Exhibit 4.2


 


UNLESS AND UNTIL
IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL NOTES REPRESENTED
HEREBY, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY.


 


UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.


 


THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE.  BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS
DEFINED IN RULE 144A ADOPTED UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S ADOPTED UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR
OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE ORDINARY SHARES
ISSUABLE UPON CONVERSION OF SUCH SECURITY, EXCEPT (A) TO THE ISSUER OR A
SUBSIDIARY THEREOF; (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A ADOPTED UNDER THE SECURITIES ACT (IF AVAILABLE); (C) TO PERSONS OTHER
THAN U.S. PERSONS OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 ADOPTED UNDER THE SECURITIES ACT OR ANOTHER AVAILABLE
EXEMPTION UNDER THE SECURITIES ACT (IF AVAILABLE), OR (E) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL,
PRIOR TO ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS MAY BE REQUIRED PURSUANT
TO THE INDENTURE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS “OFFSHORE
TRANSACTION,” “UNITED STATES”


 





















 


AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. 
IN ANY CASE, THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE
IN ANY HEDGING TRANSACTION WITH REGARD TO THIS SECURITY OR ANY COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH SECURITY, EXCEPT AS PERMITTED BY THE
SECURITIES ACT.


 


THE
FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF THE
CONDITIONS SPECIFIED IN THE INDENTURE.


 


2





















 


APEX SILVER MINES LIMITED


4.0% Convertible Senior Subordinated Note due 2024


 


	
  No. A-1

  	
   

  	
  CUSIP: 03760XAC5

  
	
  Issue Date: October 15,
  2004

  	
   

  	
  Principal Amount: $100,000,000

  
	
  Issue Price:
  $1,000.00

  	
   

  	
   

  
	
  (for each $1,000
  Principal Amount)

  	
   

  	
   

  



 


APEX
SILVER MINES LIMITED, a Cayman Islands company, promises to pay to Cede &
Co. or registered assigns, on September 15, 2024, the Principal Amount of
this Security.  This Security is issued
with a Principal Amount of ONE HUNDRED MILLION DOLLARS  ($100,000,000).


 


This
Security shall not bear interest except as specified on the other side of this
Security.  This Security is convertible
as specified on the other side of this Security.


 


Additional
provisions of this Security are set forth on the other side of this Security.


 


3





















 


IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed.


 


	
  Dated:  October 15,
  2004

  	
   

  
	
   

  	
   

  
	
   

  	
  APEX SILVER
  MINES LIMITED

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Mark A. Lettes

  	
   

  
	
   

  	
   

  	
  Name: Mark A. Lettes

  	
   

  
	
   

  	
   

  	
  Title: Chief
  Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  TRUSTEE’S CERTIFICATE OF

  AUTHENTICATION

  	
   

  
	
   

  	
   

  
	
  BANK OF NEW
  YORK,

  as Trustee, certifies that this

  is one of the Securities referred

  to in the within-mentioned Indenture.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ Beata Hryniewicka

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:  October 15,
  2004

  	
   

  



 


4





















 


4.0% Convertible Senior Subordinated Note due 2024


 


1.               Interest.


 


The Company promises to pay interest in cash on the
Principal Amount of this Security at the rate of 4.0% per year from the Issue
Date, or from the most recent date to which interest has been paid or provided
for, until the Stated Maturity.  During
such period, the Company will pay interest semiannually in arrears on each
Interest Payment Date to Holders of record at the close of business on each
Regular Record Date immediately preceding such Interest Payment Date.  Each payment of interest on the Securities
will include interest accrued through the day immediately preceding the most
recent Interest Payment Date (or the Repurchase Date, Redemption Date, the
Fundamental Change Redemption Date or, in certain circumstances, the Conversion
Date, as the case may be).  Any payment
required to be made on any day that is not a Business Day will be made on the
next succeeding Business Day.  The
interest rate will be calculated using a 360-day year composed of twelve 30-day
months.


 


Interest
on any Security that is payable, and is punctually paid or duly provided for,
on any Interest Payment Date shall be paid to the person in whose name that
Security is registered at the close of business on the Regular Record Date for
such interest at the office or agency of the Company maintained for such
purpose.  Each installment of interest on
any Security shall be paid in same-day funds by transfer to an account
maintained by the payee located inside the United States.


 


2.               Method of Payment.


 


Subject
to the terms and conditions of the Indenture, the Company will make payments in
respect of Principal Amount, Redemption Prices, Make-Whole Payments, Repurchase
Prices, Fundamental Change Redemption Prices and at Stated Maturity to Holders
who surrender Securities to a Paying Agent to collect such payments in respect
of the Securities.  In addition, the
Company will pay interest from the Issue Date until Stated Maturity, as more
fully described in paragraph 1 hereof. 
The Company will pay any cash amounts in money of the United States that
at the time of payment is legal tender for payment of public and private
debts.  However, the Company may make
such cash payments by check payable in such money.


 


3.               Paying Agent, Conversion Agent,
Registrar and Calculation Agent.


 


Initially,
The Bank of New York (the “Trustee”) will act as Paying Agent,
Conversion Agent, Registrar and Calculation Agent.  The Company may appoint and change any Paying
Agent, Conversion Agent, Registrar, co-registrar or Calculation Agent without
notice, other than notice to the Trustee except that the Company will maintain
at least one Paying Agent in the State of New York, City of New York, Borough
of Manhattan, which shall initially be an office or agency of the Trustee.  The Company or any of its Subsidiaries or any
of their Affiliates may act as Paying Agent, Conversion Agent, Registrar,
co-registrar or Calculation Agent.


 


5





















 


4.               Indenture.


 


The
Company issued the Securities pursuant to an Indenture dated as of October 15,
2004 (the “Indenture”), between the Company and the Trustee.  The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Securities themselves and the Trust Indenture Act of 1939, as in effect
from time to time (the “TIA”). 
Capitalized terms used herein and not defined herein have the meanings
ascribed thereto in the Indenture.  The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the TIA for a statement of those terms.


 


The
Securities are unsecured obligations of the Company limited to $100,000,000
aggregate Principal Amount (subject to Sections 2.07 and 2.14 of the Indenture)
and rank (i) subordinate in right of payment to future unsubordinated
indebtedness for the construction and development of the San Cristobal Project
which will be secured by the San Cristobal property and other project assets or
other assets, (ii) subordinate in right of payment to any guarantee of the
indebtedness described in (i) by the Company or its Affiliates for the period
the guarantee is in effect, and (iii) equal in right of payment to all other
existing and future unsecured and unsubordinated indebtedness of the Company.


 


The
Company may, without the consent of the Holders of the Securities, increase the
Principal Amount of the Securities by issuing additional notes in the future on
the same terms and conditions, except for any differences in the issue price
and interest accrued prior to the issue date of the additional notes, and with
the same CUSIP number as the Securities. The Securities and any additional
notes would rank equally and ratably and would be treated as a single class for
all purposes under the Indenture.  No
additional notes may be issued if any Event of Default has occurred with
respect to the Securities.  The Indenture
does not limit other indebtedness of the Company, secured or unsecured.


 


5.               Provisional Redemption.


 


No
sinking fund is provided for the Securities.


 


The
Company may redeem for cash any portion of the Securities at any time prior to September 15,
2014 upon at least 30 days and not more than 60 days’ notice by mail to the
Holders of the Securities, at a Redemption Price equal to 100% of the Principal
Amount of the Securities to be redeemed plus accrued and unpaid interest and
the Make-Whole Payment, if (1) the Closing Sale Price of the Ordinary Shares
has exceeded 140% of the then applicable Conversion Price for at least 20
trading days in any consecutive 30-day trading period ending on the trading day
prior to the mailing of the notice of redemption and (2) the shelf registration
statement covering resales of the Securities and the Ordinary Shares is
effective and available for use and is expected to remain effective and
available for use for the 30 days following the Redemption Date, unless
registration is no longer required.  The
Make-Whole Payment on the redeemed Securities will equal $396.67 per $1,000
Principal Amount of Securities, minus the amount of any interest actually paid
or accrued and unpaid on the Securities prior to the Redemption Date.  The Company will make Make-Whole Payments on
all Securities called for redemption prior to September 15, 2014,
including Securities converted after the date the Company mailed the
notice.  The Company may make Make-Whole
Payments, at its option,


 


6





















 


either in cash or in
Ordinary Shares or a combination thereof. 
The Company will specify the type of consideration for the Make-Whole
Payment in the Redemption Notice (appropriately adjusted to take into account
the occurrence of certain events that would result in an adjustment of the
Conversion Rate with respect to the Ordinary Shares).  Payments made in Ordinary Shares will be
valued at 95% of the average of the closing sales prices of Ordinary Shares for
the five consecutive trading days ending on the third trading day prior to the
Redemption Date.  Because the sale price
of Ordinary Shares will be determined before the Redemption Date, if the
Company specifies that it will make payment of the Redemption Price in Ordinary
Shares, Holders of Securities bear the market risk that Ordinary Shares will
decline in value between the date the sale price is calculated and the
Redemption Date.


 


6.               Optional Redemption.


 


Beginning
on September 15, 2014, the Company may redeem the Securities for cash, as
a whole or from time to time in part at the option of the Company at a
Redemption Price equal to 100% of the Principal Amount plus accrued and unpaid
interest, if any, to but not including the Repurchase Date.  The Company will give no less than 30 days or
more than 60 days notice of redemption by mail to Holders of Securities.


 


7.               Purchase by the Company at the Option of
the Holder.


 


Subject
to the terms and conditions of the Indenture, the Company shall become
obligated to purchase, at the option of the Holder, the Securities held by such
Holder on September 15, 2014 and September 15, 2019 at a Repurchase
Price equal to 100% of the Principal Amount of such Securities on the
applicable Repurchase Date plus accrued and unpaid interest, if any, to but not
including the Repurchase Date, upon delivery of a Repurchase Notice containing
the information set forth in the Indenture, at any time from the opening of
business on the date that is 25 Business Days prior to such Repurchase Date
until the close of business on the third Business Day prior to such Repurchase
Date and upon delivery of the Securities to the Paying Agent by the Holder as
set forth in the Indenture.


 


The
Repurchase Price may be paid, at the option of the Company, in cash or by the
issuance and delivery of Ordinary Shares of the Company, or in any combination
thereof in accordance with the Indenture. 
If the Company elects to pay the Repurchase Price, in whole or in part,
in Ordinary Shares, the number of shares to be delivered in exchange for the
portion of the Repurchase Price to be paid in Ordinary Shares will be equal to
that portion of the Repurchase Price divided by 95% of the average closing sale
price of Ordinary Shares for the five trading days ending on the third business
day prior to the applicable Repurchase Date (appropriately adjusted to take
into account the occurrence of certain events that would result in an
adjustment of the conversion rate with respect to Ordinary Shares).  The Company will not, however, deliver
fractional shares in repurchases using Ordinary Shares as consideration.  Securityholders who would otherwise be
entitled to receive fractional shares will instead receive cash in an amount
equal to the market price of an Ordinary Share multiplied by such fraction.


 


At the
option of the Holder and subject to the terms and conditions of the Indenture,
the Company shall become obligated to purchase all or a portion of the
Securities in integral multiples of $1,000 Principal Amount held by such Holder
no later than 30 days after the


 


7





















 


Fundamental Change Notice
of the Company for a Fundamental Change Redemption Price equal to 100% of the
Principal Amount of such Securities plus accrued and unpaid interest, if any,
to but not including the Fundamental Change Redemption Date, which Fundamental
Change Redemption Price shall be paid in cash.


 


A
third party may make the offer and purchase of the Securities in lieu of the
Company in accordance with the Indenture.


 


Holders
have the right to withdraw any Repurchase Notice or Fundamental Change
Redemption Notice, as the case may be, by delivering to the Paying Agent a
written notice of withdrawal in accordance with the provisions of the
Indenture.


 


If
cash (and/or securities if permitted under the Indenture) sufficient to pay the
Repurchase Price or Fundamental Change Redemption Price, as the case may be, of
all Securities or portions thereof to be purchased as of the Repurchase Date or
the Fundamental Change Redemption Date, as the case may be, is deposited with
the Paying Agent on the Business Day following the Repurchase Date or the
Fundamental Change Redemption Date, as the case may be, interest, if any, shall
cease to accrue on such Securities (or portions thereof) on such Repurchase Date
or Fundamental Change Redemption Date, as the case may be, and the Holder
thereof shall have no other rights as such (other than the right to receive the
Repurchase Price or Fundamental Change Redemption Price, as the case may be, if
any, upon surrender of such Security).


 


8.               Notice of Redemption.


 


Notice
of redemption will be mailed at least 30 days but not more than 60 days before
the Redemption Date to each Holder of Securities to be redeemed at the Holder’s
registered address.  If money and/or Ordinary
Shares (if permitted under the Indenture) sufficient to pay the Redemption
Price of, and accrued and unpaid interest, if any, with respect to, all
Securities (or portions thereof) to be redeemed on the Redemption Date is
deposited with the Paying Agent prior to or on the Redemption Date, on such
Redemption Date, interest, if any, shall cease to accrue on such Securities or
portions thereof.  Securities in
denominations larger than $1,000 of Principal Amount may be redeemed in part
but only in integral multiples of $1,000 of Principal Amount.


 


9.               Conversion.


 


Conversion Based on Ordinary Shares Price.  Subject to the provisions of this paragraph 9
and notwithstanding the fact that any other condition to conversion described
below has not been satisfied, Holders may convert the Securities into Ordinary
Shares on a Conversion Date (1) in any fiscal quarter commencing prior to September 15,
2019 if the Closing Sale Price of the Ordinary Shares for at least 20 trading
days in a period of 30 consecutive trading days ending on the last trading day
of such preceding fiscal quarter is greater than the conversion trigger price
per share and (2) after September 15, 2019 and prior to Stated Maturity,
if the Closing Sale Price of the Ordinary Shares is greater than or equal to
the conversion trigger price per share on any day after September 15,
2019.  The “conversion trigger price”
for any fiscal quarter shall be 120% of the Conversion Price per share of
Ordinary Shares on the last trading day of such


 


8





















 


preceding fiscal
quarter.  If either of the foregoing
conditions is satisfied, then the Securities will be convertible at any time of
the option of the Holder, through their maturity.


 


Conversion Based on Trading Price of Securities.  Subject to the provisions of this paragraph 9
and notwithstanding the fact that any other condition to conversion described
below has not been satisfied, Holders may convert the Securities into Ordinary
Shares during the five Business Day period after any five consecutive trading
day period in which the Trading Price per $1,000 Principal Amount of the
Securities for each day of such five day period was less than 98% of the
product of the Closing Sale Price on the applicable date and the number of
Ordinary Shares issuable upon conversion of $1,000 Principal Amount of the
Securities.


 


The “Trading Price” means, on any date, the
average of the secondary market bid quotations for the Securities obtained by
the Trustee for $5,000,000 Principal Amount of Securities at approximately 3:30
p.m., New York City time, on such date from three independent nationally
recognized securities dealers selected by the Company; provided that if at
least three such bids cannot reasonably be obtained by the Trustee, but two
bids are obtained, then the average of the two bids shall be used, and if only
one such bid can reasonably be obtained by the Trustee, one bid shall be used;
and provided further that if the Trustee cannot reasonably obtain at least one
bid for $5,000,000 Principal Amount of Securities from a nationally recognized
securities dealer, then the Trading Price per $1,000 Principal Amount of
Securities shall be deemed to be less than 98% of the product of (a) the number
of Ordinary Shares issuable upon conversion of $1,000 Principal Amount of
Securities and (b) the Closing Sale Price on such date.


 


The
Trustee (or other conversion agent appointed by the Company) shall have no
obligation to determine the Trading Price unless the Company has requested such
a determination; and the Company shall have no obligation to make such request
unless a Holder provides it with reasonable evidence that the Trading Price per
$1,000 Principal Amount of Securities would be less than 98% of the product of
the Closing Sale Price of Ordinary Shares and the number of Ordinary Shares
issuable upon conversion of $1,000 Principal Amount of Securities.  If such evidence is provided, the Company
shall instruct the Trustee (or other conversion agent) to determine the Trading
Price of the Securities beginning on the next trading day and on each
successive trading day until the Trading Price per $1,000 Principal Amount of
Securities is greater than 98% of the product of the Closing Sale Price and the
number of shares issuable upon conversion of $1,000 Principal Amount of the
Securities.


 


Conversion Upon Redemption.  Subject to the provisions of this paragraph 9
and notwithstanding the fact that any other condition described herein to
conversion has not been satisfied, a Holder may convert into Ordinary Shares a
Security or portion of a Security which has been called for redemption pursuant
to paragraph 6 hereof, provided such Securities are surrendered for conversion
prior to the close of business on the second Business Day immediately preceding
the Redemption Date.


 


Conversion Upon Occurrence of Certain Corporate Transactions.  Subject to the provisions of this paragraph 9
and notwithstanding the fact that any other condition described herein to
conversion has not been satisfied, in the event the Company is a party to a
consolidation, merger or binding share exchange  pursuant to which the Ordinary Shares would be converted into
cash, securities or other property as set forth in Section 10.15 of the
Indenture,


 


9





















 


the Securities may be
surrendered for conversion at any time from and after the date which is 15 days
prior to the date announced by the Company as the anticipated effective time
until 15 days after the actual effective date of such transaction, and at the
effective time of such transaction the right to convert a Security into
Ordinary Shares will be deemed to have changed into a right to convert it into
the kind and amount of cash, securities or other property which the holder
would have received if the holder had converted its Security into Ordinary
Shares immediately prior to the transaction. 
If such transaction also constitutes a Fundamental Change, a Holder will
be able to require the Company to redeem all or a portion of such Holder’s
Securities pursuant to Paragraph 7 hereof and Section 3.14 of the
Indenture.  In addition, if such
transaction constitutes a Fundamental Change, the Securities will cease to be
convertible after the 15th day following the actual effective date of the transaction
giving rise to such Fundamental Change.


 


A
Security in respect of which a Holder has delivered a Repurchase Notice or
Fundamental Change Redemption Notice exercising the option of such Holder to
require the Company to purchase such Security may be converted only if such
notice of exercise is withdrawn in accordance with the terms of the Indenture.


 


The
initial Conversion Rate is 34.9406 Ordinary Shares per $1,000 Principal Amount
of each Security, subject to adjustment for certain events described in the
Indenture.  The Company will deliver cash
or a check in lieu of any fractional Ordinary Share.  The ability to surrender Securities for
conversion will expire at the close of business on September 15, 2024.


 


To
exercise its conversion right, a Holder must (1) complete and manually sign the
conversion notice (or complete and manually sign a facsimile of such notice)
and deliver such notice to the Conversion Agent, (2) surrender the Security to
the Conversion Agent, (3) furnish appropriate endorsements and transfer
documents if required by the Conversion Agent, the Company or the Trustee and
(4) pay any transfer or similar taxes, if required.


 


A
Holder may convert a portion of a Security if the Principal Amount of such
portion is $1,000 or an integral multiple of $1,000.  No payment or adjustment will be made for
dividends on the Ordinary Shares except as provided in the Indenture.


 


The
Conversion Rate will be adjusted for dividends or distributions on Ordinary
Shares payable in Ordinary Shares or other Capital Stock of the Company;
subdivisions, combinations or certain reclassifications of Ordinary Shares;
distributions to all holders of Ordinary Shares of certain rights to purchase
Ordinary Shares for a period expiring within 60 days of the record date for
such distribution at less than the Closing Sale Price of the Ordinary Shares at
the Time of Determination; distributions to such holders of assets (including
cash and Capital Stock of a Subsidiary) or debt or other securities of the
Company or certain rights to purchase securities of the Company; a tender or
exchange offer by the Company or any Subsidiary for the Ordinary Shares to the
extent that the cash and value of any other consideration included in the
payment per share of Ordinary Shares exceeds the current market price per share
of Ordinary Shares on the trading day next succeeding the Expiration Time.  However, no adjustment need be made if
Securityholders may participate in the transaction or in certain other
cases.  The Company from time to time may
voluntarily increase the Conversion Rate.


 


10





















 


Subject
to Sections 10.22 and 10.23 of the Indenture, if the Company is a party to a
consolidation, merger or binding share exchange or a transfer of all or
substantially all of its assets, or upon certain distributions described in the
Indenture, the right to convert a Security into Ordinary Shares may be changed
into a right to convert it into securities, cash or other assets of the Company
or another person.


 


The
Conversion Rate will not be adjusted for accrued and unpaid interest.  Upon conversion, a holder will not receive
any cash payment of interest (unless such conversion occurs between a regular
Record Date and the interest payment date to which it relates).  Instead, accrued and unpaid interest will be
deemed to be paid in full by the Ordinary Shares received by the Holder on
conversion.


 


Conversion After a Public
Acquirer Change of Control.  In the event of a Public
Acquirer Change of Control, the Company may, in lieu of increasing the
Conversion Rate by the Additional Ordinary Shares pursuant to Section 10.23
of the Indenture, elect to adjust the Conversion Rate such that from and after
the Effective Date of such Public Acquirer Change of Control, Holders of the
Securities will be entitled to convert their Securities into a number of shares
of Public Acquirer Common Stock by adjusting the Conversion Rate in effect
immediately before the Public Acquirer Change of Control by multiplying it by a
fraction: the numerator of which will be (i) in the case of a share exchange,
consolidation, merger or binding share exchange, pursuant to which the Ordinary
Shares are converted into cash, securities or other property, the average value
of all cash and any other consideration (as determined by the Board of
Directors) paid or payable per Ordinary Share or (ii) in the case of any other
Public Acquirer Change of Control, the average of the Closing Sale Price of the
Ordinary Shares for the five consecutive trading days prior to but excluding
the Effective Date of such Public Acquirer Change of Control, and the
denominator of which will be the average of the Closing Sale Price of the
Public Acquirer Common Stock for the five consecutive Trading Days commencing
on the Trading Day next succeeding the effective date of such Public Acquirer
Change of Control.


 


Adjustment for Conversion Upon a
Cash Take-Over Transaction.  If a Holder
elects to convert Securities in connection with a Fundamental Change referred
to in clause (iii) of Section 3.14 of the Indenture pursuant to which 10%
or more of the consideration for the Ordinary Shares (excluding cash payments
for fractional shares and cash payments made in respected dissenters’ appraisal
rights) in the transaction or transactions otherwise constituting the
Fundamental Change does not consist of shares of Publicly Traded Securities (a “Cash
Take-Over Transaction”), the Company will increase the number of Ordinary
Shares issuable upon conversion of the Securities by a number of additional
Ordinary Shares (the “Additional Ordinary Shares”) as set forth in Section 10.23(b)
of the Indenture.  The number of
Additional Ordinary Shares should be determined by reference to Section 10.23(b)
of the Indenture, based on the date on which the Cash Take-Over Transaction
becomes effective (the “Effective Date”) and the price (the “Stock Price”) paid
per share for the Ordinary Shares in the Cash Take-Over Transaction.  If shareholders of Ordinary Shares receive
only cash in the Cash Take-Over Transaction, the Stock Price shall be the cash
amount paid per share.  Otherwise, the
Stock Price shall be the average of the Closing Sale Price of the Ordinary
Shares on the five trading-days prior to but not including the Effective Date
of such Cash Take-Over Transaction.


 


11





















 


10.         Conversion Arrangement on Call for Redemption.


 


Any
Securities called for redemption, unless surrendered for conversion before the
close of business on the Redemption Date, may be deemed to be purchased from
the Holders of such Securities at an amount not less than the Redemption Price
and Make-Whole Payments, if applicable, by one or more investment bankers or
other purchasers who may agree with the Company to purchase such Securities
from the Holders, to convert them into Ordinary Shares of the Company and to
make payment for such Securities to the Trustee in trust for such Holders.


 


11.         Defaulted Interest.


 


Except
as otherwise specified with respect to the Securities, any Defaulted Interest
on any Security shall forthwith cease to be payable to the registered Holder
thereof on the relevant Regular Record Date or accrual date, as the case may
be, by virtue of having been such Holder, and such Defaulted Interest may be
paid by the Company as provided for in Section 11.02 of the Indenture.


 


12.         Denominations; Transfer; Exchange.


 


The
Securities are in fully registered form, without coupons, in denominations of
$1,000 of Principal Amount and integral multiples of $1,000.  A Holder may transfer or exchange Securities
in accordance with the Indenture.  The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture.  The
Registrar need not transfer or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or any Securities in respect of which a Repurchase
Notice or Fundamental Change Redemption Notice has been given and not withdrawn
(except, in the case of a Security to be purchased in part, the portion of the
Security not to be purchased) or any Securities for a period of 15 days before
the mailing of a notice of redemption of Securities to be redeemed.


 


13.         Persons Deemed Owners.


 


The
registered Holder of this Security may be treated as the owner of this Security
for all purposes.


 


14.         Unclaimed Money or Securities.


 


The
Trustee and the Paying Agent shall return to the Company upon written request
any money or securities held by them for the payment of any amount with respect
to the Securities that remains unclaimed for two years, subject to applicable
unclaimed property laws.  After return to
the Company, as the case may be, Holders entitled to the money or securities
must look to the Company for payment as general creditors unless an applicable
abandoned property law designates another person.


 


12





















 


15.         Amendment; Waiver.


 


Subject
to certain exceptions set forth in the Indenture, (i) the Indenture or the
Securities may be amended with the written consent of the Holders of at least a
majority in aggregate Principal Amount of the Securities at the time
outstanding and (ii) certain Defaults may be waived with the written consent of
the Holders of a majority in aggregate Principal Amount of the Securities at
the time outstanding.  Subject to certain
exceptions set forth in the Indenture, without the consent of any Securityholder,
the Company and the Trustee may amend the Indenture or the Securities to cure
any ambiguity, omission, defect or inconsistency, or to comply with Article 5
or Section 10.15 of the Indenture, to secure the Company’s obligations
under this Security or to add to the Company’s covenants for the benefit of the
Securityholders or to surrender any right or power conferred, in exchange for
Holders agreeing to waive their right to require the Company to purchase all or
a portion of their Securities on a specified Repurchase Date, to add additional
Repurchase Dates on which Holders may require the Company to purchase all or a
portion of their Securities at the applicable Repurchase Price and, in
addition, to pay such Holders additional cash payments in connection therewith,
to comply with any requirement of the SEC in connection with the qualification
of the Indenture under the TIA, or as necessary in connection with the
registration of the Securities under the Securities Act or to make any change
that does not adversely affect the rights of any Holders.


 


16.         Defaults and Remedies.


 


Under
the Indenture, Events of Default include (i) the Company defaults in payment of
interest when due under the Securities and such default continues for 30 days;
(ii) default in payment of the Principal Amount, Redemption Price, Make-Whole
Payment, Repurchase Price or Fundamental Change Redemption Price, as the case
may be, in respect of the Securities when the same becomes due and payable;
(iii) failure by the Company to comply with other agreements in the Indenture
or the Securities, other than those referred to in clauses (i) and (ii) above,
subject to notice and lapse of time; (iv) certain events of bankruptcy or
insolvency affecting the Company or certain of its subsidiaries; and (v) the
Pledge Agreement shall cease to be in full force and effect or enforceable,
other than in accordance with its terms, or fails to give the Trustee the
liens, rights, powers and privileges purported to be created thereby.  A Default under clause (iii) above is not an
Event of Default until the Trustee notifies the Company, or the Holders of at
least 25% in aggregate Principal Amount of the Securities at the time
outstanding notify the Company and the Trustee, of the Default and the Company
does not cure such Default (and such Default is not waived) within the time
specified in the Indenture after actual receipt of such notice.


 


Securityholders
may not enforce the Indenture or the Securities except as provided in the
Indenture.  The Trustee may refuse to
enforce the Indenture or the Securities unless it receives indemnity or
security reasonably satisfactory to it. 
Subject to certain limitations, Holders of a majority in aggregate
Principal Amount of the Securities at the time outstanding may direct the Trustee
in its exercise of any trust or power. 
The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of amounts specified in clause (i) or (ii)
above) if it determines that withholding notice is in their interests.


 


13





















 


17.         Trustee Dealings with the Company.


 


Subject
to certain limitations imposed by the TIA, the Trustee under the Indenture, in
its individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with and collect obligations owed to it by
the Company or its Affiliates and may otherwise deal with the Company or their
Affiliates with the same rights it would have if it were not Trustee.


 


18.         No Recourse Against Others.


 


A
director, officer, employee, agent, representative, stockholder or equity
holder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation.  By accepting a Security, each
Securityholder shall waive and release all such liability.  The waiver and release shall be part of the
consideration for the issue of the Securities.


 


19.         Authentication.


 


This
Security shall not be valid until an authorized signatory of the Trustee
manually signs the Trustee’s Certificate of Authentication on the other side of
this Security.


 


20.         Abbreviations.


 


Customary
abbreviations may be used in the name of a Securityholder or an assignee, such
as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN
(=joint tenants with right of survivorship and not as tenants in common), CUST
(=custodian), and U/G/M/A (=Uniform Gift to Minors Act).


 


21.         GOVERNING LAW.


 


THE
LAW OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS SECURITY.


 


14





















 


The Company will furnish
to any Securityholder upon written request and without charge a copy of the
Indenture that has in it the text of this Security in larger type.  Requests may be made to:


 


APEX
SILVER MINES LIMITED


c/o
Apex Silver Mines Corporation


1700
Lincoln Street


Suite
3050


Denver,
Colorado 80203


 


15





















 


	
  ASSIGNMENT FORM

  	
   

  	
  CONVERSION NOTICE

  
	
   

  	
   

  	
   

  
	
  To assign this
  Security, fill in the form below:

  	
   

  	
  To convert this
  Security into Ordinary Shares of the Company, check the box:

  
	
   

  	
   

  	
   

  
	
  I or we assign
  and transfer this Security to

  	
   

  	
  o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  To convert only
  part of this Security, state the Principal Amount to be converted (which must
  be $1,000 or an integral multiple of $1,000):

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Insert assignee’s
  soc. sec. or tax ID no.)

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If you want the stock certificate made out in
  another person’s name,

  
	
   

  	
   

  	
  fill in the form below:

  
	
  (Print or type
  assignee’s name, address and zip code)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  and irrevocably
  appoint

  	
   

  	
  (Insert other
  person’s soc. sec. or tax ID no.)

  
	
   

  	
   

  	
   

  
	
                                 agent
  to transfer this Security on the books of the Company. The agent may
  substitute another to act for him.

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  (Print or type
  other person’s name, address and zip code)

  



 


16





















 


	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
    Your
  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  (Sign exactly as your name appears on the other side
  of this Security)