Exhibit 10.4

 

EXECUTION VERSION

 

 

 

SPONSOR

PLEDGE AND AGREEMENT

 

dated as of December 1, 2005

 

between

 

APEX SILVER MINES LIMITED

and

JPMORGAN CHASE BANK, N.A.,
as Collateral Agent

 

 

 

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TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

 

 

ARTICLE I DEFINITIONS, ETC.

 

1

1.01

 

Terms Generally

 

1

1.02

 

Certain Uniform Commercial Code Terms

 

1

1.03

 

Additional Definitions

 

2

 

 

 

 

 

ARTICLE II REPRESENTATIONS AND WARRANTIES

 

4

2.01

 

Representations

 

4

2.02

 

Good Title; Valid Security Interests

 

4

2.03

 

Names, Etc.

 

4

2.04

 

Proper Legal Form

 

5

 

 

 

 

 

ARTICLE III SPONSOR COLLATERAL

 

5

3.01

 

Shares of Apex Luxembourg

 

6

3.02

 

Intercompany Debt

 

6

3.03

 

Expropriation Compensation

 

7

3.04

 

New York Accounts

 

8

 

 

 

 

 

ARTICLE IV COVENANTS

 

8

4.01

 

Maintenance of Existence; Prohibition of Fundamental Changes

 

8

4.02

 

Delivery of Financial Statements

 

8

4.03

 

Limitation on Liens

 

9

4.04

 

Limitation on Indebtedness

 

9

4.05

 

Notices

 

9

4.06

 

Financial Covenant

 

10

4.07

 

Books and Records; Accounting and Cost Control Systems

 

10

4.08

 

Compliance with Law

 

10

4.09

 

Arm’s-Length Transactions

 

10

4.10

 

Further Assurances

 

10

4.11

 

L/C, Performance Bonds, Etc.

 

10

4.12

 

Discretionary Metals Hedge Transactions

 

10

4.13

 

Insurance Requirement

 

11

4.14

 

Bankruptcy

 

11

4.15

 

Taxes

 

11

 

 

 

 

 

ARTICLE V FURTHER ASSURANCES

 

11

5.01

 

Delivery and Other Perfection

 

12

5.02

 

Other Financing Statements or Control

 

12

5.03

 

Preservation of Rights

 

12

5.04

 

Deficiency

 

12

5.05

 

Locations; Names, Etc.

 

12

5.06

 

Private Sale

 

12

5.07

 

Collateral

 

12

5.08

 

Application of Proceeds

 

13

 

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5.09

 

Attorney-in-Fact

 

13

 

 

 

 

 

ARTICLE VI DEFAULTS

 

14

6.01

 

Sponsor Defaults

 

14

6.02

 

Remedies

 

16

 

 

 

 

 

ARTICLE VII MISCELLANEOUS

 

16

7.01

 

Governing Law

 

16

7.02

 

Waiver of Jury Trial

 

16

7.03

 

Severability

 

16

7.04

 

Notices

 

16

7.05

 

Benefits of Agreement

 

17

7.06

 

Counterparts

 

17

7.07

 

Jurisdiction, Service of Process and Venue

 

17

7.08

 

Amendments, Etc.

 

18

7.09

 

No Waiver

 

18

7.10

 

Successors and Assigns

 

18

7.11

 

Expenses

 

18

7.12

 

Collateral Agent Protections

 

19

 

 

 

 

 

 

 

 

 

 

ANNEX I

 

Filing Details

 

 

 

 

 

 

 

ANNEX 2

 

Quarterly Discretionary Hedge Report

 

 

 

ii

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SPONSOR PLEDGE AND AGREEMENT

 

This Agreement dated as of December 1, 2005 (this “Agreement”), is made between:

 

APEX SILVER MINES LIMITED, an exempted company duly incorporated with limited
liability and validly existing under the laws of the Cayman Islands (the
“Sponsor”), and

 

JPMORGAN CHASE BANK, N.A., a national banking corporation, as Collateral Agent
for the and on behalf of the Secured Parties (the “Collateral Agent”).

 

WHEREAS:

 

A.                                   Minera San Cristóbal, S.A. (the “Borrower”)
proposes to incur and secure Secured Debt Obligations.

 

B.                                     Apex Metals GmbH (“Apex Metals”) and the
Hedge Banks have executed and will continue to execute certain Mandatory Metals
Hedge Transactions under the Mandatory Metals Hedge Agreements to which Apex
Metals and the Hedge Banks are parties.

 

C.                                     The Sponsor (i) directly owns 100% of the
outstanding share capital of Apex Luxembourg S.A. R.L. (“Apex Luxembourg”),
which indirectly owns 100% of the outstanding share capital of the Borrower, and
(ii) indirectly owns 100% of the outstanding quotas of Apex Metals.

 

D.                                    The Sponsor has authorized the execution
and delivery of this Agreement to undertake specified obligations to induce the
Senior Lenders to make Senior Loans to the Borrower and to induce the Hedge
Banks to extend credit to Apex Metals, as the Sponsor will receive significant
benefits from such agreements.

 

NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

ARTICLE I
DEFINITIONS, ETC.

 

1.01                           Terms Generally.  All capitalized terms used and
not otherwise defined herein shall have the respective meanings ascribed to them
in the Common Security Agreement, dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the “Common Security
Agreement”), among the Borrower, Apex Luxembourg, Apex Sweden, Apex Metals, the
Administrative Agent, the Technical Agent, the Collateral Agent, the Securities
Intermediary and the Senior Lenders and Hedge Banks from time to time party
thereto.

 

1.02                           Certain Uniform Commercial Code Terms.  As used
herein, the term “Proceeds” has the meaning set forth in Article 9 of the UCC.

 

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1.03                           Additional Definitions.  In addition, as used
herein:

 

“Apex Luxembourg Shares” has the meaning assigned to such term in
Section 3.01(a).

 

“Consolidated Tangible Net Worth” means, at any date of determination, (a) the
amount which would appear in accordance with Applicable Accounting Principles on
a consolidated balance sheet of the Sponsor and its consolidated subsidiaries
opposite the heading “shareholders’ equity” (or any similar item) (but excluding
from shareholders’ equity any amounts in respect of unrealized mark-to-market
adjustments (whether positive or negative) relating to hedging and other
financial risk management activities of the Sponsor or any of its consolidated
subsidiaries), minus (b) the sum of (i) the aggregate amount of items of the
following character which are included in the consolidated assets of the Sponsor
and its consolidated subsidiaries:  (A) franchises, licenses, permits, patents,
patent applications, copyrights, trademarks, trade names, brand names, service
marks, goodwill, experimental or organizational expense and other like
intangibles; (B) deferred charges and prepaid expenses (including prepaid
pension expenses but other than (I) deferred mining development, acquisition and
exploration costs and (II) deferred charges relating to any Hedge Instrument);
(C) unamortized debt discount and expense; and (D) amounts in respect of capital
stock, promissory notes and other securities issued by the Sponsor or any of its
consolidated subsidiaries and held in its treasury; and (ii) without
duplication, any solvency deficiency in any registered pension plan based on the
most recent valuation filed with the applicable regulators.

 

“Permitted Discretionary Hedging Transaction” means a Hedge Instrument entered
into for hedging (i.e., non-speculative) purposes that meets the following
conditions:

 

(a)                                  such Hedge Instrument is entered into with
a financial institution having a long term unsecured indebtedness rating from
S&P of at least A and Moody’s of at least A1; and

 

(b)                                 the commodity subject of such Hedge
Instrument is zinc, silver or lead (of the type described in the definition of
“Metals” in Appendix A to the Common Security Agreement); and

 

(c)                                  the notional volume with respect to the
Metal subject of such Hedge Instrument, when aggregated with (i) all other
notional volumes with respect to such Metal under all other Hedge Instruments
which purport to be “Permitted Discretionary Hedging Transactions” and (ii) all
notional volumes with respect to such Metal under all outstanding Mandatory
Metals Hedging Transactions does not exceed:

 

(i)                                     70% of the volume of the forecast
production for such Metal for any calendar year covered by such Hedge Instrument
as determined in accordance with the Initial Operating Plan; or

 

(ii)                                  70% of the Proven and Probable Reserves
with respect to such Metal as set forth in the Initial Operating Plan; and

 

(d)                                 the Hedge Instrument provides for financial
settlement only; and

 

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(e)                                  the final scheduled delivery or payment
date under such Hedge Instrument is not later than six months after the Final
Maturity Date except Hedge Instruments that are options on which all premia have
been paid on or prior to the Final Maturity Date.

 

“Quarterly Discretionary Hedge Report” means a report substantially in the form
of Annex 2 to this Agreement showing the Sponsor and its subsidiaries’ positions
with respect to outstanding Permitted Discretionary Hedging Transactions.

 

“Restricted Subsidiary” means Apex Metals, Apex Sweden, Apex Luxembourg, the
Service Company, the Borrower or any other Subsidiary of the Sponsor that at any
time holds any “Interest” (as such term is defined in the Transfer Restrictions
Agreement) in any of the foregoing companies or any Intercompany Debt, whether
directly or indirectly.

 

“Secured Obligations” means, collectively, (a) all Secured Debt Obligations,
(b) all CGSA Secured Obligations, (c) all obligations of the Sponsor hereunder
and under the Completion Agreement and (d) in the case of each of the foregoing,
all interest thereon and expenses related thereto, including any interest or
expenses accruing or arising after the commencement of any case under the United
States Bankruptcy Code or any other bankruptcy or insolvency law (whether or not
such interest or expenses are allowed or allowable as a claim in whole or in
part in such case).

 

“Sponsor Collateral” has the meaning assigned to such term in Article III.

 

“Sponsor Default” has the meaning assigned to such term in Section 6.01 hereto.

 

“Sponsor Permitted Liens” means:

 

(a)                                  Liens on cash and investments maintained in
the Escrow Account;

 

(b)                                 Liens on cash pledged to the issuer of
letters of credit required pursuant to the terms of the Material Project
Documents;

 

(c)                                  Liens established in favor of the
Collateral Agent for the benefit of the Secured Parties;

 

(d)                                 Liens imposed by any Governmental Authority
for taxes, levies, assessments, pension obligations or charges not yet due or
which are being contested in good faith and by appropriate proceedings (and
against which adequate reserves are being maintained in accordance with U.S.
GAAP and Applicable Accounting Principles by the Borrower);

 

(e)                                  deposits or pledges to secure obligations
under workmen’s compensation, social security or similar laws, or under
employment insurance;

 

(f)                                    mechanics’, workmen’s, materialmen’s,
landlord’s, carriers’, warehousemen’s or other like liens arising in the
ordinary course of business with respect to obligations which are not yet due or
which are being contested in good faith and by

 

3

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appropriate proceedings and for which adequate reserves have been established in
accordance with U.S. GAAP and Applicable Accounting Principles;

 

(g)                                 pledges or deposits of money to secure
surety or appeal bonds or letters of credit in the ordinary course of business,
not exceeding $5,000,000 in the aggregate at any one time outstanding; and

 

(h)                                 pledges of shares or other equity interests
in an Unrestricted Subsidiary.

 

“Subsidiary” of any Person shall mean a corporation, partnership, joint venture,
trust, estate or other entity of which (or in which) more than 50% of (a) the
capital stock issued by, or equivalent interests in, such corporation or other
entity, (b) the interest in the capital or profits of such partnership or joint
venture or (c) the beneficial interest in such trust or estate, is at the time
directly or indirectly owned or controlled by such Person, by such Person and
one or more of its other Subsidiaries or by one or more of such Person’s other
Subsidiaries.

 

“UCC” means the Uniform Commercial Code as in effect from time to time in the
State of New York.

 

“Unrestricted Subsidiary” means any Subsidiary of the Sponsor other than a
Restricted Subsidiary.

 

ARTICLE II
REPRESENTATIONS AND WARRANTIES

 

The Sponsor represents and warrants to the Collateral Agent (for the benefit of
the Secured Parties) that:

 

2.01                           Representations.  The Sponsor’s representations
and warranties set forth in Article IV of the Completion Agreement are true and
correct on and as of the date hereof.

 

2.02                           Good Title; Valid Security Interests.  Subject
only to the security interests created hereby and any Sponsor Permitted Liens,
it has good title to all rights and property in which it purports to create a
security interest hereunder.  This Agreement creates in favor of the Collateral
Agent for the benefit of the Secured Parties the security interests purported to
be created by it under Article III hereof and such security interests
constitute, under applicable law, fully perfected first priority security
interests in the Sponsor Collateral subject only to Sponsor Permitted Liens
which are granted priority on a mandatory basis under applicable Government
Rules.

 

2.03                           Names, Etc.  The full and correct legal name,
type of organization, jurisdiction of organization, organizational ID number (if
applicable) and mailing address of the Sponsor as of the date hereof are
correctly set forth in Annex 1.  Annex 1 correctly specifies (a) the place of
business of the Sponsor or, if the Sponsor has more than one place of business,
the location of the chief executive office of the Sponsor and (b) each location
where any financing statement naming the Sponsor as debtor is currently on
file.  The Sponsor has not (a) within the period of four months prior to the
date hereof, changed its location (as defined in Section 9-307 of the UCC),
(b) except as specified in Annex 1, heretofore changed its name, or

 

4

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(c) prior to the date hereof become a “new debtor” (as defined in
Section 9-102(a)(56) of the UCC) with respect to a currently effective security
agreement previously entered into by any other Person.

 

2.04                           Proper Legal Form.  This Agreement is in proper
legal form under the laws of the Cayman Islands for the enforcement thereof
against the Sponsor under the laws of the Cayman Islands and if this Agreement
were stated to be governed by such law, it would constitute the legal, valid and
binding obligation of the Sponsor under such law, enforceable in accordance with
its terms subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors’ rights and to general equity principles; and to ensure
the legality, validity, enforceability or admissibility in evidence of this
Agreement in the Cayman Islands, it is not necessary that this Agreement or any
other document be filed or recorded with any court or other authority in the
Cayman Islands or that any stamp or similar tax be paid on or in respect of this
Agreement (except for (i) those specified in the legal opinions delivered in
satisfaction of the conditions precedent referred to in Section 11.02(h) of the
Common Security Agreement which are to be paid following the Closing Date but
prior to the Initial Disbursement Date, (ii) those which are immaterial and of a
ministerial nature and (iii) those payable in the Cayman Islands as specified in
the legal opinion of Cayman counsel as being payable in connection with
enforcement in the Cayman Islands).  The laws of the Cayman Islands do not
provide for or require any filing, recording or registration of a security
interest in the right, title and interest of the Sponsor in any of the Sponsor
Collateral as a condition of obtaining priority over a creditor that has
acquired a Lien thereon or over a receiver in bankruptcy.

 

ARTICLE III
SPONSOR COLLATERAL

 

As collateral security for the payment in full when due (whether at stated
maturity, by acceleration or otherwise) and performance of the Secured
Obligations, the Sponsor hereby pledges and grants to the Collateral Agent for
the benefit of the Secured Parties a security interest in the following (all of
the property described in Sections 3.01(a), 3.02(a), 3.03(a) and (c), and
3.04(a) and all Proceeds thereof, being collectively referred to herein as
“Sponsor Collateral”):

 

3.01                           Shares of Apex Luxembourg.

 

(a)                                  All right, title and interest which the
Sponsor has or may at any time hereafter acquire in and to (i) the shares of
Apex Luxembourg (the “Apex Luxembourg Shares”), (ii) all other shares,
securities or other property constituting or representing a right to receive a
dividend on the Apex Luxembourg Shares or constituting or representing a right
to receive a distribution or return of capital upon or in respect of the Apex
Luxembourg Shares or constituting or representing warrants or any subscription
or other purchase rights with respect to the Apex Luxembourg Shares, and
(iii) any other interest in Apex Luxembourg which may become or be converted
into an equity interest in Apex Luxembourg.  The Sponsor shall deliver to the
Collateral Agent the certificates representing the Apex Luxembourg Shares on or
prior to the Closing Date and, promptly following receipt, shall deliver to the
Collateral Agent certificates or other relevant documentation representing any
of such other shares, securities,

 

5

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property, warrants, subscriptions, interests or rights, together in each case
with stock powers duly executed by it in blank, to be held by the Collateral
Agent for the benefit and on behalf of the Secured Parties pursuant to the
pledge made hereby.  The Sponsor agrees that it shall not permit the
Organizational Documents of Apex Luxembourg to be amended or modified in any
manner that would deprive the holders of the Apex Luxembourg Shares of control
of Apex Luxembourg.

 

(b)                                 On or prior to the Initial Disbursement
Date, the Sponsor shall, as security for the Secured Obligations, make or cause
to be made any filings or recordations, give or cause to be given any notices
and take or cause to be taken any other actions as may be necessary in the State
of New York, Washington, D.C., the Cayman Islands, Luxembourg and any other
jurisdiction necessary to perfect the pledge of Apex Luxembourg Shares and all
such other shares, securities, property, warrants, subscriptions, interests and
rights in Apex Luxembourg.  The Sponsor hereby promises to deliver in pledge to
the Collateral Agent any Apex Luxembourg Shares and all such other shares,
securities, property, warrants, subscriptions, interests and rights in Apex
Luxembourg which it may acquire after the Closing Date, promptly upon the
receipt thereof, and to make or cause to be made any filings, registrations or
recordations, give or cause to be given any notices and take or cause to be
taken any other actions as may be necessary to perfect the pledge of such Apex
Luxembourg Shares and all such other shares, securities, property, warrants,
subscriptions, interests and rights in Apex Luxembourg.  The Sponsor shall
defend, all at its own cost and expense, its title to, and the existence,
perfection and priority of the Collateral Agent’s security interest in, the Apex
Luxembourg Shares and the other Sponsor Collateral referenced in
Section 3.01(a) against all adverse claims.

 

3.02                           Intercompany Debt.

 

(a)                                  All right, title and interest which the
Sponsor has or may at any time hereafter acquire in and to any Intercompany Debt
or Intercompany Note at any time payable to or owned or held by it, and all
claims resulting from any failure of performance or compliance with such
Intercompany Note by any of the Affiliated Obligors (other than the Sponsor) or
the Service Company, as the case may be, together with full power and authority,
in its own name or otherwise, to enforce such Intercompany Note against such
Affiliated Obligor or the Service Company.

 

(b)                                 On or prior to the Closing Date, the Sponsor
shall deliver to the Collateral Agent any Intercompany Notes owned or held by it
as at such date, and agrees that it promptly shall deliver to the Collateral
Agent all Intercompany Notes owned or held by it from time to time, in each
case, together with duly executed instruments of endorsement without recourse,
to be held by the Collateral Agent for the benefit and on behalf of the Secured
Parties.

 

(c)                                  If the Sponsor receives any payment by any
Affiliated Obligor or the Service Company of principal or interest on
Intercompany Debt other than from the proceeds of Restricted Payments permitted
to be made in accordance with Article IX of the Common Security Agreement, it
shall receive the same (without intermingling such payment with other funds) in
trust for the benefit of the Secured Parties and promptly following receipt
thereof remit the same to the Collateral Agent for deposit in the Apex Metals
Account.

 

6

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3.03                           Expropriation Compensation.

 

(a)                                  All right, title and interest of the
Sponsor at any time in and to any Project Equity Expropriation Compensation,
together with full power and authority, in its name or otherwise, to institute
proceedings (whether before a court or judge or by way of arbitration or
otherwise) to enforce such claims, execute judgments or awards for and collect
and receive Project Equity Expropriation Compensation.

 

(b)                                 On or prior to the Initial Disbursement
Date, the Sponsor shall make or cause to be made any filings or other
recordings, give or cause to be given any notices and take and cause to be taken
any other actions as may be necessary in the State of New York, the Cayman
Islands and in any other jurisdiction to validly assign as security and perfect
the grant of a first priority perfected security interest created by this
Section 3.03.

 

(c)                                  Any Project Equity Expropriation
Compensation received by the Sponsor shall be deposited in the name of the
Collateral Agent in a segregated bank account in New York, New York (the “New
York Equity Expropriation Account”) (such account being a “securities account”
as such term is defined in Section 9-501(a) of the UCC) or, if such Project
Equity Expropriation Compensation is paid, originated or received in Bolivia and
not permitted under applicable law to be paid directly to the New York Equity
Expropriation Account, it shall be deposited in a segregated custody account
established and maintained by the Collateral Agent in a Local Bank (the
“Bolivian Equity Expropriation Account”; the Bolivian Equity Expropriation
Account, together with the New York Equity Expropriation Account, are
hereinafter collectively referred to as the “Equity Expropriation Account”). 
The New York Equity Expropriation Account and all moneys, financial assets and
investments held in the New York Equity Expropriation Account shall constitute
additional Sponsor Collateral hereunder.  The moneys held in the New York Equity
Expropriation Account shall be held in the name of the Collateral Agent for the
purpose of making payments from the New York Equity Expropriation Account in
accordance with this Agreement, and only the Collateral Agent shall have the
right to make withdrawals and payments from the New York Equity Expropriation
Account, as provided in this Agreement and the other Financing Documents.  All
moneys held in the Bolivian Equity Expropriation Account shall be funds held for
the purpose of making payments therefrom in accordance with this Agreement and
the other Financing Documents, and only the Collateral Agent shall have the
right to make withdrawals and payments therefrom upon receiving instructions or
directions as provided in this Agreement and the other Financing Documents.

 

(d)                                 Upon the taking of any Enforcement Action in
accordance with Section 10.03 of the Common Security Agreement, the Collateral
Agent shall have the right to apply all funds in the Equity Expropriation
Account to the payment of any unpaid Secured Debt Obligations and the balance,
if any, shall be paid to the Sponsor or any other Person entitled thereto.

 

(e)                                  The Sponsor agrees to perform and observe
the agreements and limitations undertaken by Affiliated Obligors in Section 5.08
of the Common Security Agreement as if the same were set forth in full herein
and applicable by the terms thereof to the Sponsor.

 

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3.04                           New York Accounts.

 

(a)                                  The Sponsor hereby grants, transfers and
assigns to the Collateral Agent for the benefit and on behalf of the Secured
Parties, as security for the Secured Debt Obligations and the CGSA Secured
Obligations, and grants a security interest in, all right, title and interest,
if any, in and to the Equity Account and the Contingent Support Account, and, in
each case, to the money, financial assets and investments therein.

 

(b)                                 The Sponsor hereby acknowledges and consents
to the provisions of Article IV of the Common Security Agreement regarding the
Equity Account and the Contingent Support Account and agrees to be bound by the
terms thereof as if a party thereto.

 

ARTICLE IV
COVENANTS

 

4.01                           Maintenance of Existence; Prohibition of
Fundamental Changes.  The Sponsor shall do all things necessary to maintain its
corporate existence as a company under the laws of the Cayman Islands and good
standing in the Cayman Islands.  The Sponsor shall not liquidate, voluntarily
commence proceedings under bankruptcy or other similar laws, enter into any
merger or consolidation or sell or otherwise transfer all or substantially all
of its assets, without the prior consent of Majority Secured Parties.

 

4.02                           Delivery of Financial Statements.  The Sponsor
shall furnish to the Collateral Agent (i) as soon as available and, in any
event, within 90 days of the end of each of its fiscal years, consolidated
audited financial statements of the Sponsor as at the end of such fiscal year
and (ii) as soon as available and, in any event, within 60 days of the end of
each of its first three fiscal quarters of each fiscal year, unaudited
consolidated quarterly financial statements of the Sponsor, and in each case,
such financial statements shall, at the reasonable request of any Senior Lender,
be accompanied by calculations demonstrating the Sponsor’s compliance with
Section 4.06.

 

4.03                           Limitation on Liens.  The Sponsor shall not
create, assume, permit or suffer to exist any Lien upon any of its properties or
assets, whether now owned or hereinafter acquired, and wherever located, other
than Sponsor Permitted Liens.

 

4.04                           Limitation on Indebtedness.  The Sponsor shall
not create, incur, assume or suffer to exist Indebtedness for Borrowed Money on
a consolidated basis other than:

 

(a)                                  Indebtedness for Borrowed Money consisting
of payment obligations under Mandatory Metals Hedge Transactions and Permitted
Discretionary Hedge Transactions;

 

(b)                                 Indebtedness for Borrowed Money arising
solely by reason of a pledge by the Sponsor of shares or other equity interests
in an Unrestricted Subsidiary; provided that such a pledge may only be made by
the Sponsor in respect of obligations of such Unrestricted Subsidiary or another
Unrestricted Subsidiary and where such obligations, other than with respect to
such pledge, are completely non-recourse to the Sponsor and its

 

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assets (other than such shares or equity interests subject of such pledge) and
each Restricted Subsidiary and its assets;

 

(c)                                  Indebtedness for Borrowed Money relating to
obligations under letters of credit which are fully cash collateralized; and

 

(d)                                 Indebtedness for Borrowed Money not listed
in clauses (a), (b) or (c) above having an aggregate principal amount at any one
time outstanding not in excess of $600,000,000.

 

4.05                           Notices.  The Sponsor shall promptly, but in no
event later than 5 days after the Sponsor obtains knowledge thereof, deliver
written notice to the Collateral Agent of the occurrence of:

 

(a)                                  any Sponsor Default, TRA Default,
Completion Default, any material breach or default under any other Financing
Document, or any event or condition that, with the giving of notice or lapse of
time, or both, would constitute a Sponsor Default, a TRA Default, a Completion
Default or an Event of Default;

 

(b)                                 any pending or threatened dispute,
litigation, arbitration, claim or proceeding that is instituted by the Sponsor
or against the Sponsor or any Restricted Subsidiary or any of their respective
assets or affecting the Project, other than those which could not reasonably be
expected to result in a Material Adverse Effect; and

 

(c)                                  any development, event or circumstance
which (i) could reasonably be expected to result in a Material Adverse Effect;
or (ii) would materially and adversely affect the ability of the Sponsor or any
Restricted Subsidiary to perform its obligations under any Transaction Document
or Apex Metals Document to which it is a party,

 

in each case describing the nature thereof and the action the Sponsor (or the
Borrower, as the case may be), proposes to take with respect thereto.

 

4.06                           Financial Covenant.  The Sponsor shall maintain a
minimum Consolidated Tangible Net Worth of at least $280,000,000.

 

4.07                           Books and Records; Accounting and Cost Control
Systems.

 

(a)                                  The Sponsor shall (i) keep proper books of
record and account in Dollars in which entries will be made of transactions of
or in relation to its business and (ii) keep accounts and financial and cost
records in Dollars in accordance with Applicable Accounting Principles.

 

(b)                                 The Sponsor shall maintain adequate
accounting, management information and cost accounting systems for its business
and shall employ independent auditors of recognized international standing to
audit annually its financial statements.  The accounting and cost control
systems of the Sponsor shall include records of capitalized assets, including
(i) asset description, (ii) asset cost, (iii) asset book lives, (iv) cumulative
depreciation and (v) net book

 

9

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value; provided that, the recorded capitalized cost of any asset listed in the
records may differ from the asset’s capitalized purchase cost as a result of the
allocation of indirect costs.

 

4.08                           Compliance with Law.

 

(a)                                  The Sponsor shall comply with (i) all
applicable anti-corruption Government Rules and (ii) all other applicable
Government Rules unless, with respect to this clause (ii) only, such
non-compliance could not reasonably be expected to have a Material Adverse
Effect.

 

(b)                                 The Sponsor shall (i) ensure that, at the
time thereof, the making of any Senior Loans and the use of the proceeds thereof
shall not, by virtue of the activities, status or jurisdiction of organization
of any member of the Apex Group, violate the Trading With the Enemy Act, as
amended, or any of the foreign assets control regulations of the U.S. Treasury
Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto and (ii) comply with the U.S.
Executive Order 13224 of September 24, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism
(66 Fed. Reg. 49, 079 (2001) (the “Anti-Terrorism Order”) and the provisions of
Public Law 107-56 (the “USA Patriot Act”).

 

4.09                           Arm’s-Length Transactions.  Other than the
Financing Documents and the Project Document Guarantees executed and delivered
in connection with the Closing Date, each transaction or agreement between the
Sponsor and any Restricted Subsidiary shall be undertaken on fair and
commercially reasonable terms and conditions no less favorable to such
Restricted Subsidiary than would be obtained in a comparable arm’s-length
transaction executed at the same time with a Person that is not the Sponsor.

 

4.10                           Further Assurances.  The Sponsor agrees to use
its reasonable efforts to do all things necessary under applicable laws and
regulations to consummate and make effective, as soon as practicable, the
transactions contemplated by, and to carry out the purposes of, this Agreement
and the other Financing Documents to which it is a party, including the
obtaining of Authorizations and Government Approvals required in connection
therewith.

 

4.11                           L/C, Performance Bonds, Etc.

 

(a)                                  The Sponsor shall (except to the extent
provided and maintained by the Borrower) provide and maintain all letters of
credit, performance bonds and other security required by a Material Project
Counterparty under a Material Project Document or a Third Party Concentrate
Sales Agreement.

 

(b)                                 The Sponsor shall cause any cash released
from the escrow account established under the Ports Agreement to be deposited in
the Equity Account.

 

4.12                           Discretionary Metals Hedge Transactions.

 

(a)                                  The Sponsor shall not, nor shall it permit
any of its Subsidiaries to, enter into or otherwise become obligated to pay or
perform any obligations in respect of any Hedge Instruments other than (i) in
respect of itself (with respect to its obligations under the Completion

 

10

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Agreement), the Borrower (in respect of the Borrower’s obligations under the
Hedge Guaranty) and Apex Metals (in respect of its obligations under Mandatory
Metals Hedge Agreements), Mandatory Metals Hedge Transactions and (ii) in
respect of itself or any other Subsidiary, Permitted Discretionary Hedging
Transactions; provided that, notwithstanding clause (ii) above, no Restricted
Subsidiary shall be permitted to enter into or otherwise become obligated in
respect of any Permitted Discretionary Hedging Transaction.  The Sponsor shall
not permit or suffer to exist any Lien on any of its assets or any asset of any
Restricted Subsidiary to secure any obligations incurred in respect of any
Permitted Discretionary Hedging Transaction.

 

(b)                                 The Sponsor shall deliver to the Collateral
Agent and the Administrative Agent a Quarterly Discretionary Hedge Report within
five Business Days of the end of each calendar quarter.

 

4.13                           Insurance Requirement.  The Sponsor shall at all
times obtain, carry and maintain, at its own cost and expense, with financially
sound and reputable insurers, property, casualty, business interruption,
liability or other insurance with respect to its properties and business and the
properties and business of its material subsidiaries insuring against loss or
damage of the kinds customarily insured against by similar corporations of
established reputation engaged in the same or similar business and similarly
situated, of such types and in such amount as are customarily carried under
similar circumstances by such other corporations (provided that the Sponsor
shall not be required to obtain insurance against events of the type covered in
the Loan PRI Policy).

 

4.14                           Bankruptcy.  The Sponsor shall not commence, or
fail to timely controvert, any proceedings under bankruptcy or other similar
laws involving any Restricted Subsidiary.

 

4.15                           Taxes.  The Sponsor shall pay and discharge or
effectively provide for all taxes imposed on the Sponsor, on its income or
profits, on any of its property or upon the Liens provided for herein prior to
the date on which penalties attach thereto (provided that the Sponsor shall have
the right to contest the validity or amount of any such tax, in which event, the
Sponsor shall promptly pay any valid, final judgment enforcing any such tax and
cause the same to be satisfied of record) unless such failure to pay could not,
either individually or together with all other failures by the Sponsor to pay,
reasonably be expected to have a Material Adverse Effect.  The Sponsor shall
also pay, or cause to be paid, when due all claims against it for labor,
material, supplies or services that, if unpaid, could reasonably be expected to
result in a Material Adverse Effect; provided that (i) in the event that any
such claim may be paid in installments or may be deferred (whether or not
interest shall accrue on the unpaid balance thereof), the Sponsor may pay such
claim in installments (together with the accrued interest on the unpaid balance
thereof, if any) as the same become due or prior to the end of such period of
deferral and (ii) the Sponsor shall have the right to contest the validity or
amount of such claim.

 

ARTICLE V
FURTHER ASSURANCES

 

In furtherance of the grant of the security interest pursuant to Article III the
Sponsor hereby agrees with the Collateral Agent for the benefit of the Secured
Parties as follows:

 

11

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5.01                           Delivery and Other Perfection.  The Sponsor shall
promptly from time to time give, execute, deliver, file, record, authorize or
obtain all such financing statements, continuation statements, notices,
instruments, documents, agreements or consents or other papers as may be
necessary or desirable in the judgment of the Collateral Agent (subject to
Section 7.12) to create, preserve, perfect, maintain the perfection of or
validate the security interests in the Sponsor Collateral granted pursuant
hereto or to enable the Collateral Agent to exercise and enforce its rights
hereunder with respect to such security interest.

 

5.02                           Other Financing Statements or Control.  The
Sponsor shall not (a) file, authorize or permit to be filed or to be on file, in
any jurisdiction, any financing statement or like instrument with respect to any
of the Sponsor Collateral in which the Collateral Agent is not named as the sole
secured party for the benefit of the Secured Parties, or (b) cause or permit any
Person other than the Collateral Agent to have “control” (as defined in
Section 9-104, 9-105, 9-106 or 9-107 of the UCC) of any part of the Sponsor
Collateral.

 

5.03                           Preservation of Rights.  The Collateral Agent
shall not be required to take steps necessary to preserve any rights against
prior parties to any of the Sponsor Collateral.

 

5.04                           Deficiency.  If the proceeds of sale, collection
or other realization of or upon the Sponsor Collateral pursuant to the Common
Security Agreement are insufficient to cover the costs and expenses of such
realization and the payment in full of the Secured Obligations, the Sponsor
shall remain liable for any deficiency.

 

5.05                           Locations; Names, Etc.  Without at least 30 days’
prior written notice to the Collateral Agent, the Sponsor shall not (a) change
its location (as defined in Section 9-307 of the UCC), (b) change its name from
the name shown as its current legal name on Annex 1, or (c) agree to or
authorize any modification of the terms of any item of Sponsor Collateral that
would result in a change thereof from one Uniform Commercial Code category to
another such category (such as from a General Intangible to Investment
Property), if the effect thereof would be to result in a loss of perfection of,
or diminution of priority for, the security interests created hereunder in such
item of Sponsor Collateral, or the loss of control (within the meaning of
Section 9-104, 9-105, 9-106 or 9-107 of the UCC) over such item of Sponsor
Collateral.

 

5.06                           Private Sale.  The Collateral Agent and Secured
Parties shall incur no liability as a result of the sale of the Sponsor
Collateral made in connection with Enforcement Action taken under the Common
Security Agreement, or any part thereof, conducted in a commercially reasonable
manner.  Subject to the foregoing sentence, the Sponsor hereby waives any claims
against the Collateral Agent and Secured Parties arising by reason of the fact
that the price at which the Sponsor Collateral may have been sold at such a
private sale was less than the price that might have been obtained at a public
sale or was less than the aggregate amount of the Secured Obligations, even if
the Collateral Agent accepts the first offer received and does not offer the
Sponsor Collateral to more than one offeree.

 

5.07                           Collateral.  The parties agree that the Sponsor
Collateral constitutes Collateral for all purposes under the Financing Documents
(and, as such, are subject to, inter alia, Section 3.15 of the Common Security
Agreement as if the same were set out in full herein, mutatis mutandis).

 

12

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5.08                           Application of Proceeds.  The Proceeds of any
collection, sale or other realization of all or any part of the Sponsor
Collateral pursuant hereto, and any other cash at the time held by the
Collateral Agent pursuant hereto, shall be applied by the Collateral Agent as
set forth in Section 10.04 of the Common Security Agreement.

 

5.09                           Attorney-in-Fact.   The Collateral Agent or any
officer or agent thereof, with full power of substitution, is hereby appointed
the attorney-in-fact with special power of attorney of the Sponsor for the
purpose of carrying out the provisions of this Agreement and the other Financing
Documents and taking any action and executing any instruments which the
Collateral Agent may deem necessary or advisable to accomplish the purposes
hereof and thereof, which appointment as attorney-in-fact with special power of
attorney is coupled with an interest and irrevocable and, without limiting the
generality of the foregoing, which appointment hereby gives the Collateral Agent
or any officer or agent thereof the power and right on behalf of the Sponsor,
without notice to or assent by the foregoing, to the extent permitted by
applicable Government Rules, to do the following when and to the extent it is
authorized or directed to do so pursuant to the terms of this Agreement or any
of the other Financing Documents, provided that, unless otherwise permitted
hereunder to do so to perform its functions as Collateral Agent, the Collateral
Agent cannot exercise its powers under this Section 5.09 unless an Event of
Default has occurred and is continuing:

 

(a)                                  to ask for, demand, sue for, collect,
receive and give acquittance for any and all moneys due or to become due with
respect to, and to the extent of, the rights assigned to it by the Sponsor to
the extent of the interest therein of any Secured Party in the Sponsor
Collateral;

 

(b)                                 to receive, take, endorse, assign and
deliver any and all checks, notes, drafts, acceptances, documents and other
negotiable and non-negotiable instruments, documents and chattel paper taken or
received by the Collateral Agent in connection with this Agreement or any of the
other Financing Documents;

 

(c)                                  to commence, file, prosecute, defend,
settle, compromise, adjust, revoke, cancel, annul, move to dismiss or otherwise
undo any claim, suit, action or proceeding with respect to the security
interests granted for the benefit and on behalf of the Secured Parties in the
Sponsor Collateral;

 

(d)                                 to sell, transfer, assign or otherwise deal
in or with (or to so cause) the Sponsor Collateral or any part thereof pursuant
to the terms and conditions of this Agreement and any of the other Financing
Documents; and

 

(e)                                  to do, at its option and at the expense and
for the account of the Sponsor at any time or from time to time, all acts and
things which the Collateral Agent deems necessary to protect or preserve the
Sponsor Collateral and to realize upon such Sponsor Collateral.

 

The Sponsor agrees to execute and deliver to the Collateral Agent, and register
in any applicable public registry in the jurisdiction of its organization in
which such registration is necessary, a notarized deed constituting such power
of attorney.  The Collateral Agent shall not

 

13

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be responsible for the negligence or misconduct of any attorney-in-fact selected
by it without gross negligence or willful misconduct.

 

The Sponsor hereby confirms and ratifies any and all actions and things
performed or done by the Collateral Agent as its attorney-in-fact or any of its
representatives hereunder in each case pursuant to and in accordance with the
powers granted hereunder.

 

ARTICLE VI
DEFAULTS

 

6.01                           Sponsor Defaults.  Each of the following events
shall be a “Sponsor Default”:

 

(a)                                  Payment Default.  The Sponsor defaults in
the payment of any amounts due pursuant to this Agreement, and such default is
continuing for a period of three Business Days after the date such payment was
due;

 

(b)                                 Breach of Representation and Warranty.  Any
representation, warranty or statement confirmed or made by the Sponsor hereunder
or contained in any certificate, statement, notice or other document provided to
any Secured Party hereunder shall have been incorrect in any material respect
when made or deemed to be made or (except if stated to have been made solely as
of an earlier date) repeated;

 

(c)                                  Breach of Covenant.  The Sponsor fails to
comply with any of its obligations under:

 

(i)                                     Sections 4.01 (Maintenance of
Existence), 4.03 (Limitation on Liens), 4.04 (Limitation on Indebtedness),
4.05(a) (Notices), 4.08 (Compliance with Law), 4.12 (Discretionary Metals Hedge
Transactions) or 4.14 (Bankruptcy); or

 

(ii)                                  any other provision of this Agreement not
previously referenced in this Section 6.01 and such failure continues unremedied
for 30 days after written notice thereof is given to it by the Administrative
Agent at the direction of the Majority Secured Parties specifying such default
and requiring that it be remedied;

 

(d)                                 Bankruptcy of the Sponsor.

 

(i)                                     The Sponsor shall:  (A) admit in writing
its inability to, or be generally unable to, pay its debts as such debts become
due; (B) apply for or consent to the appointment of, or the taking of possession
by, a receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its Property; (C) make a general assignment for the benefit
of its creditors; (D) commence a Proceeding; (E) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or readjustment of debts; (F) fail to controvert in a
timely and

 

14

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appropriate manner, or acquiesce in writing to, any Proceeding filed against it;
or (G) take any corporate action for the principal purpose of effecting any of
the foregoing; or

 

(ii)                                  A Proceeding or case shall be commenced
against the Sponsor without its application or consent, in any court of
competent jurisdiction, seeking:  (A) its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of its debts;
(B) the appointment of a trustee, receiver, custodian, liquidator or the like
for itself or for all or any substantial part of its property; or (C) similar
relief in respect of it under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and, in each
case, such proceeding or case shall continue undismissed, or an order, judgment
or decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 or more days;

 

(e)                                  Dissolution, Termination or Winding-Up. 
Other than in respect of a proceeding relating to the insolvency of the Sponsor
as specified in Section 6.01(d), the Sponsor shall be terminated or dissolved
(as a matter of Government Rule or otherwise), or proceedings shall be commenced
by any Person seeking the termination or dissolution of the Sponsor and such
proceedings shall continue undismissed or unstayed for a period of 60 or more
days (or such shorter period of time which such Person has pursuant to
Government Rule to cause the dismissal of such proceeding or stay the
effectiveness of any such order, judgment or decree);

 

(f)                                    Unenforceability.  (i) Any of this
Agreement, the Completion Agreement, the Transfer Restrictions Agreement or any
other Financing Document to which the Sponsor is a party shall at any time for
any reason cease to be valid and binding or in full force and effect without the
prior written consent of the Collateral Agent (acting at the direction of the
Administrative Agent), (ii) the validity or enforceability of this Agreement,
the Completion Agreement, the Transfer Restrictions Agreement or any other
Financing Document to which the Sponsor is a party shall be contested by the
Sponsor or any Governmental Authority; or (iii) the Sponsor shall deny that it
has any liability or obligation under this Agreement, the Completion Agreement,
the Transfer Restrictions Agreement or any other Financing Document to which it
is a party;

 

(g)                                 Cross-Default.  Any Indebtedness for
Borrowed Money for which the Sponsor is liable in a principal amount in excess
of $20 million either individually or in the aggregate (i) is not paid when due
(after giving effect to any applicable grace period), (ii) has been declared to
be due and payable prior to the stated maturity thereof or (iii) is capable of
being declared due and payable prior to the stated maturity thereof and ninety
(90) days have passed since the occurrence of such event without the Sponsor
having remedied the default giving rise to the lender(s)’ ability to declare
such Indebtedness for Borrowed Money due and payable;

 

(h)                                 Unsatisfied Judgment.  Any final judgment or
judgments for the payment of money in excess of $20 million either individually
or in the aggregate shall be

 

15

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rendered against the Sponsor and shall remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of 30 days after the date of
entry thereof; and

 

(i)                                     Government Approvals.  Any Government
Approval necessary for (i) the legality, validity or enforceability of any
Financing Document to which the Sponsor is a party or (ii) the performance by
the Sponsor of its obligations under any Financing Document to which it is a
party is suspended, revoked, withheld, denied, withdrawn, or materially amended
or modified, ceases to be in full force and effect, ceases to be enforceable for
any reason or is not issued or is not timely renewed (unless the same shall have
been replaced by a Government Approval providing at least equivalent benefits or
privileges, and without any additional material burdens or conditions) or is not
complied with, which event, action or circumstance, in any such case, is not
cured within 30 days.

 

6.02                           Remedies.  Upon the occurrence and during the
continuation of an Event of Default, the Collateral Agent shall have all rights
and remedies of a secured party under applicable law and the right to take any
action and pursue any remedy with respect to any of the Sponsor Collateral as
set forth in Article X of the Common Security Agreement for the purpose of
enforcing the rights granted to the Collateral Agent for the benefit of Secured
Parties hereunder and under the other Financing Documents.

 

ARTICLE VII
MISCELLANEOUS

 

7.01                           Governing Law.  This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.

 

7.02                           Waiver of Jury Trial.  Each party hereto hereby
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.

 

7.03                           Severability.  If any provision of this Agreement
shall be invalid, illegal or unenforceable in any respect under any law, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

 

7.04                           Notices.  Any notice, request, demand, consent,
designation, direction, instruction, certificate, report or other communication
to be given hereunder shall be given in the English language and will be duly
given when delivered in writing or by facsimile transmission (with written
confirmation by the recipient on receipt, which confirmation may be by facsimile
transmission) to the following address or to such other address as may be
furnished for this purpose by such party:

 

(a)                                  if to the Sponsor, to it at:

 

Apex Silver Mines Limited

 

Walker House, Mary Street

 

George Town, Grand Cayman, Cayman Islands

 

British West Indies

 

Tel:

(303) 839-5060

 

 

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(888) 696-2739

 

Fax:

(303) 839-5907

 

Attn:

Senior Vice President

 

 

 

with a copy to:

 

 

 

Apex Silver Mines Corporation

 

1700 Lincoln Street, Suite 3050

 

Denver, Colorado 80203

 

Tel:

(303) 839-5060

 

 

(888) 696-2739

 

Fax:

(303) 839-5907

 

Attn:

Chief Financial Officer

 

 

(b)                                 if to the Collateral Agent, to it at its
address indicated in Section 15.08 of the Common Security Agreement.

 

7.05                           Benefits of Agreement.  Nothing in this
Agreement, express or implied, shall give to any Person, other than the parties
hereto and the Secured Parties and their successors and permitted assigns under
the applicable Financing Documents, any benefit or any legal or equitable right
or remedy under this Agreement.

 

7.06                           Counterparts.  This Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all the counterparts shall together constitute one and the same instrument.

 

7.07                           Jurisdiction, Service of Process and Venue.

 

(a)                                  The Sponsor hereby irrevocably consents and
agrees that any legal action, suit or proceeding against it with respect to its
obligations, liabilities or any other matter under or arising out of or in
connection with this Agreement may be brought in any Federal or State court
located in the Borough of Manhattan, The City of New York, and hereby
irrevocably accepts and submits to the non-exclusive jurisdiction of each such
court with respect to any such action, suit or proceeding.  Each party hereto
waives any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions, suits or proceedings brought in any such court
and hereby further waives and agrees not to plead or claim in any such court
that any such action, suit or proceeding brought therein has been brought in an
inconvenient forum.

 

(b)                                 The Sponsor agrees that a final judgment
against it in any action, suit or proceeding taken in a New York court or New
York Federal court in accordance with clause (a) shall be conclusive and may be
enforced in any jurisdiction by suit on the judgment, a certified copy of which
judgment shall be conclusive evidence thereof, or by any other means provided by
applicable law.

 

(c)                                  The Sponsor hereby irrevocably appoints CT
Corporation System, with offices at the date of this Agreement at 111 8th
Avenue, New York, New York 10011, as its

 

17

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authorized agent on which any and all legal process may be served in any such
action, suit or proceeding brought in any Federal or State court located in the
Borough of Manhattan, The City of New York.  The Sponsor agrees that service of
process in respect of it upon such agent, together with written notice of such
service given as provided in Section 7.04, shall be deemed to be effective
service of process upon it in any such action, suit or proceeding.  The Sponsor
agrees that the failure of such agent to give notice to it of any such service
shall not impair or affect the validity of such service or any judgment rendered
in any action, suit or proceeding based thereon.  If for any reason such agent
shall cease to be available to act as such, the Sponsor agrees to designate a
new agent in the Borough of Manhattan, The City of New York, on the terms and
for the purposes of this Section 7.07.  Nothing herein shall be deemed to limit
the ability of the Collateral Agent to serve any such legal process in any other
manner permitted by applicable law or to obtain jurisdiction over the Sponsor or
bring actions, suits or proceedings against it in such other jurisdictions, and
in such manner, as may be permitted or required by applicable law.

 

(d)                                 To the extent that the Sponsor has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service of notice, attachment prior to judgment,
attachment in aid of execution, execution, sovereign immunity or otherwise) with
respect to itself or its property, the Sponsor hereby irrevocably waives such
immunity, to the fullest extent permitted by law, in respect of its obligations
under this Agreement.

 

7.08                           Amendments, Etc.  The terms of this Agreement may
amended only by an agreement in writing signed by each party hereto; provided
that the amendment of a term defined by reference to the Common Security
Agreement shall be binding on the parties hereunder if such amendment has been
approved as provided in Section 15.18 of the Common Security Agreement.

 

7.09                           No Waiver.  No failure on the part of the
Collateral Agent or any Secured Party to exercise, and no course of dealing with
respect to, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise by
the Collateral Agent or any Secured Party of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.  The remedies herein are cumulative and are not
exclusive of any remedies provided by law.

 

7.10                           Successors and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.

 

7.11                           Expenses.  The Sponsor agrees to reimburse each
of the Secured Parties and the Collateral Agent for all reasonable costs and
expenses of the Secured Parties and the Collateral Agent (including, without
limitation, the reasonable fees and expenses of legal counsel) in connection
with (a) any Sponsor Default or Event of Default and any enforcement or
collection proceeding resulting therefrom, including, without limitation, all
manner of participation in or other involvement with (i) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (ii) judicial
or regulatory proceedings and (iii) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (b) the enforcement of this
Section 7.11.

 

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7.12                           Collateral Agent Protections.  The rights,
benefits, privileges and protections conferred upon the Collateral Agent
pursuant to Article XIII of the Common Security Agreement are expressly
incorporated herein by reference and shall extend to the Collateral Agent
hereunder as if such rights, benefits, privileges and protections were set forth
in full herein.

 

7.13                           No Consequential Damages.  Neither the Sponsor
nor any Secured Party shall assert any claim against the Sponsor or any Secured
Party, as the case may be, on any theory of liability, for any lost profits or
special, indirect or consequential damages or (to the fullest extent lawful) any
punitive damages arising out of, in connection with, or as a result of, this
Agreement or any other Financing Document (except as the same may be asserted by
a third party in respect of any claim for which a Secured Party is indemnified
hereunder), and each of the parties hereto hereby forever waives, releases and
agrees not to sue upon any claim for any such lost profits or special, indirect,
consequential or (to the fullest extent lawful) punitive damages, whether or not
accrued and whether or not known or suspected to exist in its favor.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Pledge and Security
Agreement to be duly executed and delivered as of the day and year first above
written.

 

 

Executed as a Deed by:

 

 

 

APEX SILVER MINES LIMITED

 

 

 

 

 

 

By:

/s/ Jeffrey G. Clevenger

 

 

 

Name: Jeffrey G. Clevenger

 

 

Title: President/CEO

 

 

 

 

 

 

In the presence of:

 

 

 

 

 

 

 

/s/ Brian Boonstra

 

 

 

Witness: Brian Boonstra

 

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Executed as a Deed by:

 

 

 

 

JPMORGAN CHASE BANK, N.A.,

 

 

as Collateral Agent

 

 

 

 

 

By:

/s/ Lucia Jaklitsch

 

 

 

Name: Lucia Jakitsch

 

 

Title: Vice President

 

 

 

 

 

 

 

In the presence of:

 

 

 

 

 

 

 

 

/s/ Andrew Oliver

 

 

 

Witness: Andrew Oliver

 

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ANNEX 1

 

FILING DETAILS

 

Name and Mailing Address

 

Apex Silver Mines Limited

a Cayman Islands limited liability exempt company

c/o Apex Silver Mines Corporation

1700 Lincoln Street, Suite 3050

Denver, Colorado 80203

 

Organization Number:

 

64989

 

Place of Business/Chief Executive Office:

 

c/o Apex Silver Mines Limited

Walker House

Mary Street

George Town, Grand Cayman

Cayman Islands, British West Indies

 

 

Existing UCC Financing Statements on File:

 

Financing Statements naming Apex Silver Mines Limited as debtor and The Bank of
New York as secured party filed on or about October 18, 2004 with the Colorado
Secretary of State [and the Washington, D.C. Recorder of Deeds] pursuant to the
Indenture dated as of October 15, 2004 between Apex Silver Mines Limited, as
issuer, and The Bank of New York, as trustee.

 

 

Annex 1 to Guarantee and Pledge Agreement

 

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