EXHIBIT 10.4
(VEDANTA LOGO)
CONSULTANCY AGREEMENT
BETWEEN
VEDANTA RESOURCES PLC
AND
STERLITE INDUSTRIES (INDIA) LIMITED
(VEDANTA LOGO)
CONSULTANCY AGREEMENT
THIS AGREEMENT made at London, United Kingdom this 29th day of March, 2005,
between Vedanta Resources plc, a Company incorporated under the laws of England
& Wales and having its registered office at Hill Street, ▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇ (hereinafter called 'VR plc', which expression shall, unless
repugnant to the context or meaning thereof, be deemed to include its
successors) of the One Part and Sterlite Industries (India) Limited, a company
registered under the provisions of the Companies Act, 1956 and having its
Registered Office at ▇-▇▇/▇, ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, Dist.
Aurangabad 431 133, Maharashtra (hereinafter called 'SIIL' which expression
shall, unless repugnant to the context or meaning thereof, be deemed to include
its successors) of the Other Part;
W H E R E A S
A) VR plc is a body corporate incorporated in England & Wales, VR plc is the
ultimate parent company of Sterlite Industries (India) Limited and the various
other Sterlite group companies in India and abroad. VR plc has a pool of
qualified and well-experienced managerial and operating personnel.
B) Sterlite Industries (India) Limited, is a leading non-ferrous metals player
in India. Its business comprises the manufacture of copper anode, copper cathode
and continuous cast copper rods. It has made down stream investment in Bharat
Aluminium Company Limited, Hindustan Zinc Limited, Indian Foils Limited and has
also acquired copper mines in Australia.
1
(VEDANTA LOGO)
C) SIIL has requested, and VR plc is willing to provide strategic planning and
consultancy services to SIIL and each of its subsidiaries in varied areas of
business such that each of the companies is able to finalise and implement plans
for growth (both generic and by acquisitions), raise finance, enhance profile
and so forth.
D) The parties have agreed that VR plc shall render such services to SIIL on the
terms and conditions hereinafter contained:
NOW IT IS AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:
1. SERVICES
a. The scope of services to be rendered by VR plc to SIIL will include but not
be limited to services as set out in Appendix 1:
b. The services shall be rendered and supplied by VR plc to SIIL and its
subsidiaries based on the needs and requirements of SIIL. The services will be
provided by VR plc on its own and also where the services are specifically
required by SIIL. SIIL shall keep VR plc informed of the development of its
programmes, projects etc., and the aforesaid services shall be rendered and
supplied by VR plc upon request made by SIIL. SIIL shall give sufficient and
reasonable time to VR plc to render and supply the aforementioned services. In
the event of SIIL requiring services other than those specified above, VR plc
will supply these if available by VR plc on such terms as may be mutually agreed
between SIIL and VR plc.
2
(VEDANTA LOGO)
2. MANNER IN WHICH SERVICES ARE TO BE PERFORMED
VR plc agrees to render these services as follows:
a. By making available its skilled employees to SIIL for the performance of the
above services.
b. By providing SIIL with oral and written expert advice in the various service
categories covered within this agreement.
c. By providing SIIL with factual information, data and recommendations and the
results of studies and services relating to the business activities and
management of SIIL, so as to enable it to promote and improve its business.
3. FEES
a. In consideration of VR plc rendering and supplying to SIIL and its
subsidiaries the services mentioned above, SIIL shall pay to VR plc fees as
set-out in Appendix 2. It is also agreed that the maximum consideration for the
first financial year under this Agreement shall not exceed USD 3 million.
The said fees will be subject to revision, on mutually accepted terms, at each
calendar year commencing from 1st April, 2005.
b. The said fees shall be paid six monthly in arrears starting with the period
commencing 1st April, 2004.
c. SIIL shall pay to VR plc the full amount of each invoice no later than 45
days following receipt of the same. Invoices shall be issued in March and
September in each year during the Term. If SIIL disputes any amount set forth in
any such invoice, SIIL shall pay the undisputed portion within the specified
period, and the SIIL and VR plc shall attempt in good faith to resolve all
disputed items as soon as reasonably practicable.
3
(VEDANTA LOGO)
d. The gross fee and any other amounts due under this agreement are exclusive of
any Value Added Tax (VAT), if any, chargeable under the Value Added Tax 1994
(including all associated regulation and European Community Directives and
Regulations pertaining thereto) ('VAT'). If VAT is chargeable, SIIL shall pay
this VAT in addition to any amount due under this agreement and VR plc will
provide a valid VAT invoice to SIIL. VR plc will provide all reasonable
assistance to SIIL to enable it to recover any VAT so charged.
e. SIIL will pay the gross fee to VR plc. If the fee is subject to any
withholding tax then VR plc may require SIIL, at its sole discretion, to
increase the fee to such an extent that the net fee after the deduction of
withholding tax shall equal the gross fee as calculated in Appendix 2 and as
referred to above, If any such withholding is made, SIIL will provide the
necessary vouchers certifying the tax withheld to VR plc.
4. CONFIDENTIALITY
Both parties undertake to maintain strict confidentiality of all information
that they may have access to or that comes to their knowledge during the course
of rendering or supplying of the said services to SIIL and its subsidiaries.
Neither of the parties shall disclose such information to any person save and
except its employees and other professional advisers on a need-to-know basis and
on obtaining from them an assurance of confidentiality.
5. TERM
This Agreement shall come into force upon the execution hereof and shall take
effect from 1st April, 2004 and unless terminated as herein provided, shall
remain in force for a period of five years.
4
(VEDANTA LOGO)
6. TERMINATION
a. This Agreement shall stand terminated forthwith if a party is unable to pay
any debt as it becomes due and has liabilities which exceed its assets.
b. This Agreement may be terminated by either of the parties forthwith, if the
other party shall happen to be in breach of any of its terms and shall have
failed to rectify such breach within sixty days of a notice in this regard
having been served upon it.
c. This Agreement can be terminated by mutual agreement after 31 March 2005 by
either party providing written notice of its intention to terminate the
Agreement.
7. TRANSITION
Upon termination or expiration of this Agreement, each party shall diligently
cooperate with the other to effect a smooth and orderly transition. From the
time that a notice of termination is received by either party until the
effective termination date, each party shall cooperate fully with any newly
appointed party performing the duties contemplated hereunder.
8. LIMITATION OF LIABILITY
In the event of termination by either party in accordance with any of the
provisions of this Agreement, neither party shall be liable to the other because
of such termination for compensation, reimbursement or damages on account of the
loss of prospective profits or anticipated sales or on account of expenditure,
investment, leases or commitments in connection with the business or goodwill of
SIIL or VR plc.
5
(VEDANTA LOGO)
9. FORCE MAJEURE
In the event of a party's obligations hereunder have been prevented from being
carried out due to a governmental restriction, act of God, war, civil war, riot
or any other cause similar to the foregoing which is beyond its control, it
shall not be responsible to the other party for failure or delay of performance
of the obligations under this Agreement; provided, however, if such failure or
delay continues for more than six months, the other party hereto may terminate
this Agreement by notice in writing to that effect.
10. RETURN OF CONFIDENTIAL INFORMATION
Upon termination, either party shall return to the other all documents and
papers which it may have in its custody belonging to the other in connection
with this Agreement the services rendered or supplied hereunder.
11. NOTICES
All notices required to be given shall be deemed to have been sufficiently
served if sent by registered post acknowledgement due or by any other means of
recorded delivery, including telex or fax, at the address of the party mentioned
herein above, or at any other address as may be communicated in writing.
12. NON ASSIGNABILITY
Neither of the parties may assign this Agreement or any rights or obligations
hereunder without the prior consent in writing of the other.
6
(VEDANTA LOGO)
13. CHANGES TO AGREEMENT
This Agreement shall be modified only by the mutual consent of both parties
expressed in writing.
14. INVALIDITY
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable, the validity, legality or enforceability of the remaining
provisions shall not in any way be affected or impaired.
15. ENTIRE AGREEMENT
This Agreement comprises the entire agreement between the Parties relating to
the subject matter hereof and each of the Parties acknowledges that it has not
entered into this Agreement relying on any representation, statement or
agreement, whether oral or in writing, other than those expressly incorporated
into this Agreement.
16. PARTNERSHIP AND AGENCY
Nothing contained herein shall be construed as constituting VR plc as an agent
of SIIL or its subsidiaries. The relationship between the parties is strictly on
a principal-to-principal basis. Similarly, nothing herein contained shall be
construed to constitute a joint venture or an arrangement for sharing of profits
or partnership between the parties.
7
(VEDANTA LOGO)
17. DISPUTES
In the event of any dispute or difference arising between the parties concerning
the interpretation of this Agreement or the rights and obligations of the
parties, the same shall be referred to a single arbitrator in case the parties
so agree, failing which each party shall nominate an arbitrator in writing and
the arbitrators so appointed shall, before entering upon reference, appoint a
third arbitrator who shall act as the presiding arbitrator and thereafter
proceed to determine the matter of difference or dispute. The decision of the
arbitrators by majority shall be conclusive. The arbitration shall be in
accordance with the UNCITRAL Arbitration Rules as in force and effect on the
date of service of a Notice of Dispute. The tribunal shall consist of a sole
arbitrator and the appointing authority shall be the Secretary General of the
Permanent Court of Arbitration of the Hague. Such arbitration shall be held at
London and the language of the arbitration shall be English.
18. LAW
This Agreement shall be construed and given effect to in accordance with the
laws of England and Wales. Subject to the provisions of Clause 17 hereinabove,
any dispute or difference arising out of this Agreement or any claim by either
party against the other party shall be adjudicated upon and decided by a Court
of competent jurisdiction in England and Wales.
8
(VEDANTA LOGO)
IN WITNESS WHEREOF this Agreement has been entered into the day and year first
above written.
SIGNED for and on behalf of )
VEDANTA RESOURCES PLC ) /s/ ▇▇▇▇▇ Sydney
Director )
Director/Company Secretary ) /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
SIGNED for and on behalf of )
STERLITE INDUSTRIES (INDIA) LIMITED ) /s/ ▇▇▇▇▇ ▇▇▇▇
Director )
Director/Company Secretary ) /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
9
(VEDANTA LOGO)
APPENDIX 1
CONSULTANCY SERVICES
1. STRATEGIC ADVICE
a) Advice on developing a global profile, particularly relevant to the metals
and mining businesses of the SIIL group of companies.
b) Advice and assistance in formulating and implementing short, medium and
long term plans and strategies for growth and diversification, and also
consolidation so as to enhance and make effective use of corporate
resources in the form of personnel, finance and goods and services.
c) Advice and assistance on all opportunities for growth through mergers and
acquisitions including identification, evaluation, negotiation and closing.
d) Advice on all plans for new ventures, businesses and facilities (including
mines and refining and manufacturing facilities) including evaluation of
proposals and their implementation.
e) Assistance in sourcing international consultants including specialists in
mining and metallurgical, suppliers, vendors and customers and negotiation
with these parties.
f) Advice on globalisation including in particular advice on best practices in
all fields of production, marketing, distribution, administration, human
resources, and so forth.
2. FINANCIAL, TREASURY AND LEGAL ADVICE
a) Advice on financial structure of the company including advice and
assistance in relation to raising of financial resources by private and/or
public placements of debt and/or equity. This advice will include
consideration of new and/or different instruments or arrangements which
10
(VEDANTA LOGO)
are evolved in the international markets and their applicability to the
companies.
b) Assistance in short, medium and long term financial planning and
forecasting.
c) Assistance in investment appraisal.
d) Support for implementation of financial systems.
e) Internal audit.
f) Assistance in cash management and cash flow planning.
g) Advice on banking arrangements and particularly in the international sector
including foreign exchange exposure.
h) Advice on taxation matters.
i) Advice on legal matters, including trademark, licence, domain name and
contractual issues.
3. MARKETING
a) Advice on public relations, marketing and customer service provision.
b) Provision of corporate marketing material. All such material will become
the property of SIIL subject to payment under section 3 of this agreement.
c) Assistance with marketing positioning and strategic market planning.
4. TRAINING
Assistance with the provision of staff training.
5. IT SUPPORT
a) Assistance with the provision of IT software support.
b) Provision of software and systems advice.
11
(VEDANTA LOGO)
6. HUMAN RESOURCE MANAGEMENT
a) Advice on short, medium and long term Human Resource planning.
b) Advice on establishing Human Resource policies, selection and training of
personnel and in other organisational matters.
c) Advice on executive development programmes, incentives, retirements and
other benefit programmes.
12
(VEDANTA LOGO)
APPENDIX 2
CALCULATION OF THE SERVICE FEES DUE UNDER THIS AGREEMENT
1. Pursuant to Clause 3 of this Agreement SIIL shall pay VR plc for the
services provided as calculated below.
2. The time spent by the relevant personnel in providing the services will be
determined.
3. Once the amount of time spent has been calculated, a proportion of salary
and all associated employment costs (including but not restricted to
salaries, benefits, bonuses, allowances, travel expenses, and other
associated employment costs) together with a proportion of overhead costs
incurred by VR plc shall be determined. Such costs will not include any
notional costs suffered by VR plc such as the attributed cost of awards to
staff under the Vedanta Resources Long Term Incentive Plan.
4. Then the total of the costs calculated in 3 above together with a ▇▇▇▇-up
of 40% shall represent the gross fee payable to VR plc for the period.
5. The anticipated fee used for reference in this agreement will initially be
based on a relevant (based on estimated time spent on the provision of
services under this agreement) proportion of expected annual budgeted costs
for the year ending 31 March 2005 plus the ▇▇▇▇-up noted above. Based on
current projections the relevant proportion of annual budgeted costs will
be in the region of USD 3 million per annum.
13
(VEDANTA LOGO)
6. The fee will be adjusted for actual time and costs incurred in the year if
the actual costs calculated in 3 above are 20% more or less than the
budgeted costs (as calculated in 5 above) on the services provided and the
estimate of the next year's fee will also be adjusted accordingly.
7. Appendix 3 sets out the expenses budget for the year ending 31 March 2005
for VR plc individuals involved and the expected gross fee chargeable to
SIIL for the year ending 31 March 2005.
8. The gross fee will be recalculated each year.
14
(VEDANTA LOGO)
APPENDIX 3
ANNUAL BUDGETED COSTS
As set-out in paragraph 5 of Appendix 2 the allocated costs for the year ending
31 March 2005 in providing the services pursuant to clause 1 of this Agreement
are set out below:
TABLE 1
------------------------------------------------------------
DESCRIPTION USD
----------
DIRECT COSTS
----------
SALARIES AND RELATED STAFF COSTS 809,850
----------
RELATED STAFF COSTS 202,450
----------
OVERHEADS
----------
PROPERTY 168,400
----------
PROFESSIONAL FEES 166,700
----------
INSURANCE 113,200
----------
COMMUNICATION AND IT COSTS 19,000
----------
CAR EXPENSES 10,600
----------
TRAVEL 579,600
----------
DEPRECIATION 55,600
----------
OTHER EXPENSES 17,500
----------
----------
TOTAL COSTS $2,142,900
----------
40% ▇▇▇▇ UP $857,100
----------
----------
TOTAL FEES $3,000,000
------------------------------------------------------------
------------------------------------------------------------
For the avoidance of doubt the costs considered do not include the cost of:
a. share awards to SIIL personnel under the Vedanta Resources Long Term
Incentive Plan
b. financing costs for provision of funds
Separate charges may be recovered by VR plc for these services.
15
(VEDANTA LOGO)
The table below lists the persons employed by VR plc and shows the percentage of
time spent by each person in the performance of consultancy services for SIIL.
The costs in Table 1, above, are based on the following time allocation:-
Table 2
------------------------------------------------------------------------------------------
POSITION NAME OF EMPLOYEE UK INDIA
DIRECTORS
Chief Executive MR. ▇▇▇▇ ▇▇▇▇▇▇▇ 60% 40%
Deputy Chief Executive ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ 0% 100%
Finance Director MR. ▇▇▇▇▇ SYDNEY-▇▇▇▇▇ 70% 30%
Non- exe Director ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ 100% 0%
Non- exe Director ▇▇ ▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇▇ 100% 0%
Non- exe Director ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 100% 0%
Non- exe Director ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 100% 0%
Non- exe Director MR AMAIN MEHTA 100% 0%
SENIOR MANAGEMENT
VP Corporate Finance ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 90% 10%
Head of Investor
Relations ▇▇ ▇▇▇▇ ▇▇▇▇▇ 90% 10%
Company Secretary ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ 90% 10%
Asst, Company Secretary ▇▇ ▇ ▇ ▇▇▇▇▇▇▇ 80% 20%
SUPPORT STAFF
Head Office Accountant MRS POOJA MARU 100% 0%
Head Office Administrator ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 100% 0%
PA to Chief Executive ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ 100% 0%
Assistant Accountant REMI ALARAN 100% 0%
Driver ▇▇▇▇ ▇▇▇▇▇▇▇ 100% 0%
------------------------------------------------------------------------------------------
16
(VEDANTA LOGO)
Appendix 4
PERSONNEL
The following personnel are employed by VR plc and provide consultancy services
in accordance with this agreement as under:
▇▇▇▇ ▇▇▇▇▇▇▇
CHIEF EXECUTIVE
▇▇. ▇▇▇▇▇▇▇ is the Chairman and Managing director of SIIL. He is closely
involved in all aspects of business of SIIL ranging from strategy to operational
matters. He devotes the majority of his time to SIIL. He has 29 years of mining
experience.
▇▇▇▇▇ SYDNEY - ▇▇▇▇▇ - F.C.A.
FINANCE DIRECTOR
Mr. ▇▇▇▇▇▇ ▇▇▇▇▇ is primarily involved in providing financial advice to SIIL.
Key areas of his services include:
- Raising finance from international markets;
- Providing advice on the financial structure;
- Advice on taxation issues;
- Advice on legal matters;
- Formulation of growth strategy and advice on new business ventures.
- Cash flow planning and management;
- Assistance in investment appraisal;
▇▇▇▇ ▇▇▇▇▇ - MSI (DIP)
HEAD OF INVESTOR RELATIONS
Mr. Smelt is primarily involved in the following areas when advising SIIL:
- Developing a global profile for SIIL;
- Assistance in formulation of a public relations strategy;
- Providing advice on best practice policies and benchmarks relevant to
the industry in which SIIL operates.
17
(VEDANTA LOGO)
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - MBA; M. TECH (METALLURGICAL ENGINEERING)
HEAD OF CORPORATE FINANCE
▇▇. ▇▇▇▇▇▇▇▇▇ is primarily involved in the following areas when advising SIIL:
- Provision of advice on mergers and acquisition of new ventures,
businesses and facilities including identification, evaluation,
negotiating and closure;
- Assistance in investment appraisal;
- Advising on strategic market planning.
▇▇▇▇▇▇▇ ▇▇▇▇ - A.C.A
COMPANY SECRETARY
▇▇. ▇▇▇▇ is primarily involved in the following areas when advising SIIL:
- Assistance in taxation and legal issues;
- Sourcing external advisors and professionals.
- Providing support for internal audit;
- Assistance in medium-long term financial planning;
- Provision of staff training;
- Advice on HR practices and policies including long term incentive
plans;
HARE ▇▇▇▇▇▇▇ -A.C.I.B; A.I.I.B
ASSISTANT COMPANY SECRETARY
▇▇. ▇▇▇▇▇▇▇ is primarily involved in the following areas when advising SIIL:
- Liaison with senior SIIL personnel in communication of information and
advice to and from VR plc;
- Assistance in cash flow planning and management;
- Assistance in legal and tax issues.
18
