Exhibit
10.4


Execution
Version


OPTION
AGREEMENT


Entered
into as of September 25, 2006



between



APEX SILVER MINES LIMITED



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

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II GENERAL

  	
   

  	
  6

  	
   

  
	
  Section 2.1

  	
   

  	
  Active and Reserve Assets

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III ACTIVE ASSET OPTION

  	
   

  	
  7

  	
   

  
	
  Section 3.1

  	
   

  	
  Grant of Active Asset Option

  	
   

  	
  7

  	
   

  
	
  Section 3.2

  	
   

  	
  Active Asset Option Term

  	
   

  	
  7

  	
   

  
	
  Section 3.3

  	
   

  	
  Exercise of Active Asset Option

  	
   

  	
  7

  	
   

  
	
  Section 3.4

  	
   

  	
  Payment with respect to each Optioned Active Asset

  	
   

  	
  8

  	
   

  
	
  Section 3.5

  	
   

  	
  Failure to Exercise Active Asset Option

  	
   

  	
  9

  	
   

  
	
  Section 3.6

  	
   

  	
  Cessation of an Active Asset; Third-Party Sale

  	
   

  	
  9

  	
   

  
	
  Section 3.7

  	
   

  	
  Access to Records

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV RESERVE ASSET OPTION

  	
   

  	
  11

  	
   

  
	
  Section 4.1

  	
   

  	
  Grant of Reserve Asset Option

  	
   

  	
  11

  	
   

  
	
  Section 4.2

  	
   

  	
  Reserve Asset Option Term

  	
   

  	
  11

  	
   

  
	
  Section 4.3

  	
   

  	
  Exercise of Option

  	
   

  	
  11

  	
   

  
	
  Section 4.4

  	
   

  	
  Payment for Optioned Reserve Assets

  	
   

  	
  12

  	
   

  
	
  Section 4.5

  	
   

  	
  Failure to Exercise Reserve Asset Option

  	
   

  	
  13

  	
   

  
	
  Section 4.6

  	
   

  	
  Cessation of a Reserve Asset; Third-Party Sale

  	
   

  	
  13

  	
   

  
	
  Section 4.7

  	
   

  	
  Access to Records

  	
   

  	
  14

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V TERM AND TERMINATION

  	
   

  	
  14

  	
   

  
	
  Section 5.1

  	
   

  	
  Term

  	
   

  	
  14

  	
   

  
	
  Section 5.2

  	
   

  	
  Effect of Termination

  	
   

  	
  15

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI FAILURE TO MAKE PAYMENT

  	
   

  	
  15

  	
   

  
	
  Section 6.1

  	
   

  	
  Failure to Make Holding Cost Payment

  	
   

  	
  15

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII ADDITIONAL PROVISIONS

  	
   

  	
  15

  	
   

  
	
  Section 7.1

  	
   

  	
  Entire Agreement

  	
   

  	
  15

  	
   

  
	
  Section 7.2

  	
   

  	
  Confidentiality

  	
   

  	
  15

  	
   

  
	
  Section 7.3

  	
   

  	
  Governing Law; Language

  	
   

  	
  16

  	
   

  
	
  Section 7.4

  	
   

  	
  Dispute Resolution

  	
   

  	
  16

  	
   

  
	
  Section 7.5

  	
   

  	
  Headings

  	
   

  	
  16

  	
   

  
	
  Section 7.6

  	
   

  	
  Notices

  	
   

  	
  16

  	
   

  
	
  Section 7.7

  	
   

  	
  Severability

  	
   

  	
  17

  	
   

  
								



 



 i
 






 



 


	
  

  	
   

  	
   

  	
   

  	
  Page

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.8

  	
   

  	
  Amendment; Waiver

  	
   

  	
  17

  	
   

  
	
  Section 7.9

  	
   

  	
  Assignment and Binding Effect

  	
   

  	
  17

  	
   

  
	
  Section 7.10

  	
   

  	
  No Benefit to Others

  	
   

  	
  18

  	
   

  
	
  Section 7.11

  	
   

  	
  No Consequential Damages

  	
   

  	
  18

  	
   

  
	
  Section 7.12

  	
   

  	
  Counterparts

  	
   

  	
  18

  	
   

  
	
  Section 7.13

  	
   

  	
  Interpretation

  	
   

  	
  18

  	
   

  
	
  Section 7.14

  	
   

  	
  Rules of Construction

  	
   

  	
  19

  	
   

  
								



 


Appendix A          Active Assets


Appendix B           Reserve
Assets


 



 ii
















 


OPTION AGREEMENT


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


APEX SILVER MINES LIMITED,
an exempted company limited by shares duly incorporated and validly existing
under the Laws of the Cayman Islands, British West Indies (“Apex”), with
its registered office at the offices of Walkers SPV Limited, P.O. Box 908GT,
Walker House, Mary Street, George Town, Grand Cayman, Cayman Islands, British
West Indies; 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 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 the date hereof (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.            In connection with the Acquisition, Sumitomo desires to
obtain, and Apex is willing to grant to Sumitomo, an option to acquire up to a
35% interest (but not less than 20%) in certain mineral exploration assets of
Apex (or its Subsidiaries) pursuant to the terms and conditions set forth
below.


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:



 1
 






 



 


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.


“Active Asset” means Apex’s (or its
Subsidiary’s) Rights with respect to an Exploration Property set forth in
Appendix A attached hereto.


“Active Asset Cessation/Sale Notice” has the
meaning specified in Section 3.6(a). 


“Active Asset Option” has the meaning specified
in Section 3.1.


“Active Asset Option Notice” has the meaning
specified in Section 3.3(a).


“Active Asset Option Term” has
the meaning specified in Section 3.2.


“Active Asset Payment” has the meaning
specified in Section 3.4(a).


“Active Offered Terms” has the meaning
specified in Section 3.6(c).


“Active Retained Interest” has the meaning
specified in Section 3.6(b).


“Active Third-Party Sale” has the meaning
specified in Section 3.6(a).


“Affiliate” means, with respect to any Person,
any other Person that directly, or indirectly through one or more
intermediaries, Controls, is Controlled by, or is under common Control with,
the Person in question.


“Agreement” means this Option Agreement
(including the Appendices attached hereto).


“Apex” has the meaning specified in the
preamble.


“Asset Development Documents” means all
material documents, agreements, accounting records, and financial statements in
Apex’s possession related to an Exploration Property.


“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.


“Confidential Information” has the meaning
specified in Section 7.2.


“Definitive Exploration Property Agreements”
has the meaning specified in Section 3.3(b).



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“Development Costs” means costs paid to third
parties incurred after the acquisition of an Exploration Property to evaluate
the feasibility of developing and conducting mining operations on such
property, provided that Development Costs shall not include any Holdings Costs.


“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.


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


“Exploration Costs” means all costs and
expenses incurred in conducting exploration and prospecting activities on or in
connection with an asset including the preparation of feasibility studies, the
active pursuit of required Government Approvals and the performance of required
environmental protection or reclamation obligations, the building, maintenance,
and repair of roads, drill site preparation, drilling, tracking, sampling,
trenching, digging test pits, shaft sinking, acquiring, diverting, and/or
transporting water necessary for exploration, logging of drill holes and drill
core, completion and evaluation of geological, geophysical, geochemical, or
other exploration data, and preparation of interpretive reports, and surveying
and laboratory costs and charges (including assays or metallurgical analyses
and tests).


“Exploration Entity” means an Entity as may be
permitted to be formed in any given jurisdiction, formed to pursue the
development of a given Exploration Property.


“Exploration Property” has the meaning
specified in Section 2.1(a).


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


“Holding Costs” means the periodic and other
ordinary and necessary costs of owning, leasing, licensing, maintaining, or
otherwise holding an Exploration Property or the Rights associated therewith
including property taxes, annual minimum lease, license, or royalty payments,
insurance, costs for providing security for persons and equipment on such
property, the costs of routine land, buildings, and equipment maintenance, and
interest on debt incurred to acquire such Exploration Property or Rights.


“Holding Costs Payment” has the meaning
specified in Section 3.6(b).


“Interest” has the meaning specified in Section
3.1.


“Interest Ratio” has the meaning specified in
the MSC Shareholder Agreement.



 3
 






 



 


“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.


“Optioned Active Asset” has the meaning
specified in Section 3.3(a).


“Optioned Asset Historical Cost” means the
documented or supported aggregate historical costs incurred by Apex with
respect to the Optioned Active Asset(s) or the Optioned Reserve Asset(s), as
applicable.  Such historical costs shall
include Exploration Costs, Holding Costs, and all other related costs,
including reasonably allocated overhead costs related to such asset.


“Optioned Reserve Asset” has the meaning
specified in Section 4.3(b).


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


“Payment Date” has the meaning specified in
Section 6.1.


“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
(i) BBB- by S&P or Baa3 by Moody’s, and (ii) 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
transfer, sale, or other disposition by Sumitomo (or its Subsidiary) of its
direct or indirect equity interests in an Exploration Entity to such Entity.


“Reserve Asset” means Apex’s (or its
Subsidiary’s) Rights with respect to an Exploration Property set forth in
Appendix B attached hereto or deemed to be a Reserve Asset in accordance
with the terms hereof.


“Reserve Asset Cessation/Sale Notice” has the
meaning specified in Section 4.6(a). 


“Reserve Asset Option”
has the meaning specified in Section 4.1. 


“Reserve Asset Option Notice” has the meaning
specified in Section 4.3(b).


“Reserve Asset Option Term” has the meaning
specified in Section 4.2. 


“Reserve Asset Trigger Notice” has the meaning
specified in Section 4.3(a).



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“Reserve Definitive Exploration Property Agreements”
has the meaning specified in Section 4.3(c).


“Reserve Offered Terms” has the meaning
specified in Section 4.6(c). 


“Reserve Retained Interest” has the meaning
specified in Section 4.6(b).


“Reserve Third-Party Sale” has the
meaning specified in Section 4.6(a).


“Review Documents” has the meaning specified in
Section 3.2.


“Rights” has the meaning specified in Section
2.1(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.


“Subsidiary” means with respect to any Person
(other than MSC, New Metals and New Cayman as same apply to Apex):


(a)           a corporation a majority in voting
power of whose share capital with voting power, under ordinary circumstances,
to elect directors is, at the date of determination thereof, directly or
indirectly, owned by such Person, by a Subsidiary of such Person, or by such
Person and one or more Subsidiaries of such Person,


(b)           a partnership or limited liability
company in which such Person or a Subsidiary of such Person is, at the date of
determination thereof, (i) in the case of a partnership, a general partner
of such partnership with the power affirmatively to direct the policies and
management of such partnership or (ii) in the case of a limited liability
company, the managing member or, in the absence of a managing member, a member
with the power affirmatively to direct the policies and management of such
limited liability company, or


(c)           any Entity (other than a corporation,
partnership, or limited liability company) in which such Person, a Subsidiary
of such Person, or such Person and one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination, has (i) the power to
elect or direct the election of a majority of the members of the governing body
of such Person or (ii) in the absence of such a governing body, at least a
majority ownership interest.


“Sumitomo” has the meaning specified in the
preamble.


“Sumitomo Interestholders” has the meaning
specified in the MSC Shareholder Agreement.



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“Term” has the meaning specified in Section
5.1(a).


“US$” means Dollars.


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

GENERAL


Section 2.1                Active
and Reserve Assets.


(a)           Appendices A and B attached
hereto set forth the ownership rights (the “Rights”) of Apex (or its
Subsidiaries) with respect to each Active Asset or Reserve Asset set forth
therein (each an “Exploration Property”).  Apex represents and warrants that it, or its
Subsidiary, own such Rights.  Sumitomo
acknowledges that the Rights may be subject to transfer restrictions or other
limitations (i.e. rights of first refusal) and in connection therewith,
Sumitomo’s rights under this Agreement are subject thereto.  Subject to Section 3.6 and Section 4.6, Apex
further covenants, represents and warrants that, to the extent within the
control of Apex, neither Apex nor any applicable Affiliate of Apex shall grant
any acquisition rights to third-parties with respect to the Rights or the
Exploration Properties other than Sumitomo during the Term. 
Notwithstanding anything herein to the contrary, in no event shall the
option rights granted hereunder apply to any property right or Contract to
which Apex (or any of its Subsidiaries) is a party or any of its rights or
interests thereunder if, and for so long as, the grant of such rights shall
constitute or result in (i) the abandonment, invalidation, or
enforceability of any right or interest of Apex (or its Subsidiaries) therein
or (ii) a breach or termination pursuant to the terms of, or a default
under, any such property right or Contract; provided, however,
that such grant shall apply immediately at such time as the condition causing
such abandonment, invalidation, or unenforceability shall be remedied, and to
the extent severable, shall apply immediately to any portion of such property
right or Contract that does not result in the consequences specified in clause
(i) or (ii) of this Section 2.1(a).


(b)           Apex shall have the right at
any time, and from time to time prior to the commencement of an Active Asset
Option Term relating to a specified Active Asset, to reclassify such Active
Asset as a Reserve Asset and vice versa
and Appendices A and B shall be amended accordingly by Apex without further
action of the Parties under Section 7.8; provided, however, that
no such reclassification shall be made on or after 18 months after the
Effective Date or with respect to an asset if an Active Asset Option Notice or
a Reserve Asset Option Notice, as applicable, has been delivered with respect
to such asset in accordance with the terms of this Agreement.



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ARTICLE
III

ACTIVE ASSET OPTION


 


Section 3.1                Grant
of Active Asset Option. 
Apex hereby grants to Sumitomo the option (the “Active Asset Option”)
to acquire from time to time during the Term and on the terms and conditions
set forth in this ARTICLE III, an undivided interest of not less than 20% but
not more than 35% (an “Interest”) in one or more of the Active Assets.


Section 3.2                Active
Asset Option Term.  The “Active Asset Option Term” for any
Active Asset shall commence on the date that Sumitomo receives the Asset
Development Documents for such Active Asset and shall terminate at 11:59 P.M.
(Denver, Colorado, U.S.A. time) on the date that is 60 days after the date
Sumitomo receives the Asset Development Documents for such Active Asset.  Apex shall deliver the Asset Development
Documents relating to all of the Active Assets to Sumitomo no later than 22
months after the Effective Date.  In the
event that Apex (or its Subsidiaries) comes in possession of an Asset
Development Document not previously in its possession after the commencement of
the Active Asset Option Term, or in the event Apex (or its Subsidiaries)
creates an Asset Development Document after the commencement of the Active
Asset Option Term, Apex shall promptly deliver such document to Sumitomo, but
the existence of such document shall not extend the Active Asset Option
Term.  In addition, Sumitomo acknowledges
and agrees that some Asset Development Documents may be made available to
Sumitomo for review but not physically delivered (“Review Documents”).  Apex shall provide Sumitomo prompt written
notice of the existence of Review Documents and the location thereof, but the
receipt of such notice and the existence of such Review Documents shall not
extend the Active Asset Option Term.


Section 3.3                Exercise of Active Asset
Option.


(a)           If Sumitomo
elects to exercise any Active Asset Option, Sumitomo shall deliver a written
notice (the “Active Asset Option Notice”) to Apex prior to the
expiration of such Active Asset Option Term relating to such Active Asset.  The Active Asset Option Notice shall set
forth the Active Asset in which Sumitomo elects to acquire an Interest (the “Optioned
Active Asset”) and the amount of the Interest Sumitomo wishes to acquire,
which in no case shall be less than 20% nor more than 35%, in each such case an
Optioned Active Asset.


(b)           Commencing upon receipt by Apex of
the Active Asset Option Notice, Apex and Sumitomo shall (i) jointly
determine a mutually acceptable structure for the acquisition of Interests in
the Optioned Active Assets, and (ii) enter into acquisition documents with
respect thereto that are on terms and conditions reasonably acceptable to the
Parties (including, among other documents, a shareholders or joint venture
agreement providing for the contribution by each party of its pro rata share of future operating and
capital costs of the Optioned Active Assets) (the “Definitive Exploration
Property Agreements”).  The
Definitive Exploration Property Agreements shall include provisions for
(A) rights of first refusal with respect to a Party’s transfer of all or
part of its interest therein, (B) the contribution by each party of its pro rata share of future operating and
capital costs of the Optioned Active Assets, (C) dilution, so that if
either Party fails to contribute its proportionate share, the other Party shall
have the right to contribute the



 7
 






 



non-contributing party’s share against
the issuance of additional beneficial interests (in shares, quotas, membership,
or partnership interest or other comparable designation) to the contributing
Party to reflect the adjusted proportionate holdings resulting from such
contribution(s) (and non-contribution, as applicable), (D) loss of
rights so that at such time a Party’s beneficial interest in an Exploration
Entity falls below 25% as a result of clause (C) of this Section 3.3(b),
such Party shall have no further rights with respect to the management of such
Exploration Entity or the Optioned Active Asset it is developing except the
right to have a director on the Board of Exploration Entity until the Party's
beneficial interest falls below 20%, and (E) provisions, on such terms as
the Parties may mutually agree, similar to ARTICLE II, Section 3.2, Section
3.3, Section 5.1 and Section 7.7 of the MSC Shareholders Agreement.  Apex shall cause any of its Subsidiaries
which have rights in the applicable Optioned Active Asset to enter into the
Definitive Exploration Property Agreements to the extent reasonably required
for Sumitomo to effectively acquire its Interest in the Optioned Active
Asset.  Notwithstanding the foregoing,
Sumitomo may at any time prior to the execution of the Definitive Exploration
Property Agreements elect, by written notice to Apex, not to acquire an interest
in one or more Optioned Active Assets to which the Definitive Exploration
Property Agreements relate, in which event (X) such Optioned Active Assets
shall cease to be subject to this Agreement, and (Y) Sumitomo shall
reimburse Apex for reasonable out-of-pocket expenses incurred by
Apex in connection with the negotiation of the Definitive Exploration Property
Agreement including attorney’s and other consultant fees.


Section 3.4                Payment with respect to each
Optioned Active Asset.


(a)           In
consideration for each Optioned Active Asset, Sumitomo shall, in each
applicable Definitive Exploration Property Agreement, agree to contribute to
each Exploration Entity operating the respective Optioned Active Asset the
Dollar amount, in cash, equal to 100% of all costs incurred by the Exploration
Entity since its establishment until such time Sumitomo’s contributions to such
entity shall equal an amount which, when divided by a number equal to the sum
of (i) Sumitomo’s said contributions plus (ii) the Optioned
Asset Historical Cost incurred up to the effective date of such Definitive
Exploration Property Agreement, equals the same percentage as the Interest in
such Optioned Active Asset that Sumitomo is acquiring (the “Active Asset
Payment”).


(b)           Sumitomo and Apex hereby acknowledge and agree that
if Sumitomo (or its Subsidiary) transfers, sells, or otherwise disposes of its
direct or indirect equity interests in an Exploration Entity prior to payment
in full of the Active Asset Payment as set forth in Section 3.4(a), then
Sumitomo (or its Subsidiary) shall, within five Business Days of the date on
which Sumitomo or its Subsidiaries ceases to own such equity interest, pay Apex
(or its Subsidiary) an amount, in cash, equal to the outstanding unpaid amount
of the Active Asset Payment which payment shall satisfy the obligation under
Section 3.4(a).  Notwithstanding the
foregoing and subject to any applicable rights of first refusal, if Sumitomo or
its Subsidiary transfers, sells or otherwise disposes of all, but not less than
all, of its direct or indirect equity interests in such Exploration Entity to a



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Qualified Third Party, and if such Qualified
Third Party expressly assumes all of Sumitomo’s obligations under this
Agreement in a writing delivered to Apex (or its Subsidiary), then Sumitomo
shall be released of its obligations with respect to the applicable Active
Asset arising from and after the completion of such transfer, except for such
obligations arising out of events or circumstances that occurred prior to the
completion of such transfer, whether occurring before, at, or after the
completion of such transfer, and only to the extent such obligations have been
assumed by the Qualified Third Party.  


Section 3.5                Failure
to Exercise Active Asset Option


.  In the event that Sumitomo does
not elect to exercise an Active Asset Option with respect to a specific Active
Asset during the Active Asset Option Period relating to such Active Asset in
accordance with the terms and conditions of this ARTICLE III, then Sumitomo’s
rights with respect to such Active Asset as set forth in this ARTICLE III shall
terminate and have no further force or effect, and, notwithstanding anything to
the contrary in this Agreement, the Parties hereto shall have no liability,
responsibility, or obligation, whatsoever, to the each other in respect of this
ARTICLE III with respect to such Active Asset.


Section 3.6                Cessation
of an Active Asset; Third-Party Sale.


 


(a)           If, prior to
the end of the Term and prior to Sumitomo’s submission of an Active Asset Option
Notice with respect to any Active Asset, Apex either (i) elects to cease
the exploration or development of an Active Asset still subject to the Active
Asset Option or (ii) agrees (subject to this Agreement) to sell an
interest in an Active Asset still subject to the Active Asset Option to an
unaffiliated third party (an “Active Third-Party Sale”), then,
promptly after such decision or agreement, Apex shall provide Sumitomo written
notice of same (the “Active Asset Cessation/Sale Notice”) together with the
Asset Development Documents relating to such Active Asset, to the extent not
already delivered.  Sumitomo shall have
the right to acquire all or part of the subject Active Asset on the terms and
conditions set forth in Section 3.6(b) and Section 3.6(c).  


(b)           If the Active Asset Cessation/Sale Notice states
that Apex intends to cease the exploration or development of an Active Asset
still subject to the Active Asset Option, then Apex shall indicate in the
Active Asset Cessation/Sale Notice the percentage interest of the interest in
such Active Asset that Apex shall have the right to retain (the “Active
Retained Interest”); provided, however, that such Active
Retained Interest shall not exceed 35% of the interest in such Active
Asset.  Sumitomo shall have 60 days from
the date of receipt of the Active Asset Cessation/Sale Notice and the related
Asset Development Documents to elect to either (i) acquire the Active
Asset, other than the Active Retained Interest therein, on the terms,
conditions, and procedures set forth in Section 3.3(b), or (ii) request
that such Active Asset be deemed a Reserve Asset.  Any such election shall be made by written
notice to Apex specifying whether Sumitomo is electing to acquire such Acquired
Asset or to deem it a Reserve Asset.  In
addition:



 9
 






 



 


(I)            If Sumitomo elects to acquire the
applicable percentage interest of such Active Asset, then the purchase price
for such interest shall be the Dollar amount, in cash, equal to the product of
(i) the percentage interest of such Active Asset to be acquired by
Sumitomo and (ii) Optioned Asset Historical Costs incurred by Apex for
such Active Asset up to the date of Sumitomo’s payment of such purchase
price.  


(II)           If Sumitomo elects to deem any such
Active Asset a Reserve Asset, such Active Asset shall thereafter be treated as
a Reserve Asset subject to the provisions of ARTICLE IV.  Sumitomo shall be responsible for all Holding
Costs with respect to such asset from the date such asset is designated a
Reserve Asset until the earlier of (A) the termination of this Agreement
or (B) the date on which Sumitomo acquires an Interest in such asset in
accordance with the terms hereof (the “Holding Costs Payment”).  In connection therewith, Apex, on a monthly
basis, shall provide Sumitomo an invoice that sets forth the amount payable by
Sumitomo with respect such Holding Costs along with reasonable supporting
documentation thereof.  All amounts
invoiced shall be payable by Sumitomo no later than five Business Days after
invoice receipt.  Payment of any such
Holding Costs that are outstanding (including any interest accrued thereon and
whether invoiced or not) shall be a condition to the closing of Sumitomo’s
acquisition of an Interest in such asset, to the extent Sumitomo elects to
acquire an Interest in accordance with ARTICLE IV.


(c)           If the Active
Asset Cessation/Sale Notice states that Apex intends to enter into an Active
Third-Party Sale, then Apex shall indicate in the Active Asset
Cessation/Sale Notice the terms and conditions on which such Active Asset is
proposed to be sold to a third party (the “Active Offered Terms”)
(including the percentage interest to be sold, sale price, and applicable time
period in which the transaction shall close). 
Sumitomo shall have 30 Business Days from the date of receipt of the
Active Asset Cessation/Sale Notice and the related Asset Development Documents
to elect to acquire such interest in the applicable Active Asset on the Active
Offered Terms.  Apex may sell such Active
Asset to a third-party on the Active Offered Terms within 120 days of the
end of such 30 Business Day period or within 120 days of Sumitomo’s failure to
consummate the transaction on the Active Offered Terms (including applicable
required time periods with respect thereto) after having made an election to do
so.  In the event Apex does not complete
such a sale to a third party on the Active Offered Terms, the Active Asset
shall, at the election of Apex, be deemed either an Active Asset or a Reserve
Asset.


Section 3.7                Access to Records.  Commencing on the Effective Date until the
end of the Term (except with respect to those Active Assets with respect to
which the Active Asset Option has terminated), Apex shall afford to Sumitomo
and its business, accounting, legal, engineering and other representatives, as
well as their respective officers and employees, reasonable access, upon
reasonable notice, to its documents, agreements, accounting records, and



 10
 






 



financial statements applicable to, and to
the physical properties comprising, the Active Assets and shall permit Sumitomo
and such representatives to make such tests, including soil and other field
tests, of such Active Assets as Sumitomo may reasonably request.  


ARTICLE IV

RESERVE
ASSET OPTION


Section 4.1                Grant
of Reserve Asset Option.  Apex hereby grants to Sumitomo the option
(the “Reserve Asset Option”) to acquire, from time-to-time
during the Term and on the terms and conditions set forth in this ARTICLE IV,
an Interest in one or more of the Reserve Assets.  


Section 4.2                Reserve
Asset Option Term.  The “Reserve Asset Option Term” with
respect to any Reserve Asset shall commence on the date (after delivery of the
applicable Reserve Asset Trigger Notice) Sumitomo receives the Asset
Development Documents (taking into account any Asset Development Documents
provided or reviewed by Sumitomo in accordance with Section 4.3 prior to such
date) with respect to such Reserve Asset and shall terminate at 11:59 p.m.
(Denver, Colorado time) on the date that is 60 days after Sumitomo receives
such documents.  In the event that Apex
(or its Subsidiaries) comes in possession of an Asset Development Document not
previously in its possession after the commencement of the Reserve Asset Option
Term, or in the event Apex (or its Subsidiaries) creates an Asset Development Document
after the commencement of the Reserve Asset Option Term, Apex shall promptly
deliver such document to Sumitomo, but the existence of such document shall not
extend the Reserve Asset Option Term.  In
addition, Sumitomo acknowledges and agrees that Apex may provide Sumitomo with
Review Documents.  Apex shall provide
Sumitomo prompt written notice of the existence of Review Documents and the
location thereof, but the receipt of such notice and the existence of such
Review Documents shall not extend the Reserve Asset Option Term.


Section 4.3                Exercise of Option.


(a)           Apex shall provide Sumitomo
written notice promptly after Apex has expended in excess of US$200,000 (as
determined from the Effective Date) in Development and/or Exploration Costs
with respect to a Reserve Asset, and Sumitomo may at any time during the Term
provide a written notice to Apex requesting that Apex deliver to Sumitomo all
Asset Development Documents relating to a specified Reserve Asset (either such
notice being a “Reserve Asset Trigger Notice”).  Apex shall provide Sumitomo with all Asset
Development Documents relating to such Reserve Asset as soon as practicable
after delivery of the Reserve Asset Trigger Notice. For clarity, Sumitomo may request to review
documents related to any of the Reserve Assets at any time during the Term of
this agreement, whether or not a Reserve Asset Trigger Notice has been
delivered by Apex, for the purpose of determining Sumitomo’s desire to present
a Reserve Asset Option Notice under the terms of this Section 4.3(a).



 11
 






 



 


(b)           At any time
prior to the end of any Reserve Asset Option Term, Sumitomo may elect to
exercise the Reserve Asset Option with respect to the Reserve Asset that is the
subject of a Reserve Asset Trigger Notice by delivering a written notice (the “Reserve
Asset Option Notice”) stating Sumitomo’s intent to acquire an Interest in
the applicable Reserve Asset (an “Optioned Reserve Asset”).  The Reserve Asset Option Notice shall set
forth the Reserve Asset in which Sumitomo elects to acquire an Interest and the
amount of the Interest Sumitomo wishes to acquire, which in no case shall be
less than 20% nor more than 35%, in each such case an Optioned Reserve Asset.


(c)           Commencing upon receipt by Apex of
the Reserve Asset Option Notice, Apex and Sumitomo shall (i) jointly
determine a mutually acceptable structure for the acquisition of the Interest
in the Optioned Reserve Asset, and (ii) enter into acquisition documents
with respect thereto that are on terms and conditions reasonably acceptable to
the Parties (including, among other documents, a shareholders or joint venture
agreement providing for the contribution by each party of its pro rata share of the future operating and
capital costs of the Optional Reserve Asset) (the “Reserve Definitive Exploration
Property Agreements”).  The Reserve
Definitive Exploration Property Agreements shall include provisions for
(A) rights of first refusal with respect to a Parties transfer of all or
part of their interest therein, (B) the contribution by each party of its pro rata share of future operating and
capital costs of the Optioned Reserve Assets, (C) if either Party
fails to contribute its proportionate share, the other Party shall have the
right to contribute the non-contributing party’s share against the
issuance of additional beneficial interests (in shares, quotas, membership or
partnership interest, or other comparable designation) to the contributing
Party to reflect the adjusted proportionate holdings resulting from such
contribution(s) (and non-contribution, as applicable), (D) at such time a
Party’s beneficial interest in an Exploration Entity falls below 25% as a
result of clause (C) of this Section 4.3(c), such Party shall have no
further rights with respect to the management of such Exploration Entity or the
Exploration Property it is developing except the right to have a director on
the Board of the Exploration Entity until the Party's beneficial interest in
the Exploration Entity falls below 20%, and (E) provisions, on such terms
as the Parties may mutually agree, similar to ARTICLE II,
Section 3.2, Section 3.3, Section 5.1 and Section 7.7 of
the MSC Shareholders Agreement.  Apex shall cause any of its
Subsidiaries having rights in the applicable Optioned Reserve Asset to enter
into the Reserve Definitive Exploration Property Agreements to the extent
reasonably required for Sumitomo to effectively acquire its Interest in the
Optioned Reserve Asset.  Notwithstanding
the foregoing, Sumitomo may at any time prior to the execution of the Reserve
Definitive Exploration Property Agreement elect, by written notice to Apex, not
to acquire an interest in one or more of the Optioned Reserve Assets to which
the Reserve Definitive Exploration Property Agreement relates in which event
such Reserve Asset shall cease to be the subject to this Agreement.


Section 4.4                Payment
for Optioned Reserve Assets.  In consideration for each Optioned Reserve
Asset, Sumitomo shall pay to Apex, at the closing of the acquisition of the
Interest in such Optioned Reserve Asset, the Dollar amount in cash, equal to
the percentage



 12
 






 



Interest of such Optioned Reserve Asset that
Sumitomo is acquiring times the Optioned Asset Historical Costs with respect to
such Optioned Reserve Asset that have been incurred up to the date of
Sumitomo’s said payment.


Section 4.5                Failure to Exercise Reserve
Asset Option.  In the
event that Sumitomo elects not to exercise any Reserve Asset Option, or fails
to timely deliver a Reserve Asset Option Notice, with respect to a Reserve
Asset for which a Reserve Asset Option Notice has been delivered, then
Sumitomo’s rights as set forth in this ARTICLE IV with respect to such Reserve
Asset shall terminate and have no further force or effect, and, notwithstanding
anything to the contrary in this Agreement, the Parties hereto shall have no
liability, responsibility, or obligation, whatsoever, to each other in respect
of this ARTICLE IV with respect to such Reserve Asset.


Section 4.6                Cessation of a Reserve Asset;
Third-Party Sale.  


(a)           Except with
respect to an Optioned Reserve Asset or a Reserve Asset for which a Reserve
Asset Trigger Notice has been delivered, if, during the Term, Apex either
(i) makes a permanent election not to pursue development of a Reserve
Asset or (ii) agrees (subject to this Agreement) to sell an interest in a
Reserve Asset to an unaffiliated third party (a “Reserve Third-Party
Sale”), then, promptly after such decision or agreement, Apex shall provide
Sumitomo written notice of same (the “Reserve Asset Cessation/Sale Notice”)
together with the Asset Development Documents relating to such Reserve Asset,
to the extent not already delivered. 
Sumitomo shall have the right to acquire all or part of the subject
Reserve Asset on the terms and conditions set forth in Section 4.6(b) and
Section 4.6(c).  


(b)           If the
Reserve Asset Cessation/Sale Notice states that Apex has permanently elected
not to pursue development of a Reserve Asset, then Apex shall indicate in the
Reserve Asset Cessation/Sale Notice the percentage interest of such Reserve
Asset that Apex shall have the right to retain (the “Reserve Retained
Interest”); provided, however, that such Reserve Retained
Interest shall not exceed 35% of the interest in such Reserve Asset.  Sumitomo shall have 60 days from the date of
receipt of the Reserve Asset Cessation/Sale Notice and the related Asset
Development Documents to elect to acquire the applicable Reserve Asset other
than the Reserve Retained Interest therein on the terms, conditions, and
procedures set forth in Section 4.3(c). 
The purchase price for such interest shall be the Dollar amount, in
cash, equal to (i) the percentage interest of such Reserve Asset to be
acquired by Sumitomo multiplied by (ii) the total amount of all Optioned
Asset Historical Costs incurred by Apex for such Reserve Asset up to
the date of payment of such purchase price. 


(c)           If the Reserve Asset Cessation/Sale Notice states
that Apex intends to enter into a Reserve Third-Party Sale, then Apex
shall indicate in the Reserve Asset Cessation/Sale Notice the terms and conditions
on which such Reserve Asset is proposed to be sold to a third party (the “Reserve
Offered Terms”) (including the percentage interest to be sold, sale price,
and applicable time period in which the transaction shall



 13
 






 



close). 
Sumitomo shall have 60 days from the date of receipt of the Reserve
Asset Cessation/Sale Notice and the related Asset Development Documents to
elect to acquire such interest in the applicable Reserve Asset on the Reserve
Offered Terms.  Apex may sell such
Reserve Asset to a third party on the Reserve Offered Terms within 120 days of
the end of such 60-day period or within 120 days of Sumitomo’s failure to
consummate the transaction on the Reserve Offered Terms (including applicable
required time periods with respect thereto) after having made an election to do
so.  In the event Apex does not complete
such a sale to a third party on the Reserve Offered Terms, the Reserve Asset
shall thereafter continue to be treated as a Reserve Asset subject to the
provisions of ARTICLE IV.


Section 4.7                Access to Records.  During the Term of this Agreement, Apex shall
afford to Sumitomo and its business, accounting, legal, engineering and other
representatives, as well as their respective officers and employees, reasonable
access, upon reasonable notice, to its documents, agreements, accounting
records, and financial statements related to, and to the physical properties
comprising, the Reserve Assets and shall permit Sumitomo and such
representatives to make such tests, including soil and other field tests, of
such Active Assets as Sumitomo may reasonably request.


ARTICLE V

TERM AND TERMINATION


Section 5.1                Term.  


(a)           Unless
otherwise agreed in writing by the Parties, the Parties obligations under this
Agreement shall commence on the Effective Date and shall terminate, along with
this Agreement, upon the date that is the earlier of (i) two years after
the Effective Date, or (ii) the date on which the aggregate Interest
Ratios of the Sumitomo Interestholders in MSC is less than 20% (the “Term”).


(b)           Subject to
Section 5.2(a) and notwithstanding the foregoing, the Term shall be tolled
solely under the following circumstances:  (i) if the Asset
Development Documents related to any Active Asset have not been delivered to
(or reviewed by) Sumitomo on or before the date that is 60 days prior to the
end of the Term, or the Section 3.3 negotiation period with respect to such
Active Asset has not expired by the end of the Term, the Term shall be tolled
with respect to such Active Asset for the duration of the applicable Active
Asset Option Term pursuant to Section 3.2 and any negotiation period with
respect thereto pursuant to Section 3.3(a); and (ii) if a Reserve Asset
Trigger Notice has been delivered to or by Sumitomo with respect to a Reserve
Asset, and the Asset Development Documents related to such Reserve Asset
have not been delivered to (or reviewed by) Sumitomo on or before the date that
is 60 days prior to the end of the Term, or the Section 4.3 negotiation period
with respect to such Reserve Asset has not expired by the end of the Term, the
Term shall be tolled with respect to such Reserve Asset for the duration of the
applicable Reserve Asset Option Term



 14
 






 



pursuant to
Section 4.2 and any negotiation period with respect thereto pursuant to Section
4.3.


Section 5.2                Effect of Termination.


(a)           If
(i) this Agreement is terminated pursuant to  Section 5.1(a)(i) and (ii) at such time
of termination, an Active Asset Option Notice or an Reserve Asset Option
Notice, as applicable, has been delivered to Apex, but the acquisition process
set forth in ARTICLE III or ARTICLE IV, as applicable, has not been completed
in accordance with the terms hereof, then, solely with respect to such optioned
asset, this Agreement shall continue until consummation of the acquisition of such
asset.


(b)           If
(i) this Agreement is terminated pursuant to Section 5.1(a)(ii) and
(ii) at such time of termination, 
an Active Asset Option Notice or an Reserve Asset Option Notice, as
applicable, has been delivered to Apex, but the acquisition process set forth
in ARTICLE III or ARTICLE IV, as applicable, has not been completed in
accordance with the terms hereof, then this Agreement shall terminate and
Sumitomo shall have no further rights with respect to such asset.


ARTICLE
VI

FAILURE TO MAKE PAYMENT


Section 6.1                Failure to Make Holding Cost
Payment.  If Sumitomo fails to make  a Holding Costs Payment within 30 days of the
date (the “Payment Date”) such payment is due and payable, Sumitomo
shall forfeit its interest and its rights to the Active Asset or Reserve Asset
to which the Holding Costs Payment applies without further notice from Apex.


ARTICLE VII

ADDITIONAL PROVISIONS


Section 7.1                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.


Section 7.2                Confidentiality.  Each Party shall keep confidential, shall
cause its Affiliates to keep confidential, and shall instruct its officers,
directors, employees, and advisors to keep confidential, all information received
from the other Party with respect to any Asset Development Document or Review
Document along with any due diligence investigation conducted relating to an
Active Asset or Reserve Asset and the consummation of the transactions
contemplated by this Agreement or otherwise, except (i) as required by
applicable securities or other Laws or stock exchange rules or administrative
process, and (ii) for information that is or becomes generally available
to the public other than as a result of a breach of this Section 7.2 (such
information, subject to clauses (i) and (ii), “Confidential Information”).  Except to the



 15
 






 



extent deemed necessary or advisable by
counsel to maintain compliance with, or to prevent violation of, applicable
securities or other Laws or stock exchange rules, each Party shall keep the
existence of and the provisions of this Agreement and the other Transaction
Documents confidential and shall disclose their contents only (1) to those
lenders, investors, partners, shareholders, directors, officers, employees, and
agents who need to know such information for purposes of its businesses and the
transactions contemplated hereby, and (2) to Governmental Authorities and
third parties for purposes of obtaining approvals for the transactions contemplated
hereby.  All Confidential Information
shall be treated as information covered by the Confidentiality Agreement, which
shall remain in full force and effect and shall not be modified or superseded
in any way by this Agreement.  With
respect to an Active Asset or Reserve Asset for which Sumitomo (or its
Affiliates) receives Asset Development Documents or Review Documents but does
not acquire an Interest in such asset, Sumitomo (or its Affiliates)
(i) shall promptly return to Apex all copies of such Asset Development
Documents or Review Documents in the possession or Sumitomo (or its
Affiliates), and, unless specifically prohibited by court order, Sumitomo (or
its Affiliates) will destroy all copies of any analyses, compilations, studies
or other documents prepared by it or for its use containing or reflecting any
such Asset Development Document or Review Document, and (ii) shall be
prohibited from using any information in such Asset Development Document or
Review Document for its (or its Affiliates) future benefit without the prior
written consent of Apex.


Section 7.3                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 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 7.4                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 payment obligations
hereunder or 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 7.5                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 7.6                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), 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



 16
 






 



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, to it at:


Apex Silver Mines Limited

c/o Apex Silver Mines Corporation

1700 Lincoln Street, Suite 3050

Denver, Colorado  80203 U.S.A.

Attention:  Vice President of Exploration

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 7.7                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
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 7.8                Amendment;
Waiver.  Except as provided in Section 2.1(b), 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 7.9                Assignment
and Binding Effect.  No Party may assign any of its rights or
delegate any of its obligations under this Agreement without (a) the prior
written consent of the



 17
 






 



other Party, and (b) 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.


Section 7.10              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 7.11              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 7.11 apply to all causes of action that
may be asserted hereunder, whether sounding in breach of contract, breach of
warranty, tort, product liability, negligence, or otherwise.


Section 7.12              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 7.13              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,
including the Appendices hereto, and not to any particular article, section, or
other subdivision hereof or Appendix hereto; (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 or to an
“Appendix” are to an article, section, preamble, recital or subdivision hereof
or an “Appendix” hereto; and



 18
 






 



(viii) references
to any Person or Entity include such Person’s or Entity’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 7.14              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]



 19
















 


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


 


	
  

  	
  APEX SILVER MINES LIMITED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey Clevenger

  	
   

  
	
   

  	
   

  	
  Jeffrey Clevenger

  
	
   

  	
  Its:

  	
  President & CEO

  
					



 









 



 


	
  

  	
  SUMITOMO CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mitsuhiko Yamada

  	
   

  
	
   

  	
   

  	
  Mitsuhiko Yamada

  
	
   

  	
  Its:

  	
  Executive Officer and General Manager, 

  
	
   

  	
   

  	
  Mineral Resources Division 1