Execution
Version


Exhibit
10.2


DEFERRED PAYMENTS AGREEMENT


Entered into as of September 25,
2006



between



APEX SILVER MINES SWEDEN AB



and



SUMITOMO CORPORATION


 











 


TABLE OF CONTENTS


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE I DEFINITIONS

  	
   

  	
  2

  
	
  Section 1.1

  	
   

  	
  Defined
  Terms

  	
   

  	
  2

  
	
  Section 1.2

  	
   

  	
  Definitions
  from Purchase and Sale Agreement

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE II
  SILVER PAYMENTS

  	
   

  	
  7

  
	
  Section 2.1

  	
   

  	
  Silver
  Payment Obligation

  	
   

  	
  7

  
	
  Section 2.2

  	
   

  	
  Calculation
  of Payment

  	
   

  	
  7

  
	
  Section 2.3

  	
   

  	
  Payment in
  Silver Bullion

  	
   

  	
  8

  
	
  Section 2.4

  	
   

  	
  Payment in
  Dollars

  	
   

  	
  9

  
	
  Section 2.5

  	
   

  	
  Payment
  Adjustments

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III
  ZINC PAYMENTS

  	
   

  	
  9

  
	
  Section 3.1

  	
   

  	
  Zinc Payment
  Obligation

  	
   

  	
  9

  
	
  Section 3.2

  	
   

  	
  Calculation
  of Payment; Payment

  	
   

  	
  9

  
	
  Section 3.3

  	
   

  	
  Payment
  Adjustments

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV
  FAILURE TO MAKE PAYMENT

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V
  TERM

  	
   

  	
  11

  
	
  Section 5.1

  	
   

  	
  Term

  	
   

  	
  11

  
	
  Section 5.2

  	
   

  	
  Adjustment
  of Sumitomo Percentage; Survival of Payment Obligations

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI
  ADDITIONAL PROVISIONS

  	
   

  	
  12

  
	
  Section 6.1

  	
   

  	
  Access to
  Records

  	
   

  	
  12

  
	
  Section 6.2

  	
   

  	
  No Right of
  Off-Set

  	
   

  	
  13

  
	
  Section 6.3

  	
   

  	
  Entire
  Agreement

  	
   

  	
  13

  
	
  Section 6.4

  	
   

  	
  Governing
  Law; Language

  	
   

  	
  13

  
	
  Section 6.5

  	
   

  	
  Dispute
  Resolution

  	
   

  	
  14

  
	
  Section 6.6

  	
   

  	
  Headings

  	
   

  	
  14

  
	
  Section 6.7

  	
   

  	
  Notices

  	
   

  	
  14

  
	
  Section 6.8

  	
   

  	
  Severability

  	
   

  	
  14

  
	
  Section 6.9

  	
   

  	
  Amendment;
  Waiver

  	
   

  	
  15

  
	
  Section 6.10

  	
   

  	
  Assignment
  and Binding Effect

  	
   

  	
  15

  
	
  Section 6.11

  	
   

  	
  No Benefit
  to Others

  	
   

  	
  15

  
	
  Section 6.12

  	
   

  	
  No
  Consequential Damages

  	
   

  	
  15

  
	
  Section 6.13

  	
   

  	
  Counterparts

  	
   

  	
  16

  
	
  Section 6.14

  	
   

  	
  Interpretation

  	
   

  	
  16

  
	
  Section 6.15

  	
   

  	
  Rules of
  Construction

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attachment A – Mine Map

  	
   

  	
   

  



 



 1
 








 


DEFERRED
PAYMENTS AGREEMENT


This Deferred Payments Agreement is entered into as of
September 25, 2006 (the “Closing Date”), by and between:


APEX SILVER MINES SWEDEN AB,
a privat aktiebolag duly
organized and validly existing under the Laws of the Kingdom of Sweden (“Apex
Sweden”), with its registered office at Accurate Accounting AB, Draketan 7,
SE-412 50, Göteborg, Sweden; and


SUMITOMO CORPORATION,
a corporation duly organized and validly existing under the Laws of Japan (“Sumitomo”),
with its headquarters at 1-8-11, Harumi, Chuo-ku Tokyo 104-8610,
Japan.


Apex Sweden and Sumitomo are sometimes referred to
herein individually as a “Party” and collectively as the “Parties.”  Capitalized terms used and not otherwise
defined in this Agreement have the respective meanings ascribed thereto in
ARTICLE I.


RECITALS


A.            Pursuant to the Purchase and Sale Agreement, dated
as of September 25, 2006 (the “Purchase and Sale Agreement”),
Sumitomo, among other things, acquired (1) 100% of the issued and
outstanding share capital of New Sweden 1, which on the Closing Date owned
35% of the issued and outstanding share capital of Minera San Cristóbal S.A., a
sociedad anónima organized under
the Laws of Bolivia (“MSC”), (2) 100% of the issued and outstanding
share capital of New Sweden 2, which on the Closing Date owned 35% of the
issued and outstanding quotas of Apex Metals Marketing GmbH, a Gesellschaft mit beschränkter Haftung
organized under the Laws of Switzerland (“New Metals”), and (3) 35%
of the issued and outstanding share capital of Apex Silver Finance Ltd., an exempted company limited by shares
incorporated under the Laws of the Cayman Islands, British West Indies (“New
Cayman”) (collectively, the “Acquisition”).


B.            MSC
owns and is developing a silver, zinc, and lead mine known as the San Cristóbal
Mine, located in the Republic of Bolivia. 
MSC shall produce zinc, lead, and bulk concentrates from certain
Production at the Mine (the “Concentrates”) and New Metals has the
exclusive right to acquire and market the Concentrates.  New Metals has entered, and from time to time
shall enter into agreements for the sale of Concentrates purchased from MSC
with smelters, refineries and traders (any such agreement entered into by New Metals
with a Person who is not an Affiliate of Apex or which is otherwise on an arm’s
length basis, a “Sales Agreement” and collectively, the “Sales
Agreements”).


C.            Pursuant
to Section 2.2 of the Purchase and Sale Agreement, the Purchase Price to
be paid by Sumitomo in connection with the Acquisition is payable, in part, by
payment of Deferred Payments to Apex Sweden. 
This is the Deferred Payments Agreement referred to in the Purchase and
Sale Agreement.  This Agreement sets
forth the terms and conditions with respect to the Deferred Payments.



 2
 








 


AGREEMENT


In consideration of the
mutual promises, covenants, and agreements set forth herein, the Purchase and
Sale Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:


ARTICLE I

DEFINITIONS


Section 1.1             Defined Terms For purposes
of this Agreement, the following terms have the following meanings:


“Acquisition” has the meaning specified in the
recitals.


“Agreement” means this Deferred Payments
Agreement.


“Apex” means Apex Silver Mines Limited, an
exempted company limited by shares incorporated under the laws of the Cayman
Islands, British West Indies.


“Apex Interestholders” means the “Apex
Interestholders” as defined in the MSC Shareholders Agreement, the “Apex
Interestholders” as defined in the New Metals Quotaholders Agreement, the “Apex
Interestholders” as defined in the New Cayman Shareholders Agreement, and their
Affiliates which own any right, tile, and interest in the Transmission Line
Loan.


“Apex Interests” has the meaning specified in
the MSC Shareholders Agreement.


“Apex Luxembourg” means Apex Luxembourg S.à
r.l., a société à responsabilité limitée organized
under the Laws of the Grand Duchy of Luxembourg, with its registered office at
73, Côte d’Eich, L-1450 Luxembourg, registered with the Luxembourg
Register of Commerce (Registre de Commerce
et des Sociétés du Grand-Duché de Luxembourg) under number
B 110 956.


“Apex Metals Account” means (a) the
unallocated metals account of Apex Sweden maintained in London, England, by
Prudential as Account No. 080020911 in the name of Apex Silver Mines Limited,
or (b) such other account or accounts as Apex Sweden may designate from
time to time by notice to Sumitomo delivered in accordance with Section 6.7 not
less than five days prior to the date of any Silver Payment to be made by
delivery of Silver Bullion.


“Apex Sweden” has the meaning specified in the
preamble.


“Business Day” means any day other than
Saturday, Sunday, and a day on which banks in New York, New York, U.S.A. or
Tokyo, Japan are required or permitted to close.


“Closing Date” has the meaning specified in the
preamble.


“Concentrates” has the meaning specified in the
recitals.



 3
 








 


“Default Rate” means a rate per annum equal to
the lesser of: (a) LIBOR plus four percent or (b) the Maximum Legal
Rate.


“Delivered Silver” has the meaning specified in
Section 2.3(a).


“Delivery Business Day” means any Business Day
other than a day on which banks in the relevant Delivery Location are required
or permitted to close.


“Delivery Location” means the vault of JP
Morgan Chase located in London, England, or such other location in London,
England, as may be designated by Apex Sweden in the Delivery Notice.


“Delivery Notice” has the meaning specified in
Section 2.3(a).


“Dispute Resolution Agreement” means that
certain Dispute Resolution Agreement, dated as of the date hereof, by and among
Apex, Apex Sweden, Apex Luxembourg, Service Company, Sumitomo, New
Sweden 1, New Sweden 2, MSC, New Metals, and New Cayman.


“Dollar” or “Dollars” means the lawful
currency of the United States of America.


“Election Notice” has the meaning specified in
Section 2.2(a).


“GAAP” means generally accepted accounting
principles as used in the United States of America.


“Governmental Equity Ownership” has the meaning
specified in Section 5.2(c).


“Governmental Mine Ownership” has the meaning
specified in Section 5.2(d).


“Indirect Interests” has the meaning specified
in the MSC Shareholders Agreement.


“Interests” has the meaning specified in the
MSC Shareholders Agreement.


“LBMA” means the London Bullion Market
Association.


“LIBOR” means the London interbank offered rate
of major banks for six-month Dollar deposits that appears on page 3750 of
the Dow Jones Telerate Service (or on any successor or substitute page of such
service or any successor to or substitute for such service or similar service,
if such service is no longer available) at approximately 11:00 a.m., London,
England time on any date of determination therefor.


“LME” means the London Metal Exchange or, if
the LME ceases to exist, the industry’s generally accepted successor exchange
thereto.


“LME Difference” means the amount by which the
LME Price of zinc exceeds US$1,800.00 per tonne.


“LME Price” means the average of the daily
official LME cash settlement quotations for Special High Grade zinc, quoted in
Dollars, for the quotational period as set forth in the 



 4
 








 


applicable Sales
Agreement (as published in Metal Bulletin during such quotational period, but
corrected to the official quotations of the LME in the event of printing
errors).


“LOCO” has the meaning set forth in LBMA
Glossary of Terms.


“Maximum Legal Rate” means on any day, the
highest non-usurious rate of interest permitted by applicable law on such
day, computed on the basis of the actual number of days elapsed over a year of
360 days.


“Metal Bulletin” means the Metal Bulletin
publication published by Metal Bulletin Plc.


“Mine” solely, for the purposes of this
Agreement, means the area inside the boundary delineated as the “Buffer Zone”
set forth on the map attached hereto as Attachment A.


“Moody’s” means Moody’s Investors Service, Inc.
and any successor thereto, so long as such successor is a “nationally
recognized statistical rating organization” registered with the Securities and
Exchange Commission of the United States of America.


“MSC” has the meaning specified in the
recitals.


“MSC Shareholders Agreement” means that certain
MSC Shareholders Agreement, dated as of the Closing Date, among Apex Sweden,
Apex Luxembourg, New Sweden 1, and MSC.


“New Cayman” has the meaning specified in the
recitals.


“New Cayman Shareholders Agreement” means that
certain Apex Silver Finance Shareholders Agreement, dated as of the Closing
Date, among Apex Luxembourg, Sumitomo, and New Cayman.


“New Metals” has the meaning specified in the
recitals.


“New Metals Quotaholders Agreement” means that
certain New Metals Quotaholders Agreement, dated as of the Closing Date, among
Apex Sweden, New Sweden 2, and New Metals.


“New Sweden 1” means Gotlex
Lageraktiebolag nr 451, organization number 556702-1083, a privat
aktiebolag duly organized and validly existing under the Laws of the
Kingdom of Sweden, with its registered office at c/o Wistrand Advokatbyra,
Lilla Bommen 1, 411 04 Göteborg, Sweden.


“New Sweden 2” means Comercial Metales Blancos
AB, a privat aktiebolag duly organized and
validly existing under the Laws of the Kingdom of Sweden, with its registered
office at c/o Anders Sköldberg, Ernst & Young AB, 401 82 Göteborg, Sweden.


“Ownership Adjustment” has the meaning
specified in Section 5.2(a).


“Party” or “Parties” has the meaning
specified in the preamble.



 5
 








 


“Payable Silver” means the amount of silver (in
troy ounces) equal to the amount of silver contained in the Concentrates for
which payment is to be made to a seller in accordance with the terms of the
applicable Sales Agreement.


“Payable Silver Payment” means, in respect of a
shipment of Concentrates made by seller pursuant to a Sales Agreement, a sum in
Dollars equal to the product of (a) the Payable Silver in such shipment
and (b) the per troy ounce silver price payable for the silver content of
such shipment as set forth in such Sales Agreement.


“Payable Zinc” means the amount of zinc (in
tonnes) equal to the amount of zinc contained in the Concentrates for which
payment is to be made to a seller in accordance with the terms of the
applicable Sales Agreement.


“Payment Date” has the meaning specified in
ARTICLE IV.


“Payment Quarter” means each calendar quarter,
or portion thereof, during the term of this Agreement.


“Production” means (a) ore from the Mine
that is processed by MSC through the mill located at the Mine that is under
construction on the Closing Date (including any expansions or extensions
thereto over time) (the “Mill”), and (b) ore from the Mine that is
processed by MSC through a facility located at the Mine other than the Mill,
which may include a heap leach or oxide treatment facility.


“Purchase and Sale Agreement” has the meaning
specified in the recitals.


“Qualified Third Party” means an Entity the non-credit-enhanced
long-term senior unsecured debt of which is rated at least the lesser of
(a) BBB- by S&P or Baa3 by Moody’s, and (b) the credit
rating of the non-credit-enhanced long-term senior unsecured
debt of Sumitomo as provided by S&P or Moody’s as of the date of the Sale
by the Sumitomo Interestholders of their Sumitomo Interests to such Entity.


“Quarterly Silver Payment” has the meaning
specified in Section 2.2(a).


“Quarterly Zinc Payment” has the meaning
specified in Section 3.2(a).


“S&P” means Standard & Poor’s Ratings
Services, a division of The McGraw-Hill Companies, Inc and any successor
thereto so long as such successor is a nationally recognized statistical rating
organization registered with the Securities and Exchange Commission of the
United States of America.


“Sale” has the meaning specified in the MSC
Shareholders Agreement.


“Sales Agreement” or “Sales Agreements”
has the meaning specified in the recitals.


“Silver Adjustment Amount” has the meaning
specified in Section 2.5.



 6
 








 


“Silver Bullion” means (a) silver bullion
bars produced by a refiner on the LBMA “Good Delivery List of Acceptable
Refiners,” complying with the standards of the LBMA relating to good delivery
and fineness from time to time in effect or (b) silver bullion which is
suitable for a metal transfer in metal accounts at LOCO London.


“Silver Payment” has the meaning specified in
Section 2.1.


“Silver Payment Adjustment Event” has the
meaning specified in Section 2.5.


“Silver Payment Adjustment Notice” has the
meaning specified in Section 2.5.


“Silver Payment Notice” has the meaning
specified in Section 2.2(a).


“Silver Share” means 22.86% of the Payable
Silver attributed to New Sweden 1’s 35% ownership interest in MSC as of
the Closing Date.


“Sumitomo” has the meaning specified in the
preamble.


“Sumitomo Interestholders” means the “Sumitomo
Interestholders” as defined in the MSC Shareholders Agreement, the “Sumitomo
Interestholders” as defined in the New Metals Quotaholders Agreement, the “Sumitomo
Interestholders” as defined in the New Cayman Shareholders Agreement, and their
Affiliates which own any right, tile, and interest in the Transmission Line
Loan.


“Sumitomo Interests” has the meaning specified
in the MSC Shareholders Agreement.


“Sumitomo Payable Silver” means, in respect of
a shipment of Concentrates delivered by a seller pursuant to a Sales Agreement,
an amount of Payable Silver equal to the product of (a) Silver Share and
(b) the Payable Silver in such shipment.


“Sumitomo Payable Silver Payment” means, in
respect of a shipment of Concentrates made by a seller pursuant to a Sales
Agreement, an amount in Dollars equal to the product of (a) the Silver
Share and (b) the Payable Silver Payment for such shipment.


“Sumitomo Payable Zinc” means, in respect of a
shipment of Concentrates delivered by a seller pursuant to a Sales Agreement,
an amount of Payable Zinc equal to the product of (a) the Zinc Share and
(b) the Payable Zinc in such shipment.


“Transmission Line Loan” has the meaning
specified in the MSC Shareholders Agreement.


“Unpaid Amount” has the meaning specified in
ARTICLE IV.


“US$” means Dollars.


“Zinc Adjustment Amount” has the meaning
specified in Section 3.3.


“Zinc Payment Adjustment Event” has the meaning
specified in Section 3.3.



 7
 








 


“Zinc Payment Adjustment Notice” has the
meaning specified in Section 3.3.


“Zinc Payment Notice” has the meaning specified
in Section 3.2(a).


“Zinc Share” means 20% of the Payable Zinc
attributed to New Sweden 1’s 35% ownership in MSC as of the Closing Date.


“Zinc Shipment Payment” has the meaning
specified in Section 3.2(a).


Section 1.2             Definitions from Purchase and
Sale Agreement.  Undefined
capitalized terms used herein have the respective meanings set forth in the
Purchase and Sale Agreement.


ARTICLE II

SILVER PAYMENTS


Section 2.1             Silver Payment Obligation.  For each Payment Quarter, Sumitomo shall pay
to Apex Sweden (the “Silver Payment”), at Sumitomo’s election in its
sole discretion, either (a) an amount of Silver Bullion equal to the
Sumitomo Payable Silver for all shipments of Concentrates delivered during such
Payment Quarter, or (b) cash equal to the Quarterly Silver Payment.  The foregoing shall be calculated in
accordance with Section 2.2 for each shipment of Concentrates delivered during
such Payment Quarter to counterparties under the Sales Agreements.


Section 2.2             Calculation of Payment.


(a)           No later than five Business Days
after the end of each Payment Quarter, Apex Sweden shall deliver to Sumitomo
notice (the “Silver Payment Notice”) in accordance with Section 6.7 setting
forth (i) the shipments of Concentrates delivered to counterparties under
the Sales Agreements during such Payment Quarter (for the avoidance of doubt
and for the purposes of this Agreement, a shipment shall be deemed delivered to
a counterparty as of the date the provisional payment under the applicable
Sales Agreement is received by New Metals), (ii) the Payable Silver and
the Sumitomo Payable Silver for each such shipment, (iii) the Payable
Silver Payment and the Sumitomo Payable Silver Payment for each such shipment,
(iv) the Dollar amount equal to the sum of the Sumitomo Payable Silver
Payments for all such shipments (the “Quarterly Silver Payment”), and
(v) the details of the bank account of Apex Sweden (which shall be in
London, England, New York, N.Y., or Tokyo, Japan) to which Sumitomo would be
required to pay the Quarterly Silver Payment should it elect to make the Silver
Payment in cash. Each Silver Payment Notice shall be accompanied by such
supporting evidence as is reasonably necessary for Sumitomo to confirm the
information set forth therein.  No later
than three Business Days after receipt of the Silver Payment Notice, Sumitomo
shall provide Apex Sweden written notice of its election either (A) to
make the Silver Payment in Silver Bullion pursuant to Section 2.1 and in
accordance with Section 2.3, or (B) to make the Silver Payment in Dollars
pursuant Section 2.1 and in accordance with Section 2.4 (the “Election
Notice”).


(b)           For the avoidance of doubt, the
Parties acknowledge and agree that the Payable Silver and the Payable Silver
Payment shall be calculated in the manner provided 



 8
 








 


in the applicable Sales Agreement without
giving effect to costs or amounts associated with the processing, refining,
smelting, or treating of the Concentrates including treatment charges, refining
charges, or penalties for impurities.


Section 2.3             Payment in Silver Bullion.


(a)           If Sumitomo elects to make the Silver
Payment in Silver Bullion (the “Delivered Silver”), then, no later than
five Business Days after receipt of the Election Notice, Apex Sweden shall
provide Sumitomo notification in accordance with Section 6.7 confirming the
information for the Delivery Location (the “Delivery Notice”).  No later than five Delivery Business Days
after receipt of the Delivery Notice, Sumitomo shall cause the Delivered Silver
to be delivered to the Delivery Location. 
The amount of the Delivered Silver shall be equal to the amount of
Sumitomo Payable Silver correctly set forth in the Silver Payment Notice.


(b)           Apex Sweden shall not be responsible
for insurance, storage, transportation, transfer, or other costs prior to the
time title to the Delivered Silver delivered hereunder has passed to Apex
Sweden in accordance with Section 2.3(c). 
Sumitomo shall bear all costs and expenses associated with the delivery
of the Delivered Silver.


(c)           Possession of and title to Delivered
Silver delivered pursuant hereto shall pass from Sumitomo to Apex Sweden when
such Delivered Silver is credited to the Apex Metals Account and is recorded
through appropriate book entry on the books and records of the institution
maintaining the Apex Metals Account. 
Until such time, Sumitomo shall be deemed to be in control and
possession of, have title to, risk of loss of, and be responsible for such Delivered
Silver and, after such time, Apex Sweden shall be deemed to be in control and
possession of, have title to, risk of loss of, and be responsible for such
Delivered Silver.


(d)           Sumitomo shall be liable for and
shall pay, cause to be paid or reimburse Apex Sweden if Apex Sweden has paid,
all Taxes applicable to the Delivered Silver delivered hereunder prior to the
time title to the Delivered Silver has passed to Apex Sweden in accordance with
Section 2.3(c).  Apex Sweden shall be
liable for and shall pay, cause to be paid or reimburse Sumitomo if Sumitomo
has paid, all Taxes applicable to the Delivered Silver delivered hereunder at
or after the time title to the Delivered Silver has passed to Apex Sweden in
accordance with Section 2.3(c).


(e)           Sumitomo hereby represents, warrants,
and covenants that (i) Sumitomo has good, valid, and marketable title to
the Delivered Silver, free and clear of all liens, upon delivery to Apex
Sweden, and (ii) the Delivered Silver shall be Silver Bullion.



 9
 








 


Section 2.4             Payment in Dollars.  If Sumitomo elects to make the Silver Payment
in Dollars, then, no later than five Business Days after the date of receipt of the Silver Payment Notice,
Sumitomo shall pay to Apex Sweden an amount equal to the Quarterly Silver
Payment by wire transfer of immediately available Dollar funds to the account
or accounts of Apex Sweden designated by it in such Silver Payment Notice.


Section 2.5             Payment
Adjustments.  The Parties acknowledge
and agree that the determination of the Silver Payment for any Payment Quarter
may, in part, be based upon “provisional payments” made in accordance with the
applicable Sales Agreements for which “final payment” has not been determined
prior to the end of such Payment Quarter. 
The foregoing may result in a necessary adjustment of the actual Payable
Silver applicable to a shipment used in the calculation of the Payable Silver
for a Payment Quarter and as such, an adjustment in the Silver Payment for such
Payment Quarter may be necessary (a “Silver Payment Adjustment Event”).  In accordance with the foregoing, if a Silver
Payment Adjustment Event occurs, then Apex Sweden shall promptly provide
Sumitomo written notice of same (a “Silver Payment Adjustment Notice”).  The Silver Payment Adjustment Notice shall
set forth (a) the amount by which the Sumitomo Payable Silver for such
Payment Quarter was either reduced or increased and (b) the Dollar value
of such adjusted amount (the “Silver Adjustment Amount”).  If the Silver Payment for a Payment Quarter
is reduced, then Apex Sweden shall deliver payment of the Silver Adjustment
Amount concurrently with delivery of the Silver Payment Adjustment Notice.  If the Silver Payment for a Payment Quarter
is increased, then Sumitomo shall make payment of the Silver Adjustment Amount
concurrently with the Silver Payment for the following Payment Quarter.


ARTICLE III

ZINC PAYMENTS


Section 3.1             Zinc Payment Obligation.  For each Payment Quarter, Sumitomo shall pay
to Apex Sweden in cash an amount equal to the Quarterly Zinc Payment.  The foregoing shall be calculated in
accordance with Section 3.2 for each shipment of Concentrates delivered during
such Payment Quarter to counterparties under the Sales Agreements.


Section 3.2             Calculation
of Payment; Payment.


(a)           No later than five Business Days
after the end of each Payment Quarter, Apex Sweden shall deliver to Sumitomo
notice (the “Zinc Payment Notice”) in accordance with Section 6.7 that
sets forth (i) the shipments of Concentrates delivered to counterparties
under the Sales Agreements during such Payment Quarter (for the avoidance of
doubt and for the purposes of this Agreement, a shipment shall be deemed
delivered to a counterparty as of the date the provisional payment under the
applicable Sales Agreement is received by New Metals), (ii) the amount of
the Payable Zinc and the Sumitomo Payable Zinc for each such shipment,
(iii) the LME Price for each such shipment as calculated pursuant to the
applicable Sales Agreement, (iv) the LME Difference for each such
shipment, (v) the Dollar amount equal to the amount of Sumitomo Payable
Zinc for each such shipment multiplied by the LME Difference for that shipment
(each a “Zinc Shipment Payment”), (vi) the Dollar amount equal to
the sum of the Zinc Shipment Payments (the “Quarterly Zinc Payment”) and
(vii) the details for 



 10
 








 


the bank account of Apex Sweden (which shall
be in London, England, New York, N.Y., or Tokyo, Japan) to which Sumitomo is
required to pay the Quarterly Zinc Payment. 
Each Zinc Payment Notice shall be accompanied by such supporting
evidence as is reasonably necessary for Sumitomo to confirm the information set
forth therein.


(b)           Each Quarterly Zinc Payment shall be
payable no later than five Business Days after the date of receipt of the Zinc
Payment Notice by wire transfer in immediately available funds to the account
designated by Apex Sweden in the Zinc Payment Notice.


(c)           For the avoidance of doubt, the
Parties acknowledge and agree that the Payable Zinc shall be calculated in the
manner provided in the applicable Sales Agreement without giving effect to
costs or amounts associated with the processing, refining, smelting or treating
of the Concentrates including treatment charges, refining charges or penalties
for impurities.


Section 3.3             Payment Adjustments.  The Parties acknowledge and agree that the
determination of a Quarterly Zinc Payment may, in part, be based upon “provisional
payments” made in accordance with the applicable Sales Agreements for which “final
payment” has not been determined prior to the end of the relevant Payment
Quarter.  The foregoing may result in a
necessary adjustment of the actual Payable Zinc applicable to a shipment used
in the calculation of the Payable Zinc for a Payment Quarter and as such, an
adjustment in the Quarterly Zinc Payment for such Payment Quarter may be
necessary (a “Zinc Payment Adjustment Event”).  In accordance with the foregoing, if a Zinc
Payment Adjustment Event occurs, then Apex Sweden shall promptly provide
Sumitomo written notice of same (a “Zinc Payment Adjustment Notice”).  The Zinc Payment Adjustment Notice shall set
forth (i) the amount by which the Sumitomo Payable Zinc for such Payment
Quarter was either reduced or increased and (ii) the Dollar value of such
adjusted amount (the “Zinc Adjustment Amount”).  If the Quarterly Zinc Payment for a Payment
Quarter is reduced, then Apex Sweden shall deliver payment of the Zinc
Adjustment Amount concurrently with delivery of the Zinc Payment Adjustment
Notice.  If the Quarterly Zinc Payment
for a Payment Quarter is increased, then Sumitomo shall make payment of the
Zinc Adjustment Amount concurrently with the Quarterly Zinc Payment for the
following Payment Quarter.


ARTICLE IV

FAILURE TO MAKE PAYMENT


If Sumitomo fails to make a Silver Payment or
Quarterly Zinc Payment (the unpaid portion thereof, an “Unpaid Amount”)
on the date such payment is due and payable (the “Payment Date”), then,
commencing on the Payment Date and continuing until such Unpaid Amount
(together with accrued interest thereon) is paid in full, the unpaid portion of
the Unpaid Amount shall bear interest, calculated daily (computed on the actual
days elapsed over a year of 360 days), at the Default Rate.  To the extent the Unpaid Amount is a Silver
Payment made in Silver Bullion pursuant to Section 2.3, interest shall accrue
based upon the amount of the Quarterly Silver Payment that would otherwise have
been due on the Payment Date.


ARTICLE V

TERM


Section 5.1             Term.  Unless otherwise agreed in writing by the
Parties, the Parties’ obligations under this Agreement shall commence on the
Closing and shall terminate, along with this Agreement, upon the earlier of:


(a)           the permanent cessation of
Production;


(b)           the completion of the Sale by the
Sumitomo Interestholders of all, but not less than all, of their Sumitomo
Interests to Apex and/or its Subsidiaries whether such Sale is pursuant to the
MSC Shareholders Agreement, the New Metals Quotaholders Agreement, the New
Cayman Shareholders Agreement, as applicable, or otherwise; or


(c)           the completion of the Sale by the
Apex Interestholders of all, but not less than all, of their Interests to
Sumitomo and/or its Subsidiaries whether such Sale is pursuant to the MSC
Shareholders Agreement, the New Metals Quotaholders Agreement, the New Cayman
Shareholders Agreement, as applicable or otherwise; provided, however, that the
purchase price for such Sale shall include an amount equal to the price for
which the right, title, and interest of Apex
Sweden in and to this Agreement could be sold, as of the date of such Sale, in
an arm’s-length transaction to an unaffiliated, bona fide, third-party purchaser in
an orderly sale.


Section 5.2             Adjustment of Sumitomo
Percentage; Survival of Payment Obligations.


(a)           The Parties understand that, during
the term of this Agreement, Sumitomo’s direct or indirect ownership interests
in MSC, New Metals, and New Cayman, and related “share” of Production may be
adjusted upward or downward from time to time as a result of adjustment events
(including by Sale to Apex) pursuant to the MSC Shareholders Agreement, the New
Metals Quotaholders Agreement, the New Cayman Shareholders Agreement, as
applicable, or otherwise (an “Ownership Adjustment”).  Notwithstanding the foregoing, the Parties
acknowledge and agree that, except as provided in Section 5.1 and this Section
5.2, if an Ownership Adjustment occurs, the Silver Share and the Zinc Share, as
set forth in ARTICLE II and ARTICLE III, respectively, shall not be adjusted to
conform to such Ownership Adjustment and shall remain as defined herein on the
Closing Date.


(b)           Subject to Section 5.1, Sumitomo and
Apex Sweden hereby acknowledge and agree that if the Sumitomo Interestholders
complete the Sale of all, but not less than all, of their Sumitomo Interests to
a Proposed Third-Party Buyer pursuant to Article V of the MSC
Shareholders Agreement, Sumitomo shall continue to be obligated to satisfy the
payment obligations set forth herein and Sumitomo shall not be relieved or
discharged of its obligations with respect thereto.  Notwithstanding the foregoing, if the Sumitomo
Interestholders Sell all, but not less than all, of their Sumitomo Interests to
a Qualified Third Party, and if such Qualified Third Party expressly assumes
all of Sumitomo Interestholders’ obligations with respect to such Sumitomo
Interests under this Agreement in a writing delivered to Apex Sweden, then
Sumitomo shall be relieved and 



 11
 








 


discharged of
its obligations hereunder to the extent they have been assumed by the Qualified
Third Party.


(c)           Notwithstanding the foregoing, if
Bolivia or any action taken by any Governmental Authority of Bolivia requires
the issuance or Sale to any Governmental Authority of Bolivia, citizens of
Bolivia, or any other Person of an any Interests or Indirect Interests (a “Governmental
Equity Ownership”), then the Silver Share and Zinc Share shall be adjusted
downward, on a pro rata basis, to reflect the then current direct or indirect
ownership of Sumitomo in MSC following such event.  The Parties acknowledge and agree that to the
extent the Government Equity Ownership adjusts upward or downward at any time
thereafter, the Silver Share and the Zinc Share shall adjust, on a pro rata
basis, accordingly, provided that neither the Silver Share nor the Zinc Share
shall be adjusted to a percentage interest in excess of that set forth in the
definitions of such terms in the Agreement as of the Closing Date.


(d)           Notwithstanding the foregoing,
(i) if Bolivia or any action taken by any Governmental Authority of
Bolivia requires the issuance or sale to any Governmental Authority of Bolivia,
citizens of Bolivia, or any other Person of an equity or other participation
interest in the Mine (a “Governmental Mine Ownership”) and
(ii) such Governmental Mine Ownership results in such Governmental
Authority or Bolivia or citizens of Bolivia or other Persons, as applicable,
owning, directly or indirectly, a percentage of any shipment of Concentrates,
then the Silver Share and Zinc Share, as applicable, shall be adjusted
downward, on a pro rata basis on a per shipment basis, to reflect the then current
direct or indirect ownership of Sumitomo in such shipment as a result of
Sumitomo’s then current direct or indirect ownership in MSC; provided that
neither the Silver Share nor the Zinc Share, as applicable, with respect to any
such shipment shall be adjusted to a percentage interest in excess of that set
forth in the definitions of such terms in the Agreement as of the Closing Date.


ARTICLE VI

ADDITIONAL PROVISIONS


Section 6.1             Access to Records.


(a)           The Parties shall, and shall cause
New Metals, any other seller of Concentrates under a Sales Agreement and MSC
to, keep and maintain complete and accurate books, records and accounts
relating to the sales of Concentrates pursuant to the Sales Agreements.  Such books, records and accounts shall be
maintained for at least seven years after the calendar year to which they
relate.  During the term of this
Agreement and for a period of seven years thereafter, the Parties shall, and
shall cause New Metals, any other seller of Concentrates under a Sales
Agreement and MSC to, afford to Sumitomo and its accounting, legal, and other
representatives, as well as their respective officers and employees, reasonable
access, upon reasonable notice, to all such books, records and accounts and any
other documents, agreements, accounting records, and financial statements
utilized in calculating the Quarterly Zinc Payment and the Silver Payment.



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(b)           Sumitomo shall have the right, from
time to time (but in no event more than once per fiscal quarter), to have
either Sumitomo or an independent auditor audit the such books, records,
accounts and other documents, agreements and financial statements to verify the
accuracy of the information provided by Apex Sweden pursuant to ARTICLE II and
ARTICLE III.  Any such audit shall be at
Sumitomo’s expense and shall be limited to the Quarterly Zinc Payments and
Silver Payments adjusted pursuant to Section 2.5 and Section 3.3, respectively
(i.e. only the “final payments” are to be audited and not the “provisional
payments”).  Sumitomo shall promptly
provide Apex Sweden a copy of all such audits.


(c)           If the audit reveals an overpayment
by Sumitomo for a Quarterly Zinc Payment or Silver Payment, then Apex Sweden
shall promptly pay to Sumitomo the amount of any overpayment revealed by any
such audit, plus interest thereon, calculated daily (computed on the actual
days elapsed over a year of 360 days), at the Default Rate, for the period
commencing on payment of the original amount by Sumitomo to Apex Sweden and
ending on the date such overpayment amount (together with the accrued interest
thereon) is paid in full.  Such amount
shall be paid in Dollars by wire transfer in immediately available funds to the
bank account of Sumitomo designated by it in writing to Apex Sweden.


(d)           If the audit reveals an underpayment
by Sumitomo for a Quarterly Zinc Payment or Silver Payment, then Sumitomo shall
make payment of any underpayment concurrently with the next applicable
quarterly payment, plus interest thereon, calculated daily (computed on the
actual days elapsed over a year of 360 days), at the Default Rate, for the
period commencing on payment of the original amount by Sumitomo to Apex Sweden
and ending on the date such underpayment amount (together with the accrued
interest thereon) is paid in full.


(e)           Any dispute regarding an audit and
the accuracy thereof shall be addressed in accordance with Section 6.5.


Section 6.2                No
Right of Off-Set.  All amounts
required to be paid to Apex Sweden under this Agreement shall be paid to Apex
Sweden in full and in a timely manner without assertion of any right of offset,
counterclaim, withholding, deduction, right of cross-collateralization,
or right of reduction on account of any obligations.


Section 6.3                Entire
Agreement.  This Agreement (together
with the Purchase and Sale Agreement and the other Transaction Documents)
contain, and are intended as, a complete statement of all of the terms of the
agreements among the Parties with respect to the matters provided for herein
and therein, and supersede and discharge any previous agreements and
understandings between the Parties with respect to those matters; provided,
however, that the Confidentiality Agreement shall survive the execution
and termination of this Agreement and continue in full force and effect in
accordance with its terms.


Section 6.4                Governing
Law; Language.  This Agreement shall
be governed by and construed in accordance with the Laws of the State of New
York, including Section 5-1401 of the New York General Obligations Law,
as applied to contracts made and performed within the 



 13
 








 


State of New York, without regard to any choice or conflicts of law
provision or rule that would cause the application of the Laws of any
jurisdiction other than the State of New York. 
This Agreement has been negotiated and executed by the Parties in
English.  In the event any translation of
this Agreement is prepared for convenience or any other purpose, the provisions
of the English version shall govern.  If
any doubt, misunderstanding, or dispute arises in their interpretation, the
English version shall govern.


Section 6.5                Dispute
Resolution.  Any controversy, claim,
or dispute between the Parties that arises out of or relates to this Agreement,
including any claim or controversy relating to the interpretation, breach,
termination, or invalidity of any provision hereof, shall be exclusively and
finally settled pursuant to and in accordance with the Dispute Resolution
Agreement.


Section 6.6                Headings.  The article and section headings of this
Agreement are for reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement.


Section 6.7                Notices.  All notices and other communications
hereunder shall be in writing and shall be delivered personally, telecopied (if
receipt of which is confirmed by the Person to whom sent), or sent by
internationally recognized overnight delivery service to the Parties at the
following addresses (or to such other Person or address for a Party as
specified by such Party by like notice) (notice shall be deemed given and
received upon receipt, if delivered personally, by overnight delivery service
or by telecopy, except that notice of a change of address shall not be deemed
given and received until actually received):


(a)           If to Apex Sweden, to it at:


Apex Silver Mines Sweden AB

c/o Apex Silver Mines Corporation

1700 Lincoln Street, Suite 3050

Denver, Colorado  80203  U.S.A.

Attention:  Senior Vice President,
Marketing and Strategic Planning

Telecopier: +1 (303) 839-5907


(b)           If to Sumitomo, to
it at:


Sumitomo Corporation

8-11, Harumi, 1-chome,

Chuo-ku, Tokyo, 104-8610 Japan

Attention:General Manager, Non-Ferrous Metals

& Raw Materials Dept.

Telecopier: +81-3-5166-6423


Section 6.8                Severability.  If at any time any covenant or provision
contained herein is deemed in a final ruling of a court or other body of
competent jurisdiction (including an arbitral tribunal convened in accordance
with the Dispute Resolution Agreement) to be invalid or unenforceable, such
covenant or 



 14
 








 


provision shall be considered divisible and such covenant or provision
shall be deemed immediately amended and reformed to include only such portion
of such covenant or provision as such court or other body has held to be valid
and enforceable (provided such amended and reformed provision shall be amended,
reformed and construed in a manner that reflects and carries out the provisions
and the intent of the Parties); and the Parties agree that such covenant or
provision, as so amended and reformed, shall be valid and binding as though the
invalid or unenforceable portion had not been included herein.


Section 6.9                Amendment;
Waiver.  No provision of this
Agreement may be amended or modified except by an instrument or instruments in
writing signed by the Parties and designated as an amendment or modification.  No waiver by any Party of any provision of
this Agreement shall be valid unless in writing and signed by the Party making
such waiver and designated as a waiver. 
No failure or delay by any Party in exercising any right, power, or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof or the exercise of any other right, power, or remedy
preclude any further exercise thereof or the exercise of any other right,
power, or remedy.  No waiver of any
provision hereof shall be construed as a waiver of any other provision.


Section 6.10              Assignment
and Binding Effect.


(a)           Subject to Section 6.10(b), no Party
may assign any of its rights or delegate any of its obligations under this
Agreement without (i) the prior written consent of the other Party and
(ii) the complete written assumption by the assignee of all of the
obligations of the assignor under this Agreement.  All of the terms and provisions of this
Agreement shall be binding on, and shall inure to the benefit of, the
respective successors and permitted assigns of the Parties.


(b)           Notwithstanding anything to the
contrary herein, the Parties acknowledge and agree that (i) Apex Sweden may
assign its rights and obligations hereunder to Apex Luxembourg, and (ii) Apex
Luxembourg may then assign its rights and obligations hereunder to Apex.


Section 6.11              No
Benefit to Others.  Except as
expressly set forth herein, the representations, warranties, covenants, and
agreements contained in this Agreement are for the sole benefit of the Parties
and their respective successors and permitted assigns, and they shall not be
construed as conferring and are not intended to confer any rights, remedies,
obligations, or liabilities on any other Person, unless such Person is
expressly stated herein to be entitled to any such right, remedy, obligation,
or liability.


Section 6.12              No
Consequential Damages.  No Party
shall be liable for any punitive, multiple, or other exemplary damage or loss,
or any indirect, special, incidental, or consequential loss or damage, lost
profits, loss of use, or lost revenues suffered by any other Party arising from
or relating to a Party’s performance, non-performance, breach of, or
default under a covenant, warranty, representation, term, or condition of this
Agreement.  Each Party waives and
relinquishes claims for such punitive, multiple, exemplary, indirect, special,
incidental, or consequential losses or damages, lost profits, loss of use, or
lost revenues.  The limitations on
liability and damages set forth in this Section 6.12 apply to all causes of
action that may be 



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asserted hereunder, whether sounding in breach of contract, breach of
warranty, tort, product liability, negligence, or otherwise.


Section 6.13              Counterparts.  This Agreement may be executed by the Parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.


Section 6.14              Interpretation.


(a)           As used herein, except as otherwise
indicated herein or as the context may otherwise require: (i) the words “include,”
“includes,” and “including” are deemed to be followed by “without limitation”
whether or not they are in fact followed by such words or words of like import;
(ii) the words “hereof,” “herein,” “hereunder,” and comparable terms refer
to the entirety of this Agreement, and not to any particular article, section,
or other subdivision hereof; (iii) any pronoun shall include the
corresponding masculine, feminine, and neuter forms; (iv) the singular
includes the plural and vice versa; (v) references to any agreement or
other document are to such agreement or document as amended, modified,
supplemented, and restated now or hereafter from time to time;
(vi) references to any statute or regulation are to it as amended,
modified, supplemented, and restated now or hereafter from time to time, and to
any corresponding provisions of successor statutes or regulations;
(vii) except as otherwise expressly provided in this Agreement, references
to “Article,” “Section,” “preamble,” “recital,” or another subdivision are to
an article, section, preamble, recital or subdivision hereof; and
(viii) references to any Person include such Person’s respective
successors and permitted assigns.


(b)           Any reference herein to a “day” or
number of “days” (without the explicit qualification of “Business”) shall be
deemed to refer to a calendar day or number of calendar days.  If any action or notice is to be taken or
given on or by a particular calendar day, and such calendar day is not a
Business Day, then such action or notice may be taken or given on the next
succeeding Business Day.


(c)           Any financial or accounting terms
that are not otherwise defined herein shall have the meanings given thereto
under GAAP.


Section 6.15              Rules
of Construction.  The Parties agree
that they have been represented by counsel during the negotiation, preparation,
and execution of this Agreement and, therefore, waive the application of any
Law or rule of construction providing that ambiguities in an agreement or other
document shall be construed against the Party drafting such agreement or
document.


[Remainder
of page intentionally left blank]



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IN WITNESS
WHEREOF, the Parties have executed this Agreement as of the date first written
above.


 


	
  

  	
  APEX SILVER MINES SWEDEN AB

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marcel DeGuire

  
	
   

  	
   

  	
  Marcel DeGuire

  
	
   

  	
  Its:

  	
  Marcel DeGuire Director

  



 



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  SUMITOMO CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mitsuhiko Yamada

  
	
   

  	
   

  	
  Mitsuhiko Yamada

  
	
   

  	
  Its:

  	
  Executive Officer and General Manager,

  Mineral Resources Division 1

  



 



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