EXHIBIT 10.1

SEPARATION AGREEMENT AND RELEASE

This Separation Agreement and Release (“Agreement”) is made between (i) Mark A.
Lettes (“Employee”) and (ii)  Apex Silver Mines Corporation (the “Company”). 
Employee and the Company are referred to collectively as the “Parties” and
individually as a “Party.”  The Effective Date of this Agreement will be as set
forth in Section 1.

RECITALS

WHEREAS, Employee’s employment with the Company ended effective June 10, 2006.

WHEREAS, the Parties wish to resolve fully and finally any potential disputes
regarding Employee’s employment with the Company and any other potential
disputes between the Parties; and

WHEREAS, in order to accomplish this end, the Parties are willing to enter into
this Agreement.

NOW THEREFORE, in consideration of the mutual promises and undertakings
contained herein, the Parties to this Agreement agree as follows:

TERMS

1.             Separation and Effective Date.  Employee’s employment with the
Company ended effective June 10, 2006.  This Agreement will become effective
(the “Effective Date”) on the eighth day after Employee’s execution of this
Agreement, provided that Employee has not revoked his acceptance pursuant to
Paragraph 7(g) below.

2.             Payments.

a.             The Company will continue to pay Employee’s salary until June 30,
2006.

b.             On the Effective Date, the Company will pay to Employee the gross
sum of $307,995, comprised of (i) $247,695, representing all amounts to which
Employee is entitled pursuant to the Severance Compensation Plan of Apex Silver
Mines Corporation and (ii) $60,300, representing all amounts to which Employee
would have been entitled pursuant to the Apex Silver Mines Limited Incentive
Bonus Plan, prorated through June 30, 2006.

c.             On the date hereof, the Company and Employee will enter into an
agreement (the “Restricted Shares Amendment Agreement”) in the form attached
hereto as Exhibit A.  The Restricted Shares Amendment Agreement will become
effective on the Effective Date and will amend certain agreements regarding the
grant of 7,800 ordinary shares of Apex Silver Mines Limited (“Apex”) pursuant to
the 2004 Equity Incentive Plan (the “Incentive Plan”) to provide that (i) the
restrictions will lapse with respect to those shares on the Effective Date

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and (ii) the Company will deliver to Employee on or before the third business
day following the Effective Date (the “Delivery Date”) a certificate
representing 7,800 ordinary shares of Apex.

d.             On the date hereof, the Company and Employee will enter into an
agreement (the “Stock Option Amendment Agreement”) in the form attached hereto
as Exhibit B, effective on the Effective Date, that amends certain agreements
regarding the grant of options under the Apex Silver Mines Limited Employees’
Share Option Plan (the “Employees’ Plan”)  and the Incentive Plan to provide
that the options set forth below will vest on the Effective Date and remain
exercisable until June 30, 2009.

Date of Grant

 

Number of
Options

 

Exercise Price

 

Vesting Dates*

 

Expiration Date*

 

12/4/2002

 

6,250

(1)

$

14.12

 

12/4/2006

 

12/4/2012

 

 

 

 

 

 

 

 

 

 

 

12/10/2003

 

12,500

(2)

$

16.95

 

12/10/2006

 

12/10/2013

 

 

 

 

 

 

 

12/10/2007

 

 

 

 

 

 

 

 

 

 

 

 

 

12/9/2004

 

7,500

(3)

$

16.68

 

12/9/2006

 

12/9/2014

 

 

 

 

 

 

 

12/9/2007

 

 

 

 

 

 

 

 

 

12/9/2008

 

 

 

 

 

 

 

 

 

 

 

 

 

12/8/2005

 

21,000

 

$

18.01

 

12/8/2006

 

12/8/2015

 

 

 

 

 

 

 

12/8/2007

 

 

 

 

 

 

 

 

 

12/8/2008

 

 

 

 

 

 

 

 

 

12/8/2009

 

 

 

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*      Prior to execution of the Stock Option Amendment Agreement.

(1)   18,750 options have already vested and also will remain exercisable until
June 30, 2009.

(2)   12,500 options have already vested and also will remain exercisable until
June 30, 2009.

(3)   2,500 options have already vested and also will remain exercisable until
June 30, 2009.

e.             After the Effective Date, the Company will pay, on Employee’s
behalf, twelve (12) months (commencing June 30, 2006) of COBRA medical and
dental insurance benefits, equivalent to such benefits as of Employee’s
separation date, at the rate of 100% for Employee and at the rate of 100% for
Employee’s spouse, to be paid by the Company to the applicable insurance
company(s).  Employee is solely responsible for all payments in respect of any
COBRA benefits for periods following June 30, 2007.

f.              Reporting of and withholding any consideration provided under
this paragraph 2, including the Restricted Shares Amendment Agreement and the
Stock Option Amendment Agreement, for tax purposes will be at the discretion of
the Company in conformance with applicable tax laws.  If a claim is made against
the Company for any additional tax or withholding in connection with or arising
out of the payment pursuant to this Agreement, the Restricted Shares Amendment
Agreement or the Stock Option Amendment Agreement, Employee will pay any such
claim within thirty (30) days of being notified by the Company and agrees to
indemnify the Company and hold it 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.

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3.             General Release.

a.             Employee, 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 its 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 Company hired Employee 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) Employee’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 Employee 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 Employee.

4.             Unknown Facts.  This Agreement includes claims of every nature
and kind, known or unknown, suspected or unsuspected.  Employee 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.

5.             No Application.  Employee agrees that he will not apply for any
job or position as an employee, consultant, independent contractor, or
otherwise, with the Company.  Employee warrants that no such applications are
pending at the time this Agreement is executed.

6.             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.

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7.             Warranties.  Employee 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
including, without limitation, the officers, directors, board members, committee
members, employees, agents and attorneys for the Company.

c.             He has no knowledge of the existence of any lawsuit, charge, or
proceeding against the Company or any of its 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 Paragraph 8 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 Employee 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, Employee 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 Employee chooses to revoke this Agreement, he must provide
written notice to Jerry Danni, 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 Employee’s execution of this
Agreement.  If Employee 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 Paragraph 2, and that consideration
is good and sufficient consideration for this Agreement.  He admits,
acknowledges, and agrees that the consideration set forth in Paragraph 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.

8.             Confidential Information.  Except as herein provided, all
discussions regarding this Agreement, including, but not limited to, the amount
of consideration, offers, counteroffers or other terms or conditions of the
negotiations or the agreement reached, will be kept confidential by Employee
from all persons and entities other than the Parties to this

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Agreement.  Employee may disclose the amount received in consideration of the
Agreement only if necessary (i) to discuss with his legal and accounting
advisors, (ii) for the limited purpose of making disclosures required by law to
agents of the local, state or federal governments, (iii) for the purpose of
enforcing any term of this Agreement, or (iv) in response to compulsory process,
and only then after giving the Company ten days advance notice, or immediately
in the event that he does not have 10 days to provide notice, of the compulsory
process and affording the Company the opportunity to obtain any necessary or
appropriate protective orders.  Employee will not use, nor disclose to any third
party, any of the Company’s business, personnel, or financial information that
Employee learned during his employment with the Company that is not in the
public domain.  Employee hereby expressly acknowledges that any breach of this
Paragraph 8 shall result in a claim for injunctive relief and/or damages against
Employee by the Company, and possibly by others.

9.             Non-Disparagement.

a.             Employee agrees not to make to any person any statement that
disparages the Company or reflects negatively on the Company, including, but not
limited to statements regarding the Company’s financial condition, employment
practices, or its officers, directors, board members, employees, or affiliates.

b.             Employee expressly acknowledges that any breach of this Paragraph
9 by Employee may result in a claim for injunctive relief and or damages against
the other Party.

10.           Return of Company Property and Information.  Employee represents
and warrants that, prior to his execution of this Agreement, he has returned to
the Company any and all property, documents and files, including any documents
(in any recorded media, such as papers, computer disks, copies, photographs,
maps, transparencies, and microfiche) that relate in any way to the Company or
the Company’s business that is not in the public domain.  Except as otherwise
provided herein, Employee agrees that, to the extent that he possesses any
files, data, or information relating in any way to the Company or the Company’s
business on any personal computer, he will delete those files, data, or
information (and will retain no copies in any form).  Employee also has returned
any Company tools, equipment, calling cards, credit cards, access cards or keys,
any keys to any filing cabinets, vehicles, vehicle keys, and all other Company
property in any form prior to the date he executes this Agreement.

11.           No Solicitation.  Employee agrees not to interfere with the
relationship between the Company and its affiliates and any current or future
employee of the Company and its affiliates, including soliciting, inducing,
enticing, hiring, employing, or attempting to solicit, induce, hire or employ
any current or former employee of the Company and its affiliates for two years
following the Effective Date.

12.           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 Employee against the
Company shall not constitute a defense to enforcement by the Company.

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13.           Assignment.  The Company may assign its rights under Paragraphs 8,
9 and 11 of this Agreement.  No other assignment is permitted except by written
permission of the Parties.

14.           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.

15.           Entire Agreement.  This Agreement, the Restricted Shares Amendment
Agreement, and the Stock Option Amendment Agreement are the entire agreement
between the Parties.  These four agreements supersede any and all prior oral or
written promises or agreements between the Parties, and Employee acknowledges
that he has not relied on any promise, representation, or statement other than
those set forth in those agreements.  This Agreement cannot be modified except
in writing signed by all Parties.

16.           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.

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

EMPLOYEE

 

 

 

 

 

 

 

 

/s/ Mark A. Lettes

 

June 9, 2006

 

Mark A. Lettes

 

Date

 

 

 

 

 

 

THE COMPANY

 

 

 

 

 

 

 

 

/s/ Jeffrey G. Clevenger

 

June 9, 2006

 

Apex Silver Mines Corporation

 

 

Date

By:

Jeffrey G. Clevenger

 

 

Title:

President

 

 

 

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