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










 



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

  	
   

  	
   

  	
   

  







*      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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