Exhibit 10.01


 


RETIREMENT AGREEMENT AND RELEASE


 


This Retirement Agreement and Release
(“Agreement”) is made between (i) Keith
R. Hulley (“Mr. Hulley”), (ii) Apex
Silver Mines Corporation, a Delaware corporation (the “Company”), and (iii) Apex Silver Mines
Limited, a Cayman Islands company (“Apex”),
of which the Company is an indirect wholly owned subsidiary.  Mr. Hulley, the Company and Apex are
referred to collectively as the “Parties”
and each individually as a “Party.”  The Effective Date of this Agreement will be
as set forth in Section 1.


 


RECITALS


 


WHEREAS, Mr. Hulley
desires to retire from employment with the Company effective January 1,
2006; and


 


WHEREAS, the
Parties desire to enter into this Agreement in connection with Mr. Hulley’s
retirement.


 


NOW THEREFORE, in
consideration of the mutual promises and undertakings contained herein, Mr. Hulley,
the Company and Apex agree as follows.


 


AGREEMENT


 


1.             Retirement
and Effective Date.  Mr. Hulley’s
employment with the Company shall terminate effective January 1,
2006.  This Agreement will become
effective (the “Effective Date”)
on the eighth (8th) day after Mr. Hulley’s execution of this
Agreement, provided that Mr. Hulley has not revoked his acceptance
pursuant to Section 6(g) below. 
The Parties acknowledge that Mr. Hulley serves as a director or
officer of certain affiliates of the Company and agree to cooperate in Mr. Hulley’s
resignation from and replacement in those positions with those affiliates
(other than Apex).


 


2.             Payments.


 


a.             On the Effective Date, Apex and Mr. Hulley
will enter into an agreement (the “Restricted
Shares Agreement”) in substantially the form attached hereto as Exhibit A.  The Restricted Shares Agreement will become
effective on the Effective Date and provides for a grant to Mr. Hulley of
20,000 restricted ordinary shares of Apex Silver Mines Limited (“Apex”) pursuant to the Apex 2004 Equity
Incentive Plan (the “Incentive Plan”).


 


b.             On January 2, 2007, if (i) Mr. Hulley
is serving as a director of Apex on such date, or has been removed as a
director of Apex without cause and (ii) all or a portion of the options
granted by Apex to Mr. Hulley on December 10, 2003 (the “2003 Options”) pursuant to the Incentive
Plan have expired unexercised, Apex and Mr. Hulley will enter into an agreement
(the “Stock Option Agreement”) in
substantially the form attached hereto as Exhibit B.  Pursuant to the Stock Option Agreement, Apex
will grant to Mr. Hulley ten year options to purchase ordinary shares of
Apex pursuant to the Incentive Plan valued at $250,000 (if all 2003 Options
expired unexercised) using the Black-Scholes option pricing model with an
exercise price per share equal to the Fair Market Value of an Apex ordinary
share on January 2, 2007 and other assumptions and variables consistent with
Apex’s normal practice in determining Incentive Plan option grants.  If a portion of the 2003 Options are
exercised prior to January 2, 2007 and thus do not expire, the $250,000
value of the options to be granted pursuant to this section shall be reduced
accordingly.


 

















 


On January 2,
2008, if (i) Mr. Hulley is serving as a director of Apex on such date
or has been removed as a director of Apex without cause , and (ii) all or
a portion of the options granted by Apex to Mr. Hulley on June 21,
2004 (the “2004 Options”) pursuant
to the Incentive Plan have expired unexercised, Apex and Mr. Hulley will
enter into a Stock Option Agreement in substantially the form attached hereto
as Exhibit B.  Pursuant to
the Stock Option Agreement, Apex will grant to Mr. Hulley ten year options
to purchase ordinary shares of Apex pursuant to the Incentive Plan valued at
$250,000 (if all 2004 Options expired unexercised) using the Black-Scholes
option pricing model with an exercise price per share equal to the Fair Market
Value of an Apex ordinary share on January 2, 2008 and other assumptions
and variables consistent with Apex’s normal practice in determining Incentive
Plan option grants.  If a portion of the
2004 Options are exercised prior to January 2, 2008 and thus do not expire,
the $250,000 value of the options to be granted pursuant to this section shall
be reduced accordingly.


 


c.             After the Effective Date, the
Company will pay, on Mr. Hulley’s behalf, for eighteen (18) consecutive
months (commencing January 2, 2006) of COBRA medical and dental insurance
benefits, equivalent to such benefits as of Mr. Hulley’s retirement date,
at the rate of 100% for Mr. Hulley and at the rate of 100% for Mr. Hulley’s
spouse.  The Company will make these
payments to the applicable insurance company(s) from time to time as they come
due.  Mr. Hulley will be solely
responsible for all payments in respect of any medical and dental insurance
benefits for periods following July 1, 2007.


 


d.             The Company and Mr. Hulley
anticipate that Mr. Hulley will continue to serve as a non-employee
director of Apex and as Chairman of the Board of Directors of Apex.  Apex and Mr. Hulley recognize and agree
that the Board of Directors may decide from time to time in its sole discretion
whether Mr. Hulley shall continue to serve as Chairman or shall be
nominated to serve as a director when his then current term expires.  For so long as Mr. Hulley continues to
serve as Chairman of the Board of Directors of Apex, he shall be paid for such
service as follows:


 


(i)            for calendar years 2006 and 2007, he
shall be compensated at the rate of $60,000 per year;


 


(ii)           for calendar years 2008 and 2009, he
shall be compensated at the rate of $30,000 per year; and


 


(iii)          for calendar years thereafter, he
shall be compensated at the rate of $15,000 per year;


 


in each case to be
paid quarterly on the last business day of the quarter.


 


e.             Reporting of and withholding for
tax purposes in respect of any consideration provided under this Agreement,
including consideration provided pursuant to the Restricted Shares Agreement
and the Stock Option Agreement, will be at the discretion of the Company and
Apex in conformance with applicable tax laws. 
If a claim is made against the Company or Apex for any additional tax or
withholding in connection with or arising out of a payment pursuant to this
Agreement, the Restricted Shares Agreement or the Stock Option Agreement, Mr. Hulley
will pay any such claim within thirty (30) days of being notified by the
Company or Apex and agrees to indemnify the Company and Apex and hold each of
them harmless against such claims, including but not limited to any taxes,
attorneys’ fees, penalties and/or interest, which are or become due from the
Company or Apex.


 


2

















 


3.             General
Release.


 


a.             Mr. Hulley, for himself and
for his affiliates, successors, heirs, subrogees, assigns, principals, agents,
partners, employees, associates, attorneys and representatives, voluntarily,
knowingly and intentionally releases and discharges the Company and Apex and
their respective predecessors, successors, parents, subsidiaries, affiliates
and assigns and each of their respective officers, directors, principals,
shareholders, agents, attorneys, board members, and employees from any and all
claims, actions, liabilities, demands, rights, damages, costs, expenses, and
attorneys’ fees (including but not limited to any claim of entitlement for
attorneys’ fees under any contract, statute, or rule of law allowing a
prevailing party or plaintiff to recover attorneys’ fees), of every kind and
description from the date Mr. Hulley commenced employment with the
Company, its predecessors or affiliates through the Effective Date (the “Released Claims”).


 


b.             The Released Claims include but are
not limited to those which arise out of, relate to, or are based upon: (i) Mr. Hulley’s
employment with the Company or the termination thereof; (ii) statements,
acts or omissions by the Parties whether in their individual or representative
capacities, (iii) express or implied agreements between the Parties,
(except as provided herein) and claims under any severance plan, (iv) any
stock or stock option grant, agreement, or plan, (v) all federal, state,
and municipal statutes, ordinances, and regulations, including but not limited
to claims of discrimination based on race, age, sex, disability, whistleblower
status, public policy, or any other characteristic of Mr. Hulley under the
Age Discrimination in Employment Act, the Older Workers Benefit Protection Act,
the Americans with Disabilities Act, the Equal Pay Act, Title VII of the Civil
Rights Act of 1964 (as amended), the Employee Retirement Income Security Act of
1974, the Rehabilitation Act of 1973, the Worker Adjustment and Retraining
Notification Act, or any other federal, state, or municipal law prohibiting
discrimination or termination for any reason, (vi) state and federal
common law, and (vii) any claim which was or could have been raised by Mr. Hulley.


 


4.             Unknown Facts.  This Agreement includes claims of every
nature and kind, known or unknown, suspected or unsuspected.  Mr. Hulley hereby acknowledges that he
may hereafter discover facts different from, or in addition to, those which he
now knows or believes to be true with respect to this Agreement, and he agrees
that this Agreement and the releases contained herein shall be and remain
effective in all respects, notwithstanding such different or additional facts
or the discovery thereof.  The Parties
hereto agree that the releases provided for herein extend to all claims
released above whether known or unknown, suspected or unsuspected.  The Parties expressly waive and relinquish
any and all rights under California Civil Code Section 1542, which
provides as follows:


 


A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH, IF
KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.


 


The
Parties expressly waive and release any rights and benefits which they have or
may have under any similar law or rule of any other jurisdiction
pertaining to the matter released herein.


 


5.             No
Admission of Liability.  The Parties
agree that nothing contained herein, and no action taken by any Party hereto
with regard to this Agreement, shall be construed as an admission by any Party
of liability or of any fact that might give rise to liability for any purpose
whatsoever.


 


3

















 


6.             Warranties.  Mr. Hulley warrants and represents as
follows:


 


a.             He has read this Agreement, and he
agrees to the conditions and obligations set forth in it.


 


b.             He voluntarily executes this
Agreement after having been advised to consult with legal counsel and after
having had opportunity to consult with legal counsel and without being
pressured or influenced by any statement or representation or omission of any
person acting on behalf of the Company or Apex including, without limitation,
the officers, directors, board members, committee members, employees, agents
and attorneys for the Company or Apex.


 


c.             He has no knowledge of the
existence of any lawsuit, charge, or proceeding against the Company, Apex or
any of their respective officers, directors, board members, committee members,
employees, or agents arising out of or otherwise connected with any of the
matters herein released.


 


d.             He has not previously disclosed any
information which would be a violation of the confidentiality provisions set
forth in Section 7 below if such disclosure were to be made after the
execution of this Agreement.


 


e.             He has full and complete legal
capacity to enter into this Agreement.


 


f.              He has had at least 21 days to
consider this Agreement.  In the event
that Mr. Hulley executes this Agreement prior to the 21st day
after receipt of it, he expressly intends such execution as a waiver of any
rights he has to review the Agreement for the full 21 days.  In such event, Mr. Hulley represents
that such waiver is voluntary and made without any pressure, representations, or
incentives from the Company for such early execution.


 


g.             He may revoke this Agreement for 7
days following its execution, and this Agreement shall not become enforceable
and effective until 7 days after such execution.  If Mr. Hulley chooses to revoke this
Agreement, he must provide written notice to Jeffrey G. Clevenger at Apex
Silver Mines Corporation, 1700 Lincoln Street, Suite 3050, Denver,
Colorado 80203, by hand delivery and by facsimile to (303) 839-5907, within 7
calendar days of Mr. Hulley’s execution of this Agreement.  If Mr. Hulley does not revoke within the
7 day period, the right to revoke is lost.


 


h.             He admits, acknowledges, and agrees
that he is not otherwise entitled to the consideration set forth in Section 2,
and that such consideration is good and sufficient consideration for this
Agreement.  He admits, acknowledges, and
agrees that the consideration set forth in Section 2 above represents full
and final payment of all wages, compensation, bonuses, stock, stock options, or
other benefits from the Company which are or could be due to him under the
terms of his employment with the Company or otherwise.


 


7.             Confidentiality.  Mr. Hulley will not use, nor disclose to
any third party, any of the Company’s or Apex’s business, personnel, or financial
information that Mr. Hulley learned during his employment with the Company
that is not in the public domain.  Mr. Hulley
hereby expressly acknowledges that any breach of this Paragraph 7 may
result in a claim for injunctive relief and/or damages against Mr. Hulley
by the Company or Apex, and possibly by others.


 


8.             No
Solicitation.  Mr. Hulley agrees
not to interfere with the relationships among the Company, Apex and their
affiliates and any current or future employee of the Company, Apex and their affiliates,
including soliciting, inducing, enticing, hiring, employing, or attempting to
solicit, induce, hire


 


4

















 


or employ any current or former employee of the Company, Apex and their
affiliates for two years following the Effective Date.


 


9.             Severability.  If any provision of this Agreement is held
illegal, invalid, or unenforceable, such holding shall not affect any other
provisions hereof.  In the event any
provision is held illegal, invalid or unenforceable, such provision shall be
limited so as to effect the intent of the Parties to the fullest extent
permitted by applicable law.  Any claim
by Mr. Hulley against the Company shall not constitute a defense to
enforcement by the Company.


 


10.           Assignment.  The Company or Apex may assign their
respective rights under this Agreement to a wholly owned subsidiary of Apex,
and may assign their respective rights under Sections 7 and 8 of this
Agreement without restriction.  No other
assignment is permitted except by written permission of the Parties.


 


11.           Enforcement.  The releases contained herein do not release
any claims for enforcement of the terms, conditions or warranties contained in
this Agreement.  The Parties will be free
to pursue any remedies available to them to enforce this Agreement.


 


12.           Entire
Agreement.  This Agreement, the
Restricted Shares Agreement and the Stock Option Agreement are the entire
agreement between the Parties regarding Mr. Hulley’s retirement.  These three agreements supersede any and all
prior oral or written promises or agreements among the Parties, and Mr. Hulley
acknowledges that he has not relied on any promise, representation, or
statement other than those set forth in these agreements.  This Agreement cannot be modified except in
writing signed by all Parties.


 


13.           Termination
and Survival of Other Agreements. 
The Parties agree that the Change of Control
Agreement between Mr. Hulley and Apex dated June 26, 2000 is
terminated as of January 1, 2006.  The Parties hereby agree that the
Incentive Share Option Agreements between Mr. Hulley and Apex dated December 10,
2003 and June 21, 2004 and the Indemnification Agreement between Mr. Hulley
and Apex dated May 30, 2002 shall remain in effect in accordance with
their respective terms.


 


14.           Venue
and Applicable Law.  This Agreement
shall be interpreted and construed in accordance with the laws of the State of
Colorado, without regard to its conflicts of law provisions.  Venue shall be in the federal or state courts
in Colorado.


 


5

















 


IN WITNESS WHEREOF,
the Parties have executed this Separation Agreement and Release on the dates
written below.


 


	
  MR. HULLEY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Keith
  R. Hulley

  	
   

  	
  February
  13, 2006

  	
   

  
	
  Keith
  R. Hulley

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  APEX SILVER MINES CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Jeffrey
  G. Clevenger

  	
   

  	
  February
  23, 2006

  	
   

  
	
  By:

  	
  Jeffrey
  G. Clevenger

  	
  Date

  	
   

  
	
  Title:

  	
  President
  and Chief Executive Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  APEX SILVER MINES LIMITED

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Jeffrey
  G. Clevenger

  	
   

  	
  February
  23, 2006

  	
   

  
	
  By:

  	
  Jeffrey
  G. Clevenger

  	
  Date

  	
   

  
	
  Title:

  	
  President
  and Chief Executive Officer

  	
   

  	
   

  
						



 


6

















 


EXHIBIT A


 


RESTRICTED SHARES AWARD AGREEMENT


 


This Restricted Shares
Award Agreement (the “Award Agreement”), made as of the       
day of February, 2006 (the “Grant Date”), between Apex Silver Mines Limited, a
Cayman Islands corporation (“Apex”), and Keith R. Hulley (“Mr. Hulley”).


 


WHEREAS, Apex desires to encourage and enable Mr. Hulley
to acquire a proprietary interest in Apex through the ownership of Apex’s
ordinary shares, par value US$0.01 per share (the “Ordinary Shares”) pursuant
to the terms and conditions of the Apex Silver Mines Limited 2004 Equity
Incentive Plan (the “Plan”) and this Award Agreement.  Such ownership will provide Mr. Hulley
with a more direct stake in the future of Apex and encourage Mr. Hulley to
continue to serve as a Director of Apex.


 


1.             Grant
of Restricted Shares.


 


1.1           The Company hereby
grants to Mr. Hulley 20,000 restricted Ordinary Shares (the “Restricted
Shares”) on the terms and conditions set forth in this Award Agreement.


 


1.2           Mr. Hulley’s
rights with respect to the Restricted Shares shall remain forfeitable at all
times prior to the dates set forth below (each a  “Lapse Date”):


 




	
  Number of Shares

  	
   

  	
  Lapse Date*

  
	
  5,000

  	
   

  	
  February
       , 2007

  
	
  5,000

  	
   

  	
  February
       , 2008

  
	
  5,000

  	
   

  	
  February
       , 2009

  
	
  5,000

  	
   

  	
  February
       , 2010

  






 






* The Lapse Dates
shall be the first, second, third and fourth anniversaries of the date of this
Award Agreement.


 


1.3           This Award Agreement
shall be construed in accordance with, and subject to, the terms of the
Plan.  For purposes of this Award
Agreement, all capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Plan.


 


2.             Rights
of Participant.


 


2.1           Except as provided
in Section 2.2, Section 6 and otherwise in this Award Agreement, Mr. Hulley
shall be entitled, at all times on and after the Grant Date, to exercise all
rights, powers and privileges of a shareholder with respect to the Restricted
Shares (whether or not the restrictions thereon shall have lapsed), other than
those Restricted Shares which have been forfeited pursuant to Section 3.2
hereof.


 


2.2           Prior to the earlier
of the Lapse Date or the Accelerated Lapse Date (as defined below in Section 3.1),
Mr. Hulley shall not be entitled to transfer, sell, pledge, encumber,
hypothecate or assign the Restricted Shares (collectively, the “Transfer
Restrictions”).


 


A-1

















 


3.             Lapse
of Restrictions.


 


3.1           The Transfer
Restrictions and all other restrictions with respect to the Restricted Shares
shall lapse, and such Restricted Shares shall become fully nonforfeitable on
the earlier of the following dates:


 


(a)           the applicable Lapse
Date, provided Mr. Hulley continues to serve as a director of Apex until
such Lapse Date; or


 


(b)           the date (the “Accelerated
Lapse Date”) of Mr. Hulley’s termination of service as a director of Apex (i) as
the result of Mr. Hulley’s death or Disability, (ii) as the result of
Mr. Hulley’s removal as a director of Apex without cause or his failure to
be reelected as a director of Apex by Apex Shareholders, or (iii) in
anticipation or as the result of a Change in Control as provided in Section 4.


 


3.2           Upon the termination
of Mr. Hulley’s service as a director of Apex prior to a Lapse Date, other
than as provided in Section 3.1(b), the Restricted Shares with respect to
which the Transfer Restrictions have not yet lapsed shall be forfeited and automatically
transferred to and reacquired by Apex at no cost to Apex, and neither Mr. Hulley
nor his heirs, executors, administrators or successors shall have any right or
interest in the Restricted Shares.


 


4.             Change of Control. 
Upon the occurrence of a Change of Control, the Transfer Restrictions
and all other restrictions shall lapse, the Restricted Shares shall become
fully nonforfeitable, and the Board shall have the power and discretion to
provide for modification of this award of Restricted Stock in accordance with
the Plan.  The provisions of this Section 4
shall not apply to any transaction undertaken for the purpose of
reincorporating Apex under the laws of another jurisdiction, if such
transaction does not materially affect the beneficial ownership of Apex’s
capital stock.


 


5.             Escrow
and Delivery of Shares.


 


5.1           Certificates
representing the Restricted Shares shall be issued in the name of Mr. Hulley
and held by Apex in escrow and shall remain in the custody of Apex until (i) their
delivery to Mr. Hulley or his estate as set forth in Section 5.2, or (ii) their
forfeiture and transfer to Apex as set forth in Section 3.2.


 


5.2           Certificates
representing the Restricted Shares shall be delivered to Mr. Hulley as
soon as practicable following the Lapse Date or Accelerated Lapse Date,
provided that Mr. Hulley has satisfied all applicable tax withholding
requirements with respect to the Restricted Shares.


 


(a)           If the Accelerated
Lapse Date occurs as a result of Mr. Hulley’s death, certificates
representing the Restricted Shares shall be delivered to Mr. Hulley’s
estate as soon as practicable following Apex’s receipt of an official death
certificate or other evidence of death acceptable to Apex, provided that Mr. Hulley’s
estate has satisfied all applicable tax withholding requirements with respect
to the Restricted Shares.


 


A-2

















 


6.             Dividends;
Voting Rights.


 


6.1           All dividends
declared and paid by Apex on Restricted Shares shall be held by Apex in escrow
for the account of Mr. Hulley. 
Dividends so held shall not bear interest.  Upon the earlier of the Lapse Date or the
Accelerated Lapse Date, the dividends shall be paid to Mr. Hulley or his
estate, as the case may be.  Upon the
forfeiture of the Restricted Shares pursuant to Section 3.2, all related
dividends shall also be forfeited.


 


6.2           Mr. Hulley
shall not have the right to vote all or any portion of the Restricted Shares
until the earlier of the applicable Lapse Date or the Accelerated Lapse Date.


 


7.             Adjustments Upon
Recapitalization.  If, by reason
of a recapitalization or other change in corporate or capital structure, Mr. Hulley
shall be entitled to new, additional or different shares of stock or securities
of Apex or any successor Company or entity or other property pursuant to Section 11
of the Plan, such new, additional or different shares or other property shall
thereupon be subject to all of the conditions and restrictions which were
applicable to the Restricted Shares immediately prior to such recapitalization
or other change in corporate or capital structure.


 


8.             Withholding of Taxes. 
If Mr. Hulley makes an election under Section 83(b) of
the Code with respect to the grant of Restricted Shares, the grant of the
Restricted Shares shall be conditioned upon the prompt payment by Mr. Hulley
to Apex of an amount equal to the applicable federal, state and local income
taxes and other amounts required by law to be withheld (the “ Withholding Taxes”)
in connection with such election.  If Mr. Hulley
does not make an election under Section 83(b) of the Code with
respect to the grant of Restricted Shares, Mr. Hulley shall pay to Apex
the Withholding Taxes upon the earlier of a Lapse Date or Accelerated Lapse
Date.  The delivery of the Restricted
Shares and related dividends shall be conditioned upon the prior payment of the
applicable Withholding Taxes.


 


The Company shall have the right to require Mr. Hulley or Mr. Hulley’s
beneficiaries or legal representatives to remit to Apex an amount sufficient to
satisfy any Cayman Islands or United States federal, state and local
withholding tax requirements.  Whenever
payments under the Plan or this Award Agreement are to be made to Mr. Hulley
in cash, such payments shall be net of any amounts sufficient to satisfy all
applicable taxes, including without limitation, all applicable Cayman Islands
or United States federal, state and local withholding tax requirements to be
withheld or submitted by Apex concerning such payments.  The Board may, in its sole discretion, permit
Mr. Hulley to satisfy the withholding obligation either by (i) surrendering
Ordinary Shares owned by Mr. Hulley or (ii) having Apex withhold from
Ordinary Shares otherwise deliverable to Mr. Hulley.  Ordinary Shares surrendered or withheld shall
be valued at their Fair Market Value, as defined in the Plan as of the date on
which income is required to be recognized for income tax purposes.


 


9.             Modification of Award
Agreement.  Except as set forth in the Plan and in this
Award Agreement, this Award Agreement may be modified, amended, suspended or
terminated, and any terms or conditions may be waived, but only by a written
instrument executed by the parties hereto.


 


A-3

















 


10.          Plan Controlling.  This Award
Agreement is intended to conform in all respects with the requirements of the
Plan.  Inconsistencies between the
requirements of this Award Agreement and the Plan shall be resolved according
to the terms of the Plan.  Mr. Hulley
acknowledges receipt of a copy of the Plan.


 


11.          Severability. 
Should any provision of this Award Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any reason, the
remaining provisions of this Award Agreement shall not be affected by such
holding and shall continue in full force and effect in accordance with their
terms.


 


12.          Governing Law. 
This Award Agreement and all rights arising hereunder shall be governed
by, and construed and interpreted in accordance with, the laws of the State of
Colorado.


 


13.          Successors in Interest. 
This Award Agreement shall inure to the benefit of and be binding upon
any successor to Apex and upon Mr. Hulley’s heirs, executors,
administrators and successors.


 


	
   

  	
  APEX
  SILVER MINES LIMITED

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
    Jeffrey
  G. Clevenger

  
	
   

  	
   

  	
  Title:

  	
    President and Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MR. HULLEY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
    Keith R. Hulley

  
						



 


A-4

















 


EXHIBIT B


 


NONQUALIFIED SHARE OPTION AGREEMENT


 


This Nonqualified Share
Option Agreement (the “Agreement”), made as of the 2nd day of January, 200  ,
by and between Apex Silver Mines Limited, an exempted limited liability company
duly formed and existing under the laws of the Cayman Islands (“Apex”), and
Keith R. Hulley (“Mr. Hulley”).


 


WHEREAS, Apex desires to encourage and enable Mr. Hulley
to acquire a proprietary interest in Apex through the ownership of Apex’s
ordinary shares, par value US$0.01 per share (the “Ordinary Shares”) pursuant
to the terms and conditions of the Apex Silver Mines Limited 2004 Equity
Incentive Plan (the “Plan”) and this Agreement. 
Such ownership will provide Mr. Hulley with a more direct stake in
the future of Apex and encourage Mr. Hulley to continue to serve as a
Director of Apex.


 


NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the
parties agree as follows:


 


1.             DEFINITIONS. 
For purposes of this Agreement, all capitalized terms used herein and
not otherwise defined herein shall have the meanings ascribed to them in the
Plan.


 


2.             GRANT OF OPTION. 
The Company hereby grants to Mr. Hulley an nonqualified share
option (the “Option”) to purchase           *
Ordinary Shares at the exercise price (the “Exercise Price”) of $      
per Ordinary Share, the Fair Market Value of Apex’s Ordinary Shares on the
grant date, subject to the terms and conditions of this Agreement and the Plan.


 


3.             OPTION TERM. 
The Option granted hereby shall expire on January 1, 201   
(the “Expiration Date”), unless sooner terminated or modified under the
provisions of this Agreement or the Plan. 
Except as otherwise set forth herein, the Option may not be exercised
after the Expiration Date.


 


4.             WHEN VESTED AND
EXERCISABLE.  The Option shall vest and be exercisable by Mr. Hulley
as of the date of this Agreement.


 


5.             TERMINATION
OF SERVICES: DEATH; DISABILITY; RETIREMENT; CAUSE.


 


(a)           If the services of Mr. Hulley
as a Director of Apex are terminated for any reason other than death,
Disability or his removal as a Director of Apex without cause, or his failure
to be reelected as a Director of Apex by Apex shareholders, , this Option shall
be exercisable by Mr. Hulley at any time on or prior to the earlier of (i) the
Expiration Date or (ii) the one year anniversary of the date of such
termination of service.  Any portion of
this Option


 






*
The number of options granted shall be determined as set forth in the
Retirement Agreement and Release among Mr. Hulley, Apex and Apex Silver
Mines Corporation, executed in February 2006.


 


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not exercised within the period described in the preceding sentence,
for whatever reason, shall terminate.


 


(b)           In the event of the
death or Disability of Mr. Hulley, or his removal as a Director of Apex
without cause, or his failure to be reelected as a Director of Apex by Apex
shareholders, the unvested portion of this Option shall immediately terminate
and be forfeited, and the vested portion of the Option on such date shall be
exercisable at any time on or prior to the one year anniversary of such date by
Mr. Hulley or by the beneficiary designated by Mr. Hulley for such
purpose (the “Designated Beneficiary”) or if no Designated Beneficiary shall be
appointed or if the Designated Beneficiary shall predecease Mr. Hulley, by
Mr. Hulley’s personal representatives, heirs or legatees.  Any portion of the Option not exercised
within the period described in the preceding sentence, for whatever reason,
shall terminate.


 


6.             CHANGE OF CONTROL.  In the event of a Change in Control, Apex
shall give Mr. Hulley notice thereof and the Board shall have the power
and discretion to provide alternatives regarding the terms and conditions for
the exercise of, or modification of, this Option in accordance with the Plan.


 


7.             NON-ASSIGNABILITY. 
The Option granted hereby and any right arising thereunder may not be
transferred, assigned, pledged or hypothecated (whether by operation of law or
otherwise), except by will or the applicable laws of descent and distribution,
and the Option and any right arising thereunder shall not be subject to
execution, attachment or similar process. 
Any attempted assignment, transfer, pledge, hypothecation or other
disposition of an Option not specifically permitted herein or in the Plan shall
be null and void and without effect.  An
Option may be exercised solely by Mr. Hulley during his lifetime, or
following his death pursuant to Section 5(b) hereof.


 


8.             MODE OF EXERCISE. 
The Option may be exercised in whole or in part.  Ordinary Shares purchased upon the exercise
of the Option shall be paid for in full at the time of such purchase.  Such payment shall be made in cash or by wire
transfer in immediately available funds, in either event denominated in
Dollars.  Upon receipt of notice of exercise
and payment in accordance with procedures to be established by the Board, Apex
or its agent shall deliver to the person exercising the Option (or his
designee) a certificate for such Ordinary Shares.


 


9.             RECAPITALIZATION. 
The number of Ordinary Shares covered by this Option and the Exercise
Price shall be proportionately adjusted for any increase or decrease in the
number of issued Ordinary Shares as set forth in the Plan; provided, however,
that any fractional shares resulting from any such adjustment shall be
eliminated. The Board may also make any other changes, including changes in the
classes of securities available, to the extent it is deemed necessary or
desirable to preserve the intended benefits of the Plan for Apex and Mr. Hulley
in the event of any other reorganization, recapitalization, merger,
consolidation, spin-off, extraordinary dividend or other distribution or
similar transaction.  Notwithstanding any
other provision of the Plan or this Agreement, the Board may cause the Option
granted hereunder to be canceled in consideration of a cash payment or
alternative Share Award made to the holder of such canceled Share Award equal
in value to the Fair Market Value of such canceled Share Award.


 


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10.          PLAN CONTROLLING. 
This Agreement is intended to conform in all respects with the
requirements of the Plan. 
Inconsistencies between the requirements of this Agreement and the Plan
shall be resolved according to the terms of the Plan.  Mr. Hulley acknowledges receipt of a
copy of the Plan.


 


11.          RIGHTS PRIOR TO EXERCISE
OF OPTION.  Mr. Hulley shall not have any rights as
a shareholder with respect to any Ordinary Shares subject to the Option prior
to the date on which he is recorded as the holder of such Ordinary Shares on
the records of Apex.


 


12.          WITHHOLDING TAXES. 
The Company shall have the right to require Mr. Hulley or his
beneficiaries or legal representatives to remit to Apex an amount sufficient to
satisfy any Cayman Islands or United States federal, state and local
withholding tax requirements, including upon the grant, vesting or exercise of
this Option.  Whenever payments under the
Plan or this Agreement are to be made to Mr. Hulley in cash, such payments
shall be net of any amounts sufficient to satisfy all applicable taxes,
including without limitation, all applicable Cayman Islands or United States
federal, state and local withholding tax requirements to be withheld or
submitted by Apex concerning such payments. 
The Board may, in its sole discretion, permit Mr. Hulley to satisfy
his tax withholding obligation either by (i) surrendering Ordinary Shares
owned by him or (ii) having Apex withhold from Ordinary Shares otherwise
deliverable to him.  Ordinary Shares
surrendered or withheld shall be valued at their Fair Market Value as of the
date on which income is required to be recognized for income tax purposes.


 


13.          GOVERNING LAW. 
This Agreement and all rights arising hereunder shall be governed by,
and construed and interpreted in accordance with, the laws of the Delaware.


 


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Executed as of the day
and year first above written.


 


	
   

  	
  APEX
  SILVER MINES LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Jeffrey G.
  Clevenger

  
	
   

  	
  Title:

  	
  President and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MR.
  HULLEY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Keith R. Hulley

  
					



 


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