Team shall be comprised of the following: the CEO, a chief financial officer who is vice president of finance (the “ CFO ”), a vice president of manufacturing and engineering (the “ VP – Manufacturing and Engineering ”), a vice president of business and services (the “ VP – Business and Services ”), a vice president of industrial relations (the “ VP – Industrial Relations ”), a general counsel (the “ General Counsel ”), and such other Senior Officers as the Board may determine. The terms of office for all Senior Officers shall be five (5) years, unless otherwise decided by the Board in accordance with Section 8.6(j) ( Board Action in General ) or in the event that a Senior Officer resigns from such office. Removal of Senior Officers prior to the expiration of their term of office shall require a Board resolution in accordance with Section 8.6(j) ( Board Action in General ).

 

(b)           Unless a suitably qualified employee directly hired by the Company can be appointed by the Board, the positions of CEO, CFO, VP – Manufacturing and Engineering, VP – Business and Services, VP – Industrial Relations, and General Counsel, along with any other Senior Officer positions, shall be filled by nominees of the Founding Shareholders as provided below. All appointments of Senior Officers shall be made on the basis of merit and performance and shall be subject to the approval of each Founding Shareholder (acting reasonably).

 

(c)           The Saudi Aramco Founding Shareholder shall have the right to nominate, and the Dow Founding Shareholder shall (subject to Section 12.1(b)) cause the Directors appointed by it to the Board to vote in favor of a resolution to appoint, the first CEO. The CEO shall be the primary executive officer of the Company, shall represent the Company before governmental authorities, judicial authorities, public bodies, and other Persons, and, subject to the terms and conditions hereof, shall be responsible for the general and executive management and daily administration of the Business and operations of the Company. The duties and powers of the CEO shall be determined, and may be amended from time to time, by the Board. The CEO shall also implement decisions of the Board and shall report directly to the Board.

 

(d)           The Dow Founding Shareholder shall have the right to nominate, and the Saudi Aramco Founding Shareholder shall (subject to Section 12.1(b)) cause the Directors appointed by it to the Board to vote in favor of a resolution to appoint, the first CFO. Once appointed and subject to the terms and conditions hereof, the CFO shall oversee and be responsible for financial matters pertaining to the Company. The CFO shall oversee the preparation of the Financial Statements and the Company’s related obligations to the Shareholders and discharge such other duties as shall be determined by the Board and as may

 

 

from time to time be delegated to him by the CEO (subject to Section 8.6 ( Board Action in General )). The CFO shall present reports on the financial condition of the Company from time to time to the CEO and, upon request of any Director, at a meeting of the Board.

 

(e)           The Dow Founding Shareholder shall have the right to nominate, and the Saudi Aramco Founding Shareholder shall (subject to Section 12.1(b)) cause the Directors appointed by it to the Board to vote in favor of a resolution to appoint, the first VP – Manufacturing and Engineering. Once appointed and subject to the terms and conditions hereof, the VP – Manufacturing and Engineering shall oversee and be responsible for operational matters of the Company. The VP – Manufacturing and Engineering shall further discharge any other duties as shall be determined by the Board and as may from time to time be delegated to him by the CEO (subject to Section 8.6 ( Board Action in General )). The VP – Manufacturing and Engineering shall present reports on the conduct of the Company’s operations from time to time to the CEO and, upon request of any Director, at a meeting of the Board.

 

(f)           The Saudi Aramco Founding Shareholder shall have the right to nominate, and the Dow Founding Shareholder shall (subject to Section 12.1(b)) cause the Directors appointed by it to the Board to vote in favor of a resolution to appoint, the first VP – Business and Services. Once appointed and subject to the terms and conditions hereof, the VP – Business and Services shall oversee and be responsible for marketing, sales, and supply chain matters of the Company. The VP – Business and Services shall further discharge any other duties as shall be determined by the Board and as may from time to time be delegated to him by the CEO (subject to Section 8.6 ( Board Action in General )). The VP – Business and Services shall present reports on the conduct of the Company’s operations from time to time to the CEO and, upon request of any Director, at a meeting of the Board.

 

(g)           The Saudi Aramco Founding Shareholder shall have the right to nominate, and the Dow Founding Shareholder shall (subject to Section 12.1(b)) cause the Directors appointed by it to the Board to vote in favor of a resolution to appoint, the first VP – Industrial Relations. Once appointed and subject to the terms and conditions hereof, the VP – Industrial Relations shall oversee and be responsible for all employment, recruiting, compensation, and human resources matters pertaining to the Company. The VP – Industrial Relations shall further discharge any other duties as shall be determined by the Board and as may from time to time be delegated to him by the CEO and the Compensation Committee (in each case subject to Section 8.6 ( Board Action in General )). The VP – Industrial Relations shall present reports on the conduct of the Company’s human resources-related operations from time to time to the CEO and, upon request of any Director, at a meeting of the Board.

 

(h)           Following the expiration of the initial term of office, or removal, of each Senior Officer and until a suitably qualified employee directly hired by the Company can be appointed by the Board, the right to nominate the Senior Officers described in Sections 12.1(c)-12.1(g) shall alternate between the Founding Shareholders. Pursuant to the foregoing, the Founding Shareholder not appointing a Senior Officer shall (subject to Section 12.1(b)) cause the Directors appointed by it to the Board to vote in favor of a resolution to appoint any Senior Officer nominated by the other Founding Shareholder.

 

(i)           The Shareholders shall cause the Board to appoint a general auditor of the

 

 

Company (the “ General Auditor ”) and the General Counsel. Following the expiration of the initial term of office of the General Auditor or the General Counsel, the Board may renew the term of such officer or appoint a new officer in accordance with Section 8.6(j) ( Board Action in General ). Once appointed and subject to the terms and conditions hereof:

 

(i)

the General Auditor shall oversee and be responsible for the coordination of the external audit, all matters relating to the internal audit, and compliance with the internal policies and procedures of the Company. The General Auditor shall further discharge any other duties as shall be determined by the Board or as may from time to time be delegated to him by the CEO (subject to Section 8.6 ( Board Action in General )). The General Auditor shall functionally report directly to the Audit Committee and administratively report directly to the CEO. The General Auditor shall present reports on the conduct of the Company’s accounting and policy compliance-related operations from time to time to the CEO and, upon request of any Director, at a meeting of the Board; and

 

(ii)

the General Counsel shall oversee and be responsible for legal matters of the Company. The General Counsel shall further discharge any other duties as shall be determined by the Board or as may from time to time be delegated to him by the CEO (subject to Section 8.6 ( Board Action in General )). The General Counsel shall present reports on all legal matters affecting the Company from time to time to the CEO and, upon request of any Director, at a meeting of the Board.

 

(j)           The Management Team shall implement management policies and programs established and authorized by the Board including those policies of the Company as set forth in Section 15 ( Policies of the Company ). The Shareholders agree that the Board shall cause the Management Team to be committed to the goals, objectives, and interests of the Company and to actively support the policies and interests of the Company.

 

12.2

Employees of and Secondees to the Company

 

(a)           The Shareholders shall cause the Company to employ such employees as are required for the conduct of the Company’s activities, as determined by the Management Team (subject to Section 8.6 ( Board Action in General )), and in conformance with this Shareholders’ Agreement, Applicable Law, and any manpower plans set forth in the Approved Operating Plan and the Approved Strategic Business Plan. The terms (including compensation and benefits to be paid by the Company) and conditions of employment shall be developed by the VP – Industrial Relations in accordance with the general policies established by the Compensation Committee pursuant to Section 11.5 ( The Compensation Committee ). The Founding Shareholders shall provide reasonable assistance in the recruitment and training of Company personnel and the establishment by the Company of its own recruitment and training systems and programs. In implementing the immediately preceding sentence, the Founding

 

 

Shareholders acknowledge and agree that it is their intention to cause the Company to replicate the experiences of Saudi Aramco with its high Saudization levels in the technical and management professions and, in this context, the Shareholders agree to do everything that is reasonably within their power to ensure that the Company adheres to the Local Content Policy.

 

(b)           In order to make available certain specific expertise that will provide a technological or commercial benefit to the Company as it commences operations, the Founding Shareholders (or their Affiliates) may second employees (“ Secondees ”) to the Company. The Shareholders agree that the Company shall only accept such Secondees if, in the opinion of the Management Team, they are qualified and have adequate experience, training, and skills for the proposed positions and are needed by the Company. The Shareholders agree that similarly qualified and experienced Secondees should receive the same remuneration from the Company pursuant to the terms and conditions of any secondment arrangements as between the Founding Shareholders and the Company as set forth in the Secondment Agreement. The Founding Shareholders shall ensure that, to the maximum extent possible following the Project Completion Date, the Company is not reliant on Secondees to perform essential activities.

 

12.3

The Marketing Council

 

(a)           The Marketing Council shall consist of six (6) members, comprised of the CEO, the CFO, the VP – Manufacturing and Engineering, and the VP – Business and Services and two (2) suitably experienced representatives from the Founding Shareholders with each Founding Shareholder appointing one (1) such representative (the “ Marketing Council ”). The Marketing Council shall be formed at least two (2) years prior to the estimated Project Operations Date.

 

(b)           The Marketing Council shall:

 

(i)

oversee the establishment and implementation of an effective marketing organization within the Company and with the Marketers;

 

(ii)

no later than ninety (90) days before the start of each Contract Year, develop the Company’s Draft Marketing Plan for such Contract Year;