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




 


 





 





















 


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

  



 





















 


	
  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





















 


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.


 





















 


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


 


2





















 


(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





















 


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





















 


(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





















 


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





















 


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.


 


7





















 


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 


 


8





















 


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





















 


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





















 


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





















 


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





















 


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





















 


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





















 


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





















 


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

  	
   

  
			



 


16





















 


	
   

  	
  (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





















 


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

  



 





















 


	
   

  	
  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

  
					



 





















 


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