PPP Contracts

JNP Shareholders Agreement dated 31st December between TLH, LUL and JNP

Recital

THIS AGREEMENT is made on 31st December 2002

BETWEEN

(1) LONDON UNDERGROUND LIMITED whose registered office is at 55 Broadway, London SW1H 0BD ( LUL or the Special Shareholder );

(2) TUBE LINES ( HOLDINGS ) LIMITED whose registered office is at 29th Floor, One Canada Square, Canary Wharf, London E14 5DY ( the Private Shareholder ); and

(3) INFRACO JNP LIMITED whose registered office is at 55 Broadway, London SW1H 0BD ( the Company ).

WHEREAS

(A) LUL and the Private Shareholder ( collectively, the Shareholders ) are shareholders in the Company.

(B) The parties are entering into this Agreement to set out:

(a) the terms governing their relationship as shareholders of the Company including their respective rights and obligations with respect to the Company; and

(b) the nature and scope of the role that they wish the Partnership Director to perform. IT IS AGREED

1. Interpretation

1.1 To the extent applicable, the provisions of this Agreement shall be interpreted in accordance with clause 1.2 of the Master Definitions Agreement between LUL, Infraco BCV Limited, Infraco Sub-Surface Limited and the Company ( the MDA ) as shall be amended and restated in the agreed form or in its final form as agreed between LUL and the Private Shareholder.

1.2 Words and expressions used in this Agreement shall, to the extent applicable and unless defined herein or the context otherwise requires, have the meaning assigned to them in Schedule 2 of the MDA.

1.3 Where a consent may be required under this Agreement and under the PPP Contract the provision of consent under one of the agreements shall not constitute a consent under the other agreement.

2. Partnership Director Appointment and Removal

2.1 The Special Shareholder may: (a) nominate an eligible person to be a non-executive director of the Company in the capacity of partnership director pursuant to this Agreement, provided that that person is also ( or is also being nominated as ) the partnership director for each of Infraco Sub-Surface Limited and Infraco BCV Limited ( such person and any replacement thereof being referred to as the Partnership Director );

(b) require the removal of the Partnership Director.

2.2 The Company and the Private Shareholder will procure the appointment or removal of the Partnership Director within a reasonable time of receipt of the requisite notice pursuant to clause 2.1 above.

2.3 An eligible person for purposes of clauses 2.1 and 4.1 is one who: (a) is independent of the parties, the Shareholders in Infraco BCV Limited and Infraco Sub-Surface Limited and their respective Affiliates ( including Transport for London and the Greater London Authority or their successors in function );

(b) is familiar with, and able to act in accordance with, best corporate governance practice from time to time;

(c) is not disqualified by law in any jurisdiction from holding the office of a director of a limited company;

(d) is of good repute with demonstrable experience in the management of companies in industries relevant to the Company's activities; and

(e) has not been removed for default or breach of the terms of his appointment from the office of Partnership Director of any Infraco.

2.4 The Company may remove the Partnership Director from office if he is in material and/or persistent breach of the terms of his appointment as set out in Appendix A to this Agreement or pursuant to clause 5.1 hereof.

3. Reserved Matters requiring Special Shareholder Consent

The Company may not engage in the following activities without the prior approval of the Special Shareholder, such approval not to be unreasonably withheld or delayed:

(a) any activity that is prohibited under the terms of the PPP Contract;

(b) increasing the ratio of other directors to the Partnership Director to greater than 9:1; or

(c) declaring or paying any dividend or distribution other than in accordance with Article 12 of the Company's Articles of Association.

4. Partnership Director

4.1 The parties wish the Company to have the benefit of an eligible person who is able, as an independent and non-executive director, to act in a public interest capacity for the good of the Company. The parties agree that the provisions of this Agreement relating to the Partnership Director are to be construed accordingly. In particular, provisions relating to any of the Company's activities under the PPP Contract are to be construed as concerning the non-executive contribution that the Partnership Director may make to the Company in considering how best to perform those activities and are not to be construed as extending any of the Company's obligations under the PPP Contract in any respect.

4.2 The parties agree that the Partnership Director is to act in the best interests of the Company and with a particular view to: (a) providing independent commercial judgement on issues of strategy, performance, resources and standards of conduct;

(b) enhancing the effective and transparent functioning of the Board, as the principal decision-making forum of the Company, subject to promoting the Company's adherence to its contractual and general law obligations in relation to corporate governance;

(c) promoting co-ordination and co-operation with respect to the Company's, and each of the other Infracos' management reporting systems and other common or overlapping activities of the Infracos, where co-operation and co-ordination will enhance the efficiency of the Infracos or LUL and the service to the Customers;

(d) promoting good communication, co-ordination of activities and co-operation between the Company and the other Infracos generally and in relation to inter-Infraco arrangements, including the Codes, the Codes Accession Agreement, the Ancillary Agreements, the Inter-Infraco Assets and Facilities Agreement, the TransPlant Agreement and the ERU Agreement;

(e) promoting compliance with the competitive tendering requirements contained in the PPP Contract;

(f) ensuring that the Company, whilst benefiting from the skills, resources and strategic vision of the Sponsors and of the Private Shareholder, is also being kept sufficiently separate so that its business could be transferred to a Successor Infraco without undue disruption or difficulty to the provision of the Services;

(g) promoting the Company's adherence to its contractual and statutory obligations in relation to safety and environmental management, including effective systems for monitoring and ensuring compliance with such obligations; and

(h) promoting the Company's adherence to its contractual and statutory obligations in relation to staff including in relation to pensions, restrictions on secondment and employment and compliance with the Code of Practice agreed with Trade Unions.

4.3 The parties wish the Partnership Director to apply his independence and expertise in areas where there are or may be perceived to be conflicts of interest between the Company and the Special Shareholder and/or the Sponsors and, in particular, so as to facilitate: (a) the Company and LUL reaching any required agreements or LUL giving any approvals or consents in relation to asset management by being in a position, with the consent of the Company, to provide his independent view to LUL on proposals for which its agreement, approval or consent is required;

(b) the Company and LUL reaching any required agreements or consents in relation to dividend proposals, having regard to the likely impact on future cash requirements; and

(c) any arrangements between the Company and the Sponsors ( or any Affiliates of the Sponsors ) and also to the terms of any settlement of contractual disputes with Sponsors and that these arrangements are entered into on an arms-length basis having regard to the fact that some of such arrangements have been agreed and approved by LUL. For the avoidance of doubt, the parties do not wish for the Partnership Director to do anything in relation to conflicts of interest which arise purely as between Sponsors or as between a Sponsor and LUL.

4.4 The parties agree that the Partnership Director is to be a member of the Safety Review Committee.

4.5 The parties agree that the Partnership Director's role as set out in this Agreement shall extend to any subsidiaries that the Company has, incorporates or acquires.

4.6 The parties agree that, to the extent reasonable to promote the Partnership Director's effectiveness as an independent, non-executive with a public interest responsibility, the Company will provide him with access to: (a) independent professional advice, as necessary, at the expense of the Company, up to a maximum of £20,000 ( exclusive of VAT ) per Contract Year; and

(b) information within the Company and the right to require specific reports, analyses, background papers and information from management as would normally be available to a director of a company.

4.7 The parties agree that the Partnership Director is not to owe any special responsibility to LUL other than as provided below. If the Partnership Director believes that the conduct by the Company of its business or the conduct of, or arrangements made with, the Sponsors give cause for concern in that they restrict or obstruct the Partnership Director from fulfilling the role envisaged for him hereunder, he shall first seek to resolve the concerns with the Board of the Company. If this process results in a conclusion that ( acting bona fide in the best interests of the Company ) the Partnership Director considers to be unsatisfactory, he should advise the Special Shareholder accordingly.

4.8 The parties agree that the Partnership Director may meet periodically ( but no more frequently than once every four (4) weeks ) with representatives of the Special Shareholder to review developments within the Company. In the intervals between these meetings, the Partnership Director may notify and meet with such representatives where any matters requiring the Special Shareholder's views arise ( for example, to discuss funding/business proposals and to understand the Special Shareholder's position ). The Partnership Director may also advise the Special Shareholder whenever appropriate pursuant to clause 4.7.

4.9 The parties agree that the Partnership Director may not disclose information referred to in sub-clauses 15.2(c)(i) - (vi) of the PPP Contract or any commercially sensitive information of the Company ( which shall include the information referred to in sub-clauses 48.1(a) - (d) of the PPP Contract ) or the Private Shareholder to LUL or any third party ( including the other Infracos ).

4.10 LUL shall not disclose any confidential information in relation to the Company, the Private Shareholder, or the Sponsors which it becomes party to as a result of obligations of the Partnership Director or otherwise pursuant to this Agreement, except to the extent that it is permitted to disclose such information under the provisions of clause 48 of the PPP Contract.

4.11 Prior to any meeting or communication with the Special Shareholder envisaged by clauses 4.7 and 4.8, the Partnership Director shall first ensure that the Board of the Company has been informed with 7 days ( except in the case of Emergency ) prior notice in writing of the agenda for the meeting and where applicable, the Partnership Director's concerns, conclusions and reasons for such concerns and/or conclusions.

4.12 The parties agree that in circumstances where there is a Dispute between the Company and another Infraco which has reached the PPP Board stage or higher pursuant to the Dispute Resolution Agreement, the other directors of the Company may request that the Partnership Director does not: (a) attend and vote at a board meeting ( or the relevant part thereof ) where the dispute in question is being considered; and/or

(b) receive copies of any papers with respect to the conduct of such dispute ( other than by way of informing him of the existence of the dispute ),

and in such circumstances the Partnership Director shall comply with such request.

5. Removal of Partnership Director

5.1 The Company may, and any other party to this Agreement may require the Company, to remove the Partnership Director from office with immediate effect if, one or more of the following has occurred: (a) the Partnership Director has committed a Safety Breach or Prohibited Act ( and for this purpose reference to LUL in limbs (a) and (d) of the definition of Prohibited Act shall be deemed to be a reference to LUL and/or the Company ) ( and the removal from office of the Partnership Director shall be treated as a complete remedy of Infraco's breach of the Service Contract in respect of the Partnership Director's act and no Mandatory Sale Notice may be served on Infraco in respect of that breach );

(b) the Partnership Director has committed a material or persistent failure to comply with any Infraco board policy or procedure which the Partnership Director has been made aware of by the Company, including without limitation a breach of any confidentiality policy or procedure with regard to communication to the press, broadcasting or other media;

(c) the Partnership Director no longer complies with one or more of the eligibility criteria listed in Clause 2.3; or

(d) the Company's right to remove the Partnership Director from office has arisen pursuant to clause 2.4 of this Agreement.

5.2 Removal of the Partnership Director by the Company in any circumstances outside of those permitted under Clause 5.1, shall be deemed to be a material breach of the PPP Contract to which the Company is party and clause 40 of the PPP Contract shall apply accordingly.

5.3 In the event that the Partnership Director is removed by the Company pursuant to clause 5.1 as a result of a wilful act or omission, LUL shall indemnify the Company against any loss, damage or claims suffered by the Company as a result of such wilful act or omission.

6. Conflict with Articles

If the provisions of this Agreement conflict with the Memorandum and Articles of Association or other constitutional documents of the Company, the provisions of this Agreement shall prevail as between the parties. The parties shall: (a) exercise all voting and other rights and powers available to them to give effect to the provisions of this Agreement; and

(b) ( if necessary ) ensure any required amendment is made to the Memorandum and Articles of Association or other constitutional documents of the Company.

7. Default

7.1 If the Company, the Private Shareholder or LUL commits a breach of any of the provisions of this Shareholders' Agreement, either of the other parties may serve notice upon the defaulting party. The notice shall specify the nature of the breach and require the defaulting party immediately to comply with the relevant provision(s) being the subject of the breach and, to the extent that it is possible, to remedy the breach within ninety (90) days. This does not affect the other parties' right subsequently to claim damages or other compensation under applicable law for the breach in question or, where appropriate, to seek an immediate remedy of an injunction, specific performance or similar court order to enforce the defaulting party's obligations.

7.2 If the Company or Private Shareholder is the defaulting party pursuant to clauses 2.2, 2.4, 3, 4.4 to 4.6, 6 or 10 hereof and it has failed to remedy the breach within ninety (90) days in accordance with clause 7.1 above, LUL may deem this to be a breach of the Company's PPP Contract and clause 22.1 of the relevant PPP Contract shall apply accordingly.

7.3 Notwithstanding any other provision of this Agreement, the Private Shareholder and LUL shall have no liability to each other under this Agreement for breach of its provisions or in tort ( including negligence ) or for breach of statutory duty or in any other respect whatsoever arising out of or in connection with this Agreement or performance of it save only other than in respect of any liability which may not be excluded by virtue of the Unfair Contract Terms Act 1977.

8. Notices

8.1 Save where specified otherwise in this Agreement any notice affecting this Agreement ( Notices ) shall be in writing and signed by the Contract Manager referred to in clause 8.2 for the party giving it on behalf of that party and may be served by leaving it at, or sending it by fax, prepaid recorded delivery, special delivery or registered post to the address and for the attention of the Contract Manager of the other party. Proof of posting or despatch of any notice or communication shall be deemed to be proof of receipt: (a) in the case of delivery by hand, when delivered;

(b) in the case of fax, the Business Day after the despatch;

(c) in the case of recorded delivery, special delivery or registered post, forty eight (48) hours from the date of posting.

8.2 Notices or communications referred to in clause 8.1 affecting this Agreement shall in the case of LUL be addressed to:

Ground Floor
Albany House
Petty France
London
SW1H 0BD

Tel: 020 7918 3850
Fax: 020 7918 4138
Attention: Contract Manager

and in the case of JNP be addressed to:
15 Westferry Circus
7th Floor
London E14 4HD

Tel: 0845 660 5466
Fax: 0207 088 5489
Attention: Head of Prime Contract Management

And in the case of Tube Lines ( Holdings ) Limited be addressed to:

29th Floor
One Canada Square
Canary Wharf
London E14 5DY

Tel: 020 7712 1556
Fax: 020 7712 1577
Attention: Head of Prime Contract Management

or such person or address as the relevant party may from time to time notify in writing to the others.

9. Waiver

9.1 The failure of any party at any time to enforce any provision of this Agreement shall in no way affect its right to require complete performance by the other party, nor shall the waiver of any breach of any provision be taken or held to be a waiver of any subsequent breach of any provision, or be a waiver of the provision itself.

9.2 Save as expressed to the contrary in this Agreement, each party's rights and remedies under this Agreement are cumulative and shall not apply to exclude or limit any right or remedy at law or any claim for equitable relief.

10. Assignment

10.1 Subject to clause 10.2, no party shall assign, transfer, charge or otherwise deal with, in whole or in part, any of its rights or obligations under this Agreement ( nor grant, declare a trust of, create or dispose of any right or interest in it ) without the prior written consent of the other parties.

10.2 No consent under this Agreement shall be required from any party if the assignment, transfer or charge referred to in clause 10.1 is entered into by the Private Shareholder by way of security or the Company by way of security in accordance with the terms of the PPP Contract.

10.3 Other than in the case of an assignment, transfer or charge entered into pursuant to clause 10.2, if a party ( the assignor ) does assign its rights under this Agreement to another party ( the assignee ), the assignor shall procure that the assignee shall enter into a deed of accession so that the assignee is bound by provisions corresponding to the assignor's obligations under this Agreement.

11. Severability

Should any provision of this Agreement be held to be invalid or unenforceable then such provision shall, so far as invalid or unenforceable, be given no effect and shall be deemed not to be included in this Agreement but without invalidating any of the remaining provisions of this Agreement. The parties shall then use all reasonable endeavours to replace the invalid or unenforceable provision by a valid provision the effect of which is the closest possible to the intended effect of the invalid or unenforceable provision.

12. Liability

LUL's liability in respect of any breach of its obligations under this Agreement shall be no greater than any liability of LUL resulting from an LUL Breach under the PPP Contract of the Company.

13. Disputes

13.1 The parties agree that: (a) for the purposes of this Shareholders' Agreement only any Dispute under this Agreement shall be resolved in accordance with the Dispute Resolution Agreement ( as amended from time to time ); and

(b) each of the parties shall act in accordance with the Dispute Resolution Agreement as if the Private Shareholder were a party to that agreement.

13.2 The parties further agree that in circumstances where a Dispute arises under this Shareholders' Agreement, the Private Shareholder shall be entitled to appoint ( by written notice to the other parties to the Dispute ): (a) a Contract Manager or equivalent, where such a Dispute is referred to Contract Managers pursuant to paragraphs 3.1 or 3.2 of the Dispute Resolution Agreement; and

(b) a Senior Representative or equivalent, where such a Dispute is referred to Senior Representatives pursuant to paragraphs 3.8 to 3.11 of the Dispute Resolution Agreement. Such appointees and their appointment shall be subject to the provisions of the Dispute Resolution Agreement as if those appointees were Contract Managers or Senior Representatives appointed by LUL or an Infraco under the Dispute Resolution Agreement.

13.3 Where a Dispute under this Shareholders' Agreement is referred to a PPP Board, the relevant board shall be an Other PPP Board ( as defined in paragraph 3.2(h) of the Dispute Resolution Agreement ).

14. Governing law

Without prejudice to clause 13 ( Dispute Resolution ), this Agreement shall be governed by and construed in accordance with the laws of England and Wales and the parties irrevocably submit to the exclusive jurisdiction of the courts of England and Wales as provided for in clauses 9.1 to 9.2 of the Dispute Resolution Agreement.

15. Contracts (Rights of Third Parties) Act 1999

Other than subject to clause 4.10, a person who is not a party to this Agreement shall have no right under the Contracts ( Rights of Third Parties ) Act 1999 to enforce any of its terms.

16. Termination

This Agreement shall terminate on the Contract Disposal Date in the event that the PPP Contract to which to Company is party is subject to Mandatory Sale procedure in clauses 40 or 41 of the applicable PPP Contract.

AS WITNESS this Agreement has been signed for and on behalf of the parties on the date first above written.

Signed by MARTIN CALLAGHAN ) MARTIN CALLAGHAN
and FRANCES LOW ) FRANCES LOW
for and on behalf of )
London Underground Limited )

Signed by RICHARD WICKERSON ) RICHARD WICKERSON
for and on behalf of )
Tube lines ( holdings ) limited )

Signed by MARTIN CALLAGHAN ) MARTIN CALLAGHAN
and FRANCES LOW ) FRANCES LOW
for and on behalf of )
Infraco JNP Limited )

APPENDIX A - LETTER OF APPOINTMENT OF THE PARTNERSHIP DIRECTOR

[on the headed notepaper of Infraco]
[name and address of Partnership Director]

Dear [ ]

Infraco JNP Limited ( the Company )

This letter contains the terms which we have discussed and agreed for your appointment ( the Appointment ) as a non-executive director ( known as a Partnership Director ) of and by the Company following your nomination by London Underground Limited ( LUL ) as Special Shareholder in the Company. Your appointment is made pursuant to and is subject to the terms and conditions set in the Shareholders' Agreement dated [_____ _____] and made between (1) LUL (2) Tube Lines ( Holdings ) Limited ( the Shareholders ) and (3) the Company ( the Shareholders' Agreement ) ( as amended from time to time ).
An aggregate fee of £20,000 per annum ( to be indexed annually in accordance with RPIX ) will be paid to you on a four-weekly basis in respect of your services as a non-executive director of the Company. On termination of the Appointment, any accrued fee will be paid on a pro rata basis. You will not be entitled to any other fees or remuneration save as set out in paragraph 3 or as otherwise expressly agreed in writing with the Company.
You will be reimbursed for all travel and other similar expenses properly and necessarily incurred in the performance of your duties to the extent and in accordance with the policies and procedures established by the board for all directors from time to time.
You will be expected to devote 2 full time days ( or equivalent ) per 4 week period to fulfilling the requirements of your office including attending all board meetings and general meetings of the Company. You will receive details of all such meetings in advance.
You will not, whether during your Appointment or after its termination, use, divulge or disclose, and shall use all reasonable endeavours to prevent the use or disclosure by any third party of any confidential information gained by virtue of your office of Partnership Director relating to the Private Shareholder or the Company or its performance under the PPP Contract unless such information is legitimately in the public domain or LUL is entitled to receive such information under the provisions of the PPP Contract.
You shall owe the normal fiduciary and statutory duties of a director to the Company as your primary duty. Other than as expressly described in this Appointment and/or the Shareholders' Agreement you shall owe no duties to any other person.
Regardless of the provisions of the Articles of Association of the Company, you shall not be entitled to appoint a person to act as your alternate director.
Subject to paragraph 5 hereof, you shall keep a record of all information disclosed to LUL and provide copies thereof to the Company as soon as possible following a request to do the same. Insofar as you report to LUL orally you will provide to the Company a written summary of the material aspects of your report and any subsequent discussion(s).
Your Appointment will automatically cease in the event that you resign as a director or you are removed from office in accordance with Clauses 2.4 or 5 of the Shareholders' Agreement. In particular, in signing this letter, you acknowledge that your office is subject to the terms of the Shareholders' Agreement and the Company's Articles of Association and may be determined as permitted under the terms of the Shareholders' Agreement or Articles and that such termination will not give rise to any claim against the Company whatsoever.
On termination of your Appointment, you agree that you will promptly return to the Company secretary all papers and property of the Company which are in your possession or under your control.
The Company shall arrange appropriate insurance for you in your capacity as a director of the Company.
To the extent permitted by Law ( including section 310 of the Companies Act 1985 ), the Company shall indemnify you against any claims in respect of acts of negligence committed by you. For the avoidance of doubt this indemnity shall not indemnify you against claims in respect of acts of gross negligence or fraud.

Please indicate your acceptance and acknowledgement of these terms by signing the attached copy and returning it to me. I look forward to seeing you at the next Board Meeting.

Yours sincerely

..................................................
SIGNATORY

I agree to and acknowledge the terms and conditions set out above relating to my Appointment as non-executive director ( known as the Partnership Director ) of Infraco JNP Limited.

Signed...........................................

Dated ...........................................

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