INDIA SHAREHOLDERS AGREEMENT

SHAREHOLDERS AGREEMENT

THIS AGREEMENT is made on the 12th day of March 2004 at Hyderabad
BETWEEN:
1. ANDHRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED, a company incorporated in under the Companies Act,1956, having its Registered Office at 6th Floor,Parisrama Bhavan, Fateh Maidan Road, Basheerbaug, Hyderabad 500 004 (hereinafter called “APIIC” which expression shall include its successors and permitted assigns), (the “First Shareholder”)
2. VISAKHAPATNAM MUNICIPAL CORPORATION, a local body established under Visakhapatnam Municipal Corporation Act, 1979 (the “Second Shareholder”) represented by the Commissioner, having its office at Tenneti Bhavan, Asilmetta Junction, Visakhapatnam 530 002 (hereinafter called “VMC”)
3. L&T HOLDINGS LIMITED, a company incorporated under the Companies Act, 1956 having its Registered Office at Mount Poonamalle Road, Manapakkam, Chennai 600 089 ( hereinafter called “LTHL”) which expression shall include its successors and permitted assigns (the “Third Shareholder”)
4. PSL LIMITED, a company incorporated under the Companies Act, 1956 having its Registered Office at 386, Veer Savarkar Marg, Prabhadevi, Mumbai 400 025 (hereinafter called “PSL”) which expression shall include ints successors and permitted assigns (the “Fourth Shareholder”)
 5. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY COMPANY LIMITED, a company incorporated under the Companies Act, 1956, having its Registered Office at c/o, Andhra Pradesh Industrial Infrastructure Corporation Limited, 6th Floor, Parisrama Bhawan, Fateh Maidan Road, Basheerbaug, Hyderabad 500 004, hereinafter referred to as the “Company”.

INTRODUCTION:
Andhra Pradesh Industrial Infrastructure Corporation Limited and India Project Development Fund have sponsored a project for development, financing, design, construction, operation and maintenance of Visakhapatnam Water Supply Project and for the said purpose promoted the “company” to implement the above said project.
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this agreement:
“Accounting Period” means the period commencing on 1st April in any year and ending on 31st March in the next following year or such other accounting period as may be adopted by the Company in accordance with clause 7 (Reserved matters);
“Affiliate” in relation to a body corporate means any other body corporate over which that body corporate has Control;
“Agreed Form” in relation to any document means that document in a form agreed by the Shareholders and initialled for the purposes of identification by or on behalf of the Shareholders;
“Ancillary Agreements” means the Concession Agreement, Loan Agreement, Bulk Water Supply Agreements and Site Lease Agreement;
“Articles of Association” means the articles of association of the Company in the form set out in schedule 2 of this Agreement, or, if the articles of association of the Company are amended or replaced in accordance with clause 7 (Reserved matters), the articles of association of the Company as so amended or replaced;
“Bulk Water Supply Agreement” means agreements entered into between each of Rashtriya Ispat Nigam Limited, Vizag Municipal Corporation, National Thermal Power Corporation Limited and the Company.
“Business” means the business activities described in clause 4 (Business of the Company) or, if the business of the Company is altered in accordance with clause 7 (Reserved matters), the business of the Company as so altered;
“Business Day” means a day (other than a Saturday or Sunday) on which banks are open for business in the State of Andhra Pradesh;
“Business Plan” means the business plan for the Company for the initial period in the Agreed Form and any subsequent or amended business plan adopted by the Company in accordance with clause 7 (Reserved matters);
“Chairman” means the chairman of the board of directors of the Company;
“Compulsory Offer” has the meaning set out in clause 17.3 (Compulsory Offer);
“Compulsory Offer Period” has the meaning set out in clause 17.3 (Compulsory Offer);
“Compulsory Transfer Notice” has the meaning set out in clause 17.3 (Compulsory Transfer Notice);
“Conditions” means the conditions set out in clause 2.1 (Conditions);
“Control” in relation to a body corporate means the ability of a person to ensure that the activities and business of that body corporate are conducted in accordance with the wishes of that person and a person shall be deemed to have Control of a body corporate if that person possesses or is entitled to acquire the majority of the issued share capital or majority of the Directors on the Board or the voting rights in that body corporate or the right to receive the majority of the income of that body corporate on any distribution by it of all of its income or the majority of its assets on a winding up;
“Concession Agreement” means the agreement between the Government of the State of Andhra Pradesh and the “Company” pursuant to which the Company is granted a concession to construct, own operate and transfer the Visakhapatnam Water Supply Project over the concession period.
“Directors” means the directors of the Company;
“Disposal” in relation to a Share includes, without limitation:
(i) sale, assignment or transfer;
(ii) creating or permitting to subsist any pledge, charge, mortgage, lien or other security interest or encumbrance;
(iii) creating any trust or conferring any interest;
(iv) any agreement, arrangement or understanding in respect of votes or the right to receive dividends;
(v) the renunciation or assignment of any right to subscribe or receive a Share or any legal or beneficial interest in a Share;
(vi) any agreement to do any of the above, except an agreement to transfer Shares which is conditional on compliance with the terms of this agreement; and
(vii) the transmission of a Share by operation of law;

“Event of Default” 
has the meaning set out in clause 17.1 (Events of Default);
“Existing Shareholders” means India Project Development Fund (“IPDF”) and APIIC;
“Godavari Pipeline” Means the 56 km long pumped conveyance system from the Godavari River to the YLBC discharging at km 2.0 and all associated infrastructure and facilities including but notlimited to all intake equipment and structures, water pumps, pipelines, offtake equipment, meters, tanks, building, land and any other assets, facility, structure, equipment, machinery, plant oritems on the site and related to the system and all rights and interests therein.
“Group” in relation to any body corporate means any wholly owned subsidiary of that body corporate at the relevant time and any other body corporate of which that body corporate is a wholly owned subsidiary, and a body corporate is a wholly owned subsidiary of another body corporate if no person has any interest (including, without limitation, any security interest) in its shares except that other and that other’s wholly owned subsidiaries or persons acting on behalf of that other or its wholly owned subsidiaries;
“Group Transferee” means a body corporate to whom Shares have been transferred under clause 15.1 (Transfers within a Group);
“Long Stop Date” means one year from the date of signing of this Agreement or such later date as may be agreed in writing between the Shareholders;
“Original Holder” in relation to any Group Transferee means the Shareholder who made the transfer of the relevant Shares to the Group Transferee or, in the case of a series of transfers between Group Transferees, the Shareholder who made the initial transfer of the relevant Shares to a Group Transferee, and the relevant Shares means the Shares held by the Group Transferee or any Shares from which those Shares are derived or by virtue of which those Shares were acquired;
“Prescribed Value” in relation to any Shares means the value of those Shares determined in accordance with clause 19 (Prescribed Value);
“Project” means the development, financing, design, construction, operation and maintenance and transfer of the Visakhapatnam Water Supply Project and all activities incidental thereto.
“Purchaser” has the meaning set out in clause 17.3 (Compulsory Offer);
“Rehabilitation Works” means the upgrade and rehabilitation of the YLBC to reduce water losses in order to improve transmission capacity and establish long term sustainability for increased transmission capacity and all related works, the pumping station being constructed on the YLBC to pump water to the storage reservoir at IDA Parwada for the supply of raw water to Pharmacity, IDA Parwada and SEZ.
“Representative Number” has the meaning set out in clause 9 (Representative Number);
“Shareholders” means APIIC, VMC, LTHL, PSL and any other person to whom the benefit of this agreement is extended pursuant to clause 18 (Effect of Deed of Adherence);
“Shares” means ordinary shares in the capital of the Company;
“Specified Shares” has the meaning set out in clause 17.1 (Events of Default);
“Transfer Notice” has the meaning set out in clause 17.3 (Transfer Notice);
“Working Hours” means 9.30 a.m. to 5.30 p.m. on a Business Day.

1.2 Interpretation
1.2.1 References to Articles, Clauses, Recitals, Appendices and Schedules are to articles, clauses, recitals, appendices and schedules to this Shareholders Agreement.
1.2.2 Any reference to a statutory provision shall include such provision as is from time to time modified or re-enacted or consolidated so far as such modification or re-enactment or consolidation applies or is capable of applying to any transactions entered into hereunder.
1.2.3 Words denoting the singular only shall include the plural and vice versa.
1.2.4 Words denoting the masculine gender only shall include the feminine gender and vice versa.
1.2.5 The Recitals to this Shareholders Agreement shall be and form an integral part of this Shareholders Agreement.
1.2.6 Headings in this Shareholders Agreement are for convenience of reference only and shall not be used to construe or interpret this Shareholders Agreement.
APIIC, VMC, LTHL and PSL recognise and acknowledge the execution of the “Concession Agreement” and agrees that this Shareholders Agreement shall be read in conjunction with the “Concession Agreement”.
2. CONDITIONALITY
2.1 Conditions
This agreement is conditional upon:-
(A) redemption of the project development investment and returns thereon by LTHL and PSL, of the Existing Shareholders amounting to Rs. 176.01 million;
(B) the Board of Directors of the respective Shareholder approves this Shareholder’s Agreement;
(C) all such clearances which are material in the context of the arrangements contemplated by this agreement having been received by any Shareholder as any Shareholder, in its sole discretion, considers it necessary or appropriate to obtain from any court or governmental, statutory or regulatory body having jurisdiction to act in respect of the transactions contemplated in this agreement.
2.2 Obligations concerning satisfaction of Conditions
Each party shall use all reasonable endeavours, and shall co-operate with the other parties as required, to fulfil or procure the fulfilment of the Conditions as soon as possible and in any event on or before the Long Stop Date.
2.3 Non-satisfaction of Conditions
Each party undertakes to disclose in writing to the others anything which will or may prevent any of the Conditions from being satisfied on or before the Long Stop Date, immediately it comes to the notice of that party.
3. ESTABLISHMENT OF THE COMPANY
On the fifth Business Day after the date upon which the last of the Conditions is satisfied or waived (unless the same has already been done):
(A) each Shareholder shall deliver to each of the other parties an opinion in the Agreed Form addressed to them by a person qualified in the laws of the jurisdiction in which that Shareholder is incorporated;
(B) the Existing Shareholders shall pay up any unpaid amounts on the subscriber shares in the Company;
(C) each of the Shareholders shall subscribe  the number of Shares set opposite its name, partly by paying in cash and partly for consideration other than cash, in the table below :-
Shareholder No. of Shares Subscription price in Rs.
APIIC 155,00,000 15,50,00,000
VMC 75,00,000 7,50,00,000
LTHL 135,00,000 13,50,00,000
PSL 105,00,000 10,50,00,000

(D)  the Business Plan shall be adopted; and
(E) each of the Ancillary Agreements shall be entered into by the respective parties thereto.
4. BUSINESS OF THE COMPANY
Except to the extent that a change in the business of the Company is approved in accordance with clause 7 (Reserved matters), the business of the Company shall be to establish and conduct the Project.
5. SHAREHOLDING
The authorised share capital of the “Company” on the date of this shareholders agreement is Rs. 47,00,10,000.00 (Rupees forty seven crores ten thousand only) divided into 4,70,01,000 (four crores seventy lacs one thousand) Shares, with a par value of Rs. 10/- (Rupees Ten) each. Subject to the provisions as set out in this shareholders agreement and the memorandum and articles of association of the “Company”, the authorised share capital will be increased to cover additional equity in the project to complete and operate the project as stipulated under the “Concession agreement”.
The agreed shareholding pattern of the “Company” will be as per the details given below
APIIC     - 33.0% (for consideration other than cash)
VMC     - 16.0% (Cash)
LTHL     - 28.7% (Cash)
PSL     - 22.3% (Cash)
TOTAL    - 100%
APIIC shall bring in the agreed Equity in the form of land and the Equity Shares will be allotted to APIIC on the lease premium of the land as agreed in the Concession Agreement.
6. EQUITY SUBSCRIPTION OBLIGATIONS
Each of the Parties undertakes to comply with its obligations to bring in the agreed equity as envisaged in the “Financial Model” of the project in proportion to their percentage of shareholdings except APIIC, which will bring in the land towards their Equity Contributions instead of cash and the “Company” shall allott equity to APIIC for consideration other than cash.
The authorised officer of the “Company” shall call upon the shareholders to make the Equity Contributions specified in a notice, shall provide not less than 30 (thirty) business days for the remittance of the Equity Contributions and shall also specify the escrow account into which the remittance shall be paid. The Parties shall appoint upon receipt of the aforesaid notice remit their respective Equity Contributions to the credit of the escrow account.
For any delay in remittance pursuant to the notice beyond the stipulated date as specified in the notice, the “Company” shall be entitled to collect interest on the outstanding amount at the prevailing rate from the Party delaying its remittance.
7. RESERVED MATTERS
7.1 Requirement for approval
None of the actions listed below shall be taken by the Company, without approval by each of the Shareholders, subject to Law of Land
(A) any amendment to the memorandum or articles of association of the Company;
(B) any change to the rights attaching to any class of shares in the Company which are not set out in the memorandum or articles of association of the Company;
(C) the creation, consolidation, sub-division, conversion or cancellation of any share capital of the Company;
(D) any reduction of the share capital of the Company;
(E) the purchase or redemption of any share capital of the Company;
(F) any application for the listing of any shares or other securities of the Company on any stock exchange or for permission for dealings in any shares or other securities of the Company in any securities market;
(G) any resolution to wind up the Company;
(H) the filing of a petition for winding up by the Company or the making of any arrangement with creditors generally or any application for an administration order or for the appointment of a receiver or administrator;
(I) the repayment of capital or assets to members;
(J) any material change in the nature or scope of the Business, including the introduction or discontinuance of any field of activity and the new business Plans or expansion of the business of the Company, or the establishment of any business, outside [Andhra Pradesh];
(K) other than pursuant to [the O&M Contract, the Construction Contract, the Concession Agreement, [the EPC]] the entering into, variation or termination of any agreement or arrangement outside the ordinary scope of the Business or which is intended to bind the Company for longer than 12 months;
(L) the commencement or settlement in any jurisdiction of legal or arbitration proceedings other than routine debt collection which involve or might involve an amount (including related costs) in excess of Rs. 5,00,000.00 or which proceedings are between the Company and any Shareholder or an Affiliate of any Shareholder;
(M) making any investment, or the liquidation of any investment made by the Company, in any other person or business;
(N) other than pursuant to the O&M Contract, the Construction Contract, the Concession Agreement, the acquisition or disposal of any asset related to the Project;
(O) other than pursuant to the O&M Contract, the Construction Contract, the Concession Agreement, the disposal of, or the grant of any option or right of pre-emption in respect of, any asset other than on normal commercial terms in the ordinary course of the Business;
(P) the declaration or payment of any dividend or the declaration or making of any other distribution or the passing of any resolution to retain or allocate profits;
(Q) any change in the basis of accounting or accounting principles or policies employed by the Company other than as required by law or accounting policies generally accepted in India from time to time;
(R) any change of the auditors or the Accounting Period of the Company;
(S) other than in respect of the Financing, the raising of any indebtedness other than by way of trade credit on normal commercial terms and in the ordinary course of the Business, or the variation or termination of any agreement for the raising of any such indebtedness (including without limitation early repayment);
(T) other than in respect of the Financing, the creation or redemption of any mortgage, charge, debenture, pledge, lien or other encumbrance or security interest over any of the assets, property, undertaking or uncalled capital of the Company;
(U) other than pursuant to [the O&M Contract, the Construction Contract, the Concession Agreement, [the EPC]] the entering into or variation of any transaction by the Company with (i) a Shareholder or (ii) any Affiliate of a Shareholder or (iii) any Director or officer of any Shareholder or any Affiliate of any Shareholder;
(V) the appointment, terms and conditions of employment, transfer and discharge of any employee appointed to the position of Managing Director/ Whole-time Director / Manager of the Company or earning in excess of remuneration as mentioned in Part II, Schedule XIII of Companies Act, 1956 and whose employment is not terminable by the Company without compensation on three months’ notice or less; and
(W) Declaration of Dividend.
7.2 Currency
In clause 7.1 (Requirement for approval), references to “Rs” are to Indian Rupees and reference to any amount in such currency shall be deemed to include reference to an equivalent amount in any other currency.
7.3 Method of approval
A Shareholder may give its approval under clause 7.1 (Requirement for approval):
(A) in writing; or
(B) by a vote in favour of a separate and specific members’ resolution on that matter; or
7.4 Effect of approval of Business Plan
The approval of any Business Plan shall not imply or be deemed to be an approval of any matter within that Business Plan which would require approval in accordance with clause 7.1 (Requirement for approval).
8. DEADLOCK RESOLUTION
8.1 Deadlock situation
If a proposal is made in respect of one of the matters referred to in clause 7 (Reserved matters) but is not approved in accordance with that clause, any Shareholder (other than a Group Transferee) may give written notice to the others that it regards a deadlock situation as having arisen (“Deadlock Notice”).  Only one Deadlock Notice may be served in respect of any one proposal.
8.2 Circulation of memoranda
Within twenty-eight days of the date of service of a Deadlock Notice, each of the Shareholders (other than any Group Transferee) shall prepare and send to the others a memorandum stating its understanding of the disagreement, its position in relation to the disagreement, its reasons for taking that position and any proposals for resolving the disagreement.
8.3 Referral to chairmen
If within forty-two days from the date of service of a Deadlock Notice the Shareholders shall have failed to resolve the disagreement, the respective chairmen of the Shareholders (other than any Group Transferee) shall be provided with copies of all such memoranda and shall as soon as reasonably practicable meet to discuss the disagreement and use all reasonable endeavours to resolve it.
8.4 Unresolved deadlock
If a deadlock relating to any proposal made in respect of one of the matters referred to in clause 7 (Reserved matters) is not resolved after applying the above procedure, the proposal shall not proceed.
9. MANAGEMENT APPOINTMENTS
9.1 Appointment of Directors
The “Company” shall be managed and controlled by the Board of Directors. The Board shall have the responsibility, power and authority to manage and supervise the business and affairs of the “Company” in accordance with this Shareholders Agreement, the Memorandum and Articles of Association of the “Company” and Applicable Law.
The Board shall consist of not less than 3 (Three) and not more than 12 (Twelve) Directors. Immediately prior to the signing of this Shareholders Agreement, the Board consisted of six Directors of which two Directors were appointed by APIIC, two Directors were appointed by IPDF and two Directors were appointed by Infrastructure Leasing & Financial Services Limited (“IL&FS).
Upon completion of the funding of the Equity Contributions as contemplated by the Shareholders Agreement, the Board shall consist of 6 (Six) Directors and such Directors shall be appointed in the following numbers:
a) 2 Directors by APIIC
b) 1 Director by VMC
c) 2 Directors by LTHL
d) 1 Director by PSL
The number of Directors appointed by LTHL and PSL shall include the appointment of Chairman and the Managing Director.
The Board shall comprise a minimum of three Directors and a maximum of twelve Directors.  Each Shareholder shall be entitled, by notice in writing to the Company and to appoint a number of Directors equal to or less than its Representative Number from time to time and to remove any Director appointed by it from time to time.
9.2 Vacation of office
If at any time the Representative Number of any Shareholder becomes (and remains for at least one month) less than the number of its appointees then in office as Directors, the last Director(s) to have been appointed by that Shareholder shall automatically vacate office so that the number of Directors appointed by that Shareholder equals its Representative Number.
9.3 Indemnity
Any Shareholder who removes a Director from office, or whose appointee vacates office as a Director or under the Articles of Association, shall indemnify each other Shareholder and the Company against any claim, whether for compensation for loss of office, wrongful dismissal or otherwise, which arises out of that Director ceasing to hold office.
9.4 Chairman
The Chairman of the Company shall be a nominee of LTHL / PSL, who are jointly holding 51% of the Paid Up Capital of the Company.  In the event of LTHL / PSL fall below 51%, then the Chairman of the Company shall be the nominee of the Shareholder / group of Shareholders, who is holding 51% or more of the Paid Up Capital of the Company.
9.5 Alternate directors
A Shareholder shall be entitled by notice in writing to the Board of Directors, to nominate any person to act as an Alternate Director in place of any Director appointed by that Shareholder during such appointee’sabsence for a period of not less than three months from the State in which meetings of the Board are ordinarily held and upon receipt of such notice the Board shall appoint that person as the Alternate Director for the original appointee Managing Director
The Managing Director of the Company shall be a nominee of LTHL / PSL, who shall be responsible for the conduct of the day-to-day management of business and affairs of the Company. The Parties shall procure that the person nominated as aforesaid, is appointed by the Board as the Managing Director at an appropriate remuneration package to be approved by the Board.
The Managing Director shall be delegated by the Board adequate power and authority to unertake, conduct and carry out the day-to-day management, business and affairs of the Company.  The Managing Director shall report and function, subject to the supervision, direction and control of the Board.
9.6 Members of the same Group
For the purposes of this clause, all Shareholders who are members of the same Group shall be deemed to be one Shareholder and shall act together in the exercise of their rights and be jointly and severally liable under this clause.
10. PROCEEDINGS OF DIRECTORS
10.1 Convening Directors’ meetings
A Director may, and/or The Company Secretary of the Company at the request of a Director or Shareholder shall, call a meeting of the Directors.  The Directors shall hold meetings [in Hyderabad] at least once every [three months].
10.2 Notice of Directors’ meetings
Wherever practicable, at least five Business Days’ notice of each meeting of the Directors shall be given to each Director entitled to attend and the notice shall be accompanied by an agenda and a board paper setting out in such reasonable detail as may be practicable in the circumstances the subject matter of the meeting.  Breach of this clause shall not affect the validity of any meeting of the Directors which has otherwise been validly convened.
10.3 Quorum at Directors’ meetings
Subject to Section 287 of the Companies Act, 1956 the Shareholders hereby agree that the quorum for a meeting of the Board of Directors of the company shall be two/three, provided,however, that there shall be no quorum unless at least one Director appointed by each Shareholder holding a minimum of 15% of the Paid Up Capital of the Company.  A Director represented by alternate shall be deemed to be present for the purpose of determining quorum. If within half-an-hour from the time appointed for a meeting a quorum as aforesaid is not present, the meeting shall stand adjourned to the same day in the next week at the same time and place or to such other later day and as stuch other time and place as the Directors may determine.  If at such adjourned meeting also, a quorum is not present, the meeting shall stand adjourned for further half-an-hour and if the quorum as aforesaid is still not present, then the Directors present shall constitute a quorum.
10.4 Voting at Directors’ meetings
Resolutions of the Directors shall be decided by majority of the votes cast and each Director shall have one vote.  In the case of an equality of votes, the chairman of the meeting shall not have a casting vote.
10.5 Directors’ interests
No Director of the Company shall take part in the discussion of or vote on any contract or arrangement entered into by or on behalf of the Company, if he is in any way, whether directly or indirectly, concerned or interested in the contract or arrangement nor shall his presence count for the purpose of forming a quorum at the time of such discussion or vote. Written resolutions
A resolution in writing signed by all the Directors shall be as valid and effective for all purposes as a resolution passed by the Directors at a meeting duly convened, held and constituted.
11. ACCESS TO INFORMATION AND ACCOUNTS
11.1 Provision of information by the Company
The Company shall provide each Shareholder (at the cost of that Shareholder) with access to and copies of such information and records of the Company and its Affiliates as that Shareholder may reasonably require from time to time, provided that no Shareholder shall be entitled to require the Company to restate financial or other information for the purpose of preparing the Shareholder’s accounts.
11.2 Retention of Records
All records of the Company shall be retained for period of at least for a minimum of eight (8) years from the end of the year or such other period as required under statute to which such record relates.
11.3 Provision of information by Directors
Each Director is irrevocably authorised by the Company to disclose any information or records belonging to or concerning the Company, its Affiliates or its or their business and assets to any Shareholder who has appointed him and members of its Group.
11.4 Management accounts
The Directors will submit a report concurrently to each Shareholder (and in normal circumstances within [thirty Business Days] of the end of the month to which it relates) showing, inter alia, the revenues, operating results, overall results and relevant cash flow information on a monthly and year-to-date basis and performance compared to the Business Plan.  These monthly reports shall also describe the status of the implementation of the Company’s strategy and the Project.
11.5 Annual accounts
The Company shall provide to each Shareholder concurrently (i) draft accounts of the Company for each Accounting Period (in normal circumstances within thirty Business Days of the end of the period to which they relate) and (ii) audited accounts of the Company for each Accounting Period promptly following their approval by the Directors.
12. OPERATION OF BANK ACCOUNTS
This can be exercised in the meeting of the Board of Directors of the Company and need not be included in this agreement.
13. ISSUE OF SHARES
No unissued Share, and no right to subscribe for or convert any security into a Share, shall be allotted or issued without the prior consent in writing of each of the Shareholders.
14. RESTRICTIONS ON DEALING WITH SHARES
14.1 Restrictions on disposals
No Disposal of any Share or any legal or beneficial interest in a Share shall be permitted except a transfer of the entire legal and beneficial interest in the Share which is permitted by the other terms of this agreement.
14.2 Lock-in period
No transfer of Shares shall be permitted by all the Parties, subject to clause 15, till Godavari Pipline and Rehabilitation Works, is complete, as envisaged in the Concession Agreement or a final decision on the above is taken in this regard as per the Concession Agreement. Notwithstanding the above, transfer of Shares shall be permitted as per provisions of the Concession Agreement.
15. PERMITTED TRANSFERS
15.1 Group Transferee leaving the Group
A Group Transferee shall transfer, in a manner and to a transferee permitted by this agreement, all the Shares held by it before it ceases to be in the same Group as the Original Holder.
15.2 Information and evidence
The transferor and transferee of any Share transferred under this clause and the Original Holder (if any) of the transferred Share shall each provide to the Directors, at his own expense, any information and evidence requested in writing by the Directors for the purpose of determining whether the transfer to the proposed transferee complies with the terms of this clause.
15.3 Compliance with agreement
Each Shareholder shall procure that all Group Transferees in relation to which it is the Original Holder comply with the terms of this agreement.
16. TRANSFER AND ENCUMBRANCE OF SHARES; PRE-EMPTION RIGHTS
16.1 Transfer of shares
Subject to the provisions of Clause number 14.2 above and hereinafter contained, each of APIIC, VMC, LTHL, PSL agree that the transfer of the Shareholding of each shall be subject to the following provisions
a) Each of APIIC, VMC, LTHL, PSL shall not transfer or dispose off its respective Shareholding, or any part or parts thereof in the “Company” in manner whatsoever except as hereinafter expressly provided; and
b) Each of APIIC, VMC, LTHL, PSL shall not, at any time, create any charge, mortgage, lien or pledge or encumber in any manner its respective shares, whether in whole or in part or at any time or in any manner grant options in respect of its respective shares or any part or parts thereof as a result of which the rights and obligations accruing to such Party under this Shareholders Agreement stand altered, varied or modified in any manner whatsoever, except creating any charge, mortgage,lien or pledge or encumber in favour of Financial Institutions/Banks who may provide for the business of the Company.
16.2 Right of First Refusal
(a) Subject to Clause 14.2, each of LTHL, PSL being desirous of transferring their respective Equity Shares, they shall first offer the same to the other of them.  In the event of either LTHL or PSL, as the case be, is not willing to purchase the shares offered, then the same be offered to other Shareholders, in accordance with Clause 16.2.(b).
(b) Each of APIIC, VMC, LTHL, PSL hereby agrees that if it decides to sell its Shares, or any part or parts thereof, in the Company (the "Offering Party”), it will offer the first right of purchase/refusal to the other Parties  (as the case may be) (the “Non-Offering Party”) and such Offering Party will notify the Non-Offering Party and the Board of the Company in writing of the proposed sale of such Shares, including the number of Shares to be sold and the proposed sale price per Share. If the Non-Offering Party agrees to purchase such Shares in full or parts thereof, as the case may be, such Shares or part thereof shall be transferred to such Non-Offering Party in accordance with the procedure set forth in Clause 16.2(c). If the Non-Offering Party does not accept the initial offer from the Offering Party within 30 (thirty) days of receipt of the notice from the Offering Party required by this Clause 16.2(a), then the Offering Party may sell the Shares or the part or parts thereof, as the case may be, originally offered to the Non-Offering Party to a third party or parties who is or are nominated by the Offering Party; provided that under no circumstances shall the number and sale price of the Shares and the terms and conditions upon which the Shares are proposed to be sold to such third party or parties be more favorable than that on which they were offered to the Non-Offering Party who had refused, unless they are once again offered to the Non-Offering Party. For the purposes of this Clause 16.2 a Party receiving the offer can accept for itself or procure the acceptance by its Affiliate.
(c) In the event of acceptance by the Non-Offering Party of the offer of the Offering Party to sell the Shares held by it or any part or parts thereof, as the case may be ("the Purchasing Party"), the sale of Shares shall be completed and full payment of the price thereof be made by the Purchasing Party within 30 (Thirty) days of the date of acceptance of the offer or the receipt of the requisite approvals, whichever is later. In case of acceptance by more than one Non Offering Party, the shares would be sole ot each such Non Offering Party in proportion to their respective Shareholding in the Company on the date of offer. In the event of default in the payment of the said sale price the Offering Party shall be free to sell the shares to such third party or parties as are nominated in accordance with Clause 16.2(a) above at the cost, risk and responsibility of the defaulting Party. All transfers by any such Offering Party shall be subject to Applicable Law and any covenants under the Financing Documents.
(d) Notwithstanding any other provisions of this Shareholders Agreement, but subject to Clause 16.1, each of the Parties (excluding the Company) to this Shareholders Agreement may, at any time, Transfer its Shares and/or assign its rights and obligations hereunder to an Affiliate; and the provisions of Clause (a), (b) and (c) of Clause 16 will not apply; provided that (i) such Transferring Party has provided 30 (Thirty) days prior written notice of its intention of such Transfer to all of the other Parties, (ii) such Affiliate is not in receivership, bankruptcy, insolvency, dissolution, liquidation or any similar proceeding, (iii) the Transferring Party has, prior to such transfer or simultaneously therewith, effected the execution by such Affiliate of a Deed of Adherence, substantially in the form annexed hereto as Schedule 1, whereby the Affiliate unconditionally agrees to be bound by all the provisions of this Shareholders Agreement, including, but not limited to, such provisions of this Shareholders Agreement as constitute agreements relating to voting, and restrictions on Transfer of Shares, and (iv) the Affiliate Transferee complies with the time limit for payment as provided for in this Shareholders Agreement.
17. TRANSFER OF SHARES ON DEFAULT
17.1 Events of Default
The following are “Events of Default” in relation to a Shareholder and “Specified Shares” in relation to an Event of Default:-
(A) any Shareholder makes any Disposal of any Shares which is in breach of this agreement, in which case the Specified Shares shall be all the Shares held by that Shareholder and members of its Group;
(B) any Shareholder is in material or persistent breach of any of the other provisions of this agreement and/or any Ancillary Agreement and such breach has not, if capable of remedy, been remedied to the reasonable satisfaction of the other Shareholders within thirty days of receipt by the Shareholder in breach of written notice from any of the other Shareholders requiring such remedy, in which case the Specified Shares shall be all the Shares held by that Shareholder and members of its Group;
(C) a Group Transferee ceases to be a member of the same Group as the Original Holder while it still holds Shares, in which case the Specified Shares shall be all the Shares held by that Group Transferee;
(D) there is a Change of Control of any Shareholder within the meaning set out in Clause 17.2, in which case the Specified Shares shall be all the Shares held by that Shareholder and all bodies corporate who were members of its Group immediately prior to the change of Control;
(E) any procedure is commenced with a view to the winding-up or re-organisation of any Shareholder or its Ultimate Parent Company (other than for the purpose of a solvent amalgamation or reconstruction with the prior approval of the other Shareholders, such approval not to be unreasonably withheld or delayed), and that procedure (unless commenced by that Shareholder or its Ultimate Parent Company, as the case may be) is not terminated or discharged within thirty days, in which case the Specified Shares shall be all the Shares held by that Shareholder and members of its Group;
(F) any procedure is commenced with a view to the appointment of an administrator, receiver, administrative receiver or trustee in bankruptcy in relation to any Shareholder or its Ultimate Parent Company or all or substantially all of its assets and that procedure (unless commenced by that Shareholder or its Ultimate Parent Company, as the case may be) is not terminated or discharged within thirty days, in which case the Specified Shares shall be all the Shares held by that Shareholder and members of its Group;
(G) the holder of any security over all or substantially all of the assets of any Shareholder or its Ultimate Parent Company takes any step to enforce that security and that enforcement is not discontinued within thirty days, in which case the Specified Shares shall be all the Shares held by that Shareholder and members of its Group;
(H) any Shareholder or its Ultimate Parent Company is unable to pay its debts as they fall due or enters into a composition or arrangement with its creditors or any class of them, in which case the Specified Shares shall be all the Shares held by that Shareholder and members of its Group;
(I) any Shareholder or its Ultimate Parent Company ceasing or threatening to cease wholly or substantially to carry on its business, other than for the purpose of a solvent amalgamation or reconstruction in which case the Specified Shares shall be all the Shares held by that Shareholder and members of its Group; or
(J) if the Directors have requested any reasonable information and/or evidence (other than confidential matters) from any Shareholder to enable them to determine whether any of the above circumstances apply to that Shareholder or any member of its Group, such information or evidence not being provided to the reasonable satisfaction of the Directors within fourteen days after the request is received, in which case the Specified Shares shall be all the Shares held by that Shareholder and members of its Group.
17.2 Change of Control
(A) Subject to sub-clause (B), a Change of Control shall occur for the purposes of this agreement where:
(i) a person acquires Control of a Shareholder where no person previously had Control of that Shareholder; or
(ii) the Ultimate Parent Company of a Shareholder ceases to have Control of that Shareholder; or
(iii) a person acquires Control of the Ultimate Parent Company of a Shareholder; or
(iv) a person who is not under the Control of the Ultimate Parent Company of a Shareholder acquires Control of that Shareholder.
(B) A body corporate (the “acquiring company”) is not to be treated as acquiring Control of another body corporate (the “target company”) where the acquiring company issues shares in itself to the shareholders of the target company in exchange for the shares in the target company and, after such exchange:
(i) each person who immediately before the exchange was a shareholder of the target company is a shareholder of the acquiring company; and
(ii) the shares in the acquiring company are of the same classes as were the shares in the target company immediately before the exchange; and
(iii) the number of shares of any particular class in the acquiring company bears the same proportion to all the shares in the acquiring company as the number of shares of that class in the target company bore to all the shares in the target company immediately before the exchange; and
(iv) the proportion of shares of any particular class in the acquiring company held by any particular shareholder is the same as the proportion of shares of that class in the target company held by him immediately before the exchange.
17.3 Compulsory Offer
(A) If an Event of Default (other than a Disposal of any Shares which is in breach of this agreement) occurs and is continuing in relation to any Shareholder the Directors may give notice to the holder(s) of the Specified Shares (“Compulsory Transfer Notice”) requiring the transfer of the Specified Shares.
(B) If:
(i) any Shareholder makes any Disposal of any Shares which is in breach of this agreement; or
(ii) a Compulsory Transfer Notice is given in respect of any other Event of Default;
the holder of the Specified Shares shall be deemed to have appointed the Company as his agent for the transfer of each of the Specified Shares, free of all encumbrances and with all rights attached to them. 
(C) The parties shall use all reasonable endeavours to determine or procure the determination of the Prescribed Value of the Specified Shares as soon as reasonably practical after the giving of a Compulsory Transfer Notice or the Disposal of Shares (as the case may be).
(D) Within 21 days after the date on which the Prescribed Value of the Specified Shares is determined, the Company shall send a notice in writing to all existing holders of Shares (other than the holder of the Specified Shares or any other holder of Shares who has given a Transfer Notice in respect of any of its Shares):-
(i) containing an offer (“Compulsory Offer”) of the Specified Shares at the Prescribed Value (or, if the Directors so resolve in the case of an Event of Default within any of clauses 17.1, less a discount of five per cent]) and inviting each recipient to notify the company in writing within a period of 7 days (“Compulsory Offer Period”) whether it is willing to take any, and if so what maximum number, of the Specified Shares;
(ii) stating that, if the recipients who accept the Compulsory Offer express, in aggregate, a willingness to take more than the total number of Specified Shares, the Specified Shares shall be allocated to such recipients in proportion as nearly as may be to the number of Shares then held by them and the maximum number specified by each such recipient; and
(iii) setting out the name of any person nominated by the Directors who has expressed an interest in acquiring all or any of the Specified Shares and to whom any Specified Shares not allocated among the recipients of the Compulsory Offer may be allocated.
(E) The Company shall, within seven days after the date on which the Compulsory Offer Period ends, notify in writing:-
(i) the holder of the Specified Shares of the name and address of each person (“Purchaser”) to whom Specified Shares have been allocated and the number of Shares to be transferred to each of them;
(ii) each of the Purchasers of the number of Shares to be transferred to it; and
(iii) the holder of the Specified Shares and each of the Purchasers of the time(s) (not being less than forty-eight hours nor more than seven days after the date of such notification) and place(s) for completion of the transfer of Shares to the Purchasers.
(F) The holder of the Specified Shares and each of the Purchasers shall be obliged to complete the transfer of the Specified Shares in accordance with this agreement.
17.4 Directors’ interests
For the purposes of this clause, references to the Company shall mean the Company acting through the Directors and references to the Directors shall exclude any Director who has been appointed by the holder of the Specified Shares or any member of its Group.
17.5 Stamp duty
The Initiating Shareholder agrees to pay any present and future stamp, documentary and other duties and taxes, if any, payable in respect of the grant or the exercise of this option.
18. EFFECT OF DEED OF ADHERENCE
The parties agree to extend the benefit of this agreement to any person who acquires Shares in accordance with this agreement and enters into a Deed of Adherence in the form set out in Schedule 1, but without prejudice to the continuation inter se of the rights and obligations of the original parties to this agreement and any other persons who have entered into such a Deed of Adherence.
19. PRESCRIBED VALUE
The “Prescribed Value” of any Shares shall be determined as follows:
(A) the Prescribed Value shall be as agreed between all the Shareholders  or (in the absence of agreement) as certified in a reasoned certificate by the Independent Auditor acting as experts and not as arbitrators whose decision shall be final and binding and whose fees shall be borne by the Shareholders in the proportions in which they hold Shares or as otherwise determined by the auditors.
20. SHAREHOLDER UNDERTAKINGS
Each Shareholder undertakes with each other Shareholder that it will
(A) comply with each of the provisions of this agreement;
(B) exercise its voting rights and other rights as a member of the Company in order (insofar as it is able to do so through the exercise of such rights) to give full effect to the terms of this agreement and the rights and obligations of the parties as set out in this agreement; and
(C) procure that any Director appointed by it from time to time shall (subject to their fiduciary duties to the Company) exercise their voting rights and other powers and authorities in order (insofar as they are able to do so through the exercise of such rights, powers and authorities) to give full effect to the terms of this agreement and the rights and obligations of the parties as set out in this agreement.
21. UNDERTAKINGS BY THE COMPANY
To the extent to which it is able to do so by law, the Company undertakes with each of the Shareholders that it will comply with each of the provisions of this agreement.  Each undertaking by the Company in respect of each provision of this agreement shall be construed as a separate undertaking and if any of the undertakings is unlawful or unenforceable the remaining undertakings shall continue to bind the Company.
22. CONFIDENTIALITY
22.1 Confidential information
Each party shall treat as confidential all information obtained as a result of negotiating and entering into this agreement or, in the case of a Shareholder, through its interest in the Company or any of its business or assets and which relates to:
(A) the provisions of this agreement;
(B) the negotiations relating to this agreement;
(C) the Company or its business or assets; or
(D) any Shareholder or its business or assets.
22.2 Use of Confidential information
Each party shall:-
(A) not disclose any such confidential information to any person other than:
(i) a Director appointed by it or a member of its Group, or any of its directors or employees whose duties include the management or monitoring of the business of the Company and who needs to know such information in order to discharge his duties; or
(ii) a person to whom any Share is bona fide proposed to be transferred;
(B) not to use any such confidential information other than for the purpose of managing or monitoring its investment in the Company;
(C) procure that any person to whom such confidential information is disclosed by it complies with the restrictions set out in this clause as if such person were a party to this agreement.
22.3 Permitted disclosure
Notwithstanding the previous provisions of this clause, any party may disclose any such confidential information:-
(A) if and to the extent required by law or for the purpose of any judicial proceedings;
(B) if and to the extent required by any Project Agreement;
(C) if and to the extent required by any securities exchange or regulatory or governmental body to which that party is subject, wherever situated;
(D) if and to the extent required for the purpose of any arbitration pursuant to clause 37 (b);
(E) to auditors and bankers; or
(F) if and to the extent the information has come into the public domain through no fault of that party.
22.4 Duration of obligations
The restrictions contained in this clause shall continue to apply to each party (including any Shareholder who has ceased to hold Shares) for a period of 5 years from the date of this agreement.
23. ANNOUNCEMENTS
23.1 Restriction on announcements
No announcement concerning this agreement or the business or assets of the Company shall be made by any party without the prior written approval of the others, such approval not to be unreasonably withheld or delayed.
23.2 Permitted announcements
Notwithstanding the previous provisions of this clause, any party may, whenever practicable after consultation with the other parties, make an announcement concerning this agreement or the business or assets of the Company if required by:
(A) law;
(B) any Project Agreement; or
(C) any securities exchange or regulatory or governmental body to which that party is subject, wherever situated.
23.3 Duration of restrictions
The restrictions contained in this clause shall continue to apply to each party (including any Shareholder who has ceased to hold Shares) without limit in time.
24. TERMINATION
This agreement shall terminate immediately (except for those provisions expressly stated to continue without limit in time and without prejudice to any rights or liabilities arising under this agreement prior to such termination to which clause 37 (b) will continue to apply):-
(A) if the Shares are listed on, or dealings in the Shares commence in, a securities market;
(B) if only one Shareholder (together with members of its Group) remains holding Shares;
(C) in respect of the rights and obligations of any Shareholder if it and all members of its Group cease to hold any Shares and each person to whom Shares have been transferred by that Shareholder and members of its Group has entered into a Deed of Adherence in the form set out in Schedule 1.
25. SEVERABILITY 
Each Article, Section, paragraph and clause of this Agreement constitutes a separate and distinct undertaking, covenant and/or provision.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law.  In the event that any provision of this Agreement shall be finally determined to be unlawful, such provision shall be deemed severed from this Agreement, but every other provision of this Agreement shall remain in full force and effect.
26. GOVERNING LAW
This Agreement shall be governed by and interpreted and construed in accordance with the laws of India.
27. ASSIGNMENT
This Agreement and the rights, obligations and duties hereunder shall inure to the benefit of the Shareholders and to its successors and assigns. The Company shall not assign this Agreement to any Third Party under any circumstances whatsoever.
28. ORGANISATIONAL DOCUMENTS 
The Parties agree that, in the event of any conflict between the provisions of this Agreement and the Articles of the Company, the provisions of this Agreement shall prevail. The Parties agree to amend the Articles of the Company so that they reflect the terms and conditions (or portions thereof) of this Agreement: (a) to the extent required by Applicable Law, (b) to the extent necessary or desirable to ensure the enforceability of the provisions hereof to the full extent possible under Applicable Law, or (c) to the extent necessary or desirable resolve any conflict between the provisions of this Agreement and the provisions of the Articles.
29. AUTHORITY; EXECUTION BY THE PARTIES
Each Party hereby represents that they have full corporate power and authority to execute and deliver this Agreement, to perform their obligations hereunder and to consummate the transactions contemplated hereby.  The execution and delivery by the Parties of this Agreement, the performance by each Party of its obligations hereunder and the consummation by the Parties of the transactions contemplated hereby have been duly and validly authorised and approved by all requisite action on the part of the respective Party, and no other proceedings on the part of the Parties are necessary to approve this Agreement, to perform their obligations hereunder or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by all the Parties and constitutes a valid and binding obligation of the respective Party, enforceable against them in accordance with its terms.
30. AMENDMENT
This Agreement shall not be altered, changed, supplemented or amended except by a written instrument signed by the Parties and expressly stated to be an amendment to this Agreement.
31. NO THIRD PARTY BENEFICIARIES
This Agreement is solely for the benefit of the parties and their respective successors and permitted assigns, and this Agreement shall not otherwise be deemed to confer upon or give to any other third party, including any lender, any remedy, claim, liability, reimbursement, cause of action or other right.
32. ENTIRE AGREEMENT 
This Agreement, together with its Schedules / Annexures, and the relevant agreements, constitutes the entire agreement reached between the Parties to this Agreement with respect to the transactions contemplated by this Agreement and may not be amended or modified except by written instrument duly executed by each of the Parties to this Agreement.  Any and all previous agreements and understandings between the Parties regarding or relating to the subject matter of this Agreement, whether written or oral, are superseded by this Agreement.
33. BENEFIT OF AGREEMENT  
Nothing herein expressed or implied is intended, nor shall it be construed, to confer upon or give to any Third Party any right, remedy or claim under or by reason of this agreement or any part hereof.
34. WAIVER NOT TO IMPAIR THE RIGHTS OF THE PARTIES
No delay in exercising or omission to exercise any right, power or remedy accruing to any Party upon any default under this Agreement, or any other agreement or document shall impair any such right, power or remedy or shall be construed to be a waiver thereof or any acquiescence in such default, nor shall the action or inaction of any Party in respect of any default or any acquiescence by it in any default, affect or impair any right, power or remedy of any Party in respect of any other default.
35. COUNTERPARTS  
This Agreement may be executed by the Parties hereto in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
36. DURATION
The rights of a Party under this Agreement shall subsist so long as it together with its Affiliates holds Shares of the Company.
37. DISPUTE RESOLUTION 
(A) Any and all claims, disputes, questions or controversies involving the Parties and arising out of or in connection with this Agreement, or the execution, interpretation, validity, performance, breach or termination hereof (collectively, “Dispute(s)”) that cannot be finally resolved by the Parties within thirty (30) calendar days of the arising of a Dispute by amicable negotiation and conciliation shall first be submitted for settlement by informal arbitration to an arbitral panel consisting of the senior officials of the Shareholders and the Company. If such panel, negotiating in good faith, is unable to resolve and settle the Dispute within sixty (60) calendar days after the Dispute is first submitted to it, then any Party shall be entitled to cause the Dispute to be submitted for settlement pursuant to the terms of Section 37(B) hereof.
(B) Arbitration - Any dispute which is not settled pursuant to  Article 37(A) shall be referred to a panel of arbitrators consisting of one arbitrator appointed by the petitioner in party or parties, as the case may be, one arbitrator appointed by the respondent party or respondent parties as the case may be and both the arbitrators shall appoint the presiding arbitrator and the arbitration shall be conducted in accordance with the Indian Arbitration and Conciliation Act, 1996 as amended from time to time. The venue of Arbitration shall be Hyderabad.
38. JURISDICTION
This agreement shall be subject to the jurisdiction of the courts in Hyderabad.
IN WITNESS WHEREOF the parties hereunto have signed this Agreement on the day, month and year above written.
ANDHRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED

Signature:
Name:
Designation : VISAKHAPATNAM MUNICIPAL CORPORATION

Signature:
Name:
Designation :
Witness:
1.
 Witness:
1.

2.

 2.

L&T HOLDINGS LIMITED

Signature:
Name:
Designation : PSL LIMITED

Signature:
Name:
Designation :
Witness:
1.
 Witness:
1.

2.

 2.

VISAKHAPATNAM INDUSTRIAL WATER SUPPLY COMPANY LIMITED
Signature:
Name:
Designation:
 
Witness:
1.

2.

 
Schedule 1

Form of Deed of Adherence

DEED OF ADHERENCE

THIS DEED OF ADHERENCE entered into day of ________ between M/s ____________, a Company having registered address at ___________ (the  Party of the First Part) and VISAKHAPATNAM INDUSTRIAL WATER SUPPLY COMPANY LIMITED, a Company incorporated under the Companies Act, 1956 having its registered office at C/o Andhra Pradesh Industrial Infrastructure Corporation Limited, 6th Floor, Parisrama Bhawan, Fateh Maidan Road, Hyderabad – 500 004, (hereinafter referred to as “the Company”).

AND WHEREAS a Shareholders Agreement dated ________ (the “Shareholders Agreement”) has been entered into among the Company, viz.

1. APIIC, (full address to be given)
2. VMC, (full address to be given)
3. LTHL (full address to  be given)
AND
4 PSL (full address to be given)

which Shareholders Agreement incorporates the terms and conditions of the inter se relationship and terms and conditions on which the management of the Company would be organised.

AND WHEREAS it is a term of the Shareholders Agreement, each Affiliate of a Party to the Agreement that is going to hold the Shares for and on behalf of the Party shall execute a Deed of Adherence and be bound by the Shareholders Agreement before becoming Members.

AND WHEREAS it is agreed among all the Parties that any future shareholder pursuant to Clause 18 of the Shareholders Agreement (hereinafter called “New Shareholder”) or any transferee (hereinafter called “Transferee”) from an existing Party shall be bound by the terms and conditions of the Shareholders Agreement referred above.

NOW THIS DEED WITNESSETH AND IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO :

1. DEFINITIONS AND INTERPRETATION
Capitalised term used but not defined in this Deed shall, unless the context   otherwise suggest, have the respective meanings ascribed in the Shareholders Agreement.

2. COVENANT BY AFFILIATE, TRANSFEREE AND NEW SHAREHOLDER
 (a) __________________ (Name of Affiliate/Transferee) for itself or any of its Affiliates now or hereafter holding any Shares, hereby undertakes to exercise all of its rights and to perform all of the rights and obligations of _____________(Name of the Party) under the Shareholders Agreement in accordance with the terms thereof and agrees not to revoke its undertakings and to ensure that the aforesaid designation remains valid and the provisions of this Deed are complied with and are and remain enforceable for so long as it holds any Shares during the terms of the Shareholders Agreement.

 (b) ___________________(Name of Affiliate/New Shareholder/Transferee, as the case may be) hereby acknowledge that it has heretofore received a copy of and has read and understood, the Shareholders Agreement and covenants, thereof and agrees and confirms that it shall be bound by all provisions of the Shareholders Agreement as if it was an original Party thereto, and the Shareholders Agreement shall have a full force and effect on it and shall be read and construed to be binding on it.

 (c) ____________________ shall be bound by each and all of the obligations of M/s __________(Name of Party) __________________ and shall represent it as its constituted attorney/authorised representative/proxy in relation to all matters in its capacity as a Party.

3. GOVERNING LAW

This Deed shall be governed by and construed in accordance with the laws the Republic of India.  The terms and conditions of the Shareholders Agreement in relation to the provisions regarding arbitration and other terms and conditions shall be deemed to have been incorporated in this Deed and expressly agreed to between the parties hereto.

IN WITNESS WHEREOF the parties hereto have executed this Deed as of the date and year first hereinabove mentioned.

SIGNED, SEALED AND DELIVERED )
BY M/S     )
IN THE PRESENCE OF    )

1.

2.

SIGNED, SEALED AND DELIVERED )
BY THE COMPANY THROUGH ITS  )
MANAGING DIRECTOR AS AUTHORISED )
BY BOARD RESOLUTION   )
DATED     )

IN THE PRESENCE OF

1.
2.
Schedule 2

Form of Articles of Association

ANDHRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED

and

VISAKHAPATNAM MUNICIPAL CORPORATION

and

L&T HOLDINGS LIMITED

and

PSL LIMITED

and

VISAKHAPATNAM INDUSTRIAL WATER SUPPLY COMPANY LIMITED

________________________________________
SHAREHOLDERS’ AGREEMENT
________________________________________

MARCH 12, 2004
 
Contents
Page
1. DEFINITIONS AND INTERPRETATION 2
2. CONDITIONALITY 7
3. ESTABLISHMENT OF THE COMPANY 8
4. BUSINESS OF THE COMPANY 9
5. SHAREHOLDING 9
6. EQUITY SUBSCRIPTION OBLIGATIONS 9
7. RESERVED MATTERS 10
8. DEADLOCK RESOLUTION 12
9. MANAGEMENT APPOINTMENTS 13
10. PROCEEDINGS OF DIRECTORS 15
11. ACCESS TO INFORMATION AND ACCOUNTS 16
12. OPERATION OF BANK ACCOUNTS 16
13. ISSUE OF SHARES 16
14. RESTRICTIONS ON DEALING WITH SHARES 17
15. PERMITTED TRANSFERS 17
16. TRANSFER AND ENCUMBRANCE OF SHARES; PRE-EMPTION RIGHTS 17
17. TRANSFER OF SHARES ON DEFAULT 19
18. EFFECT OF DEED OF ADHERENCE 23
19. PRESCRIBED VALUE 23
20. SHAREHOLDER UNDERTAKINGS 23
21. UNDERTAKINGS BY THE COMPANY 24
22. CONFIDENTIALITY 24
23. ANNOUNCEMENTS 25
24. TERMINATION 26
25. SEVERABILITY 26
26. GOVERNING LAW 26
27. ASSIGNMENT 26
28. ORGANISATIONAL DOCUMENTS 26
29. AUTHORITY; EXECUTION BY THE PARTIES 27
30. AMENDMENT 27
31. NO THIRD PARTY BENEFICIARIES 27
32. ENTIRE AGREEMENT 27
33. BENEFIT OF AGREEMENT 27
34. WAIVER NOT TO IMPAIR THE RIGHTS OF THE PARTIES 28
35. COUNTERPARTS 28
36. DURATION 28
37. DISPUTE RESOLUTION     28
38. JURISDICTION      29

Schedules
Schedule 1 Form of Deed of Adherence 31
Schedule 2 Form of Articles of Association 33