<PAGE>
                                                                    EXHIBIT 10.4

                              EMPLOYMENT AGREEMENT

                  THIS AGREEMENT, dated as of July 17, 2001, as amended, is by
and between STILLWATER MINING COMPANY, a corporation duly organized and existing
under the laws of the State of Delaware (the "Company"), and Ronald W. Clayton
("Employee").

                  WHEREAS, the Company desires to employ Employee and Employee
desires to be employed by the Company pursuant to the terms and conditions of
this Agreement; and

                  WHEREAS, the Company has heretofore determined that it is in
the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication of the Employee, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company; and

                  WHEREAS, the Company has determined it is imperative to
diminish the inevitable distraction of the Employee by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control, to
encourage the Employee's full attention and dedication to the Company currently
and in the event of any threatened or pending Change of Control and to provide
the Employee with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits to be paid to the
Employee are at least as favorable as those in effect at the time of the Change
of Control and which are competitive with those of other corporations.

                  NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
parties agree as follows:

                                   ARTICLE 1
                                   EMPLOYMENT

                  The Company hereby employs Employee, and Employee agrees to
serve as Vice President, Nye Operations for the Company.

                                   ARTICLE 2
                                      TERM

                  The term of this Agreement shall be for a period commencing on
July 17, 2001 and ending December 31, 2001, unless sooner terminated as
hereinafter provided. The Agreement shall thereafter continue in effect for
subsequent one (1) year terms, commencing January 1, unless altered or
terminated as hereinafter provided; provided, however, that following a Change
of Control, as defined in Section 5.6, the Employment Term shall continue for no
less than eighteen (18) additional months. The period of Employee's employment
hereunder, including any extension or extensions pursuant to the foregoing
sentence, from the date of commencement until the date of expiration or
termination of this Agreement, is referred to hereinafter as the "Employment
Term."


<PAGE>


                                    ARTICLE 3
                              DUTIES AND AUTHORITY

                  Employee agrees, unless otherwise specifically authorized by
the Company, to devote substantially all of his business time and effort to his
duties for the profit, benefit and advantage of the business of the Company,
except that Employee may serve on the boards of directors of other business
corporations that have no business relationship with the Company and which do
not compete with the Company. In performing his duties hereunder, Employee shall
have the authority customarily held by others holding positions similar to those
assigned to Employee in similar businesses, subject to the general and customary
supervision of the Company's Board of Directors and Chief Executive Officer.

                                    ARTICLE 4
                                  COMPENSATION

         4.1 Base Salary. The Company agrees to pay Employee a base salary of
One Hundred Eighty-Five Thousand Dollars ($185,000) per year, payable at the
usual times for the payment of the Company's executive employees, subject to
adjustment as provided herein. Employee's base salary shall be reviewed at least
annually and may be increased, but not decreased, consistent with general salary
increases for the Company's executive employees or as appropriate in light of
the performance of Employee and the Company. Notwithstanding anything herein to
the contrary, Employee's base salary may be reduced in the event of an
across-the-board salary reduction for all executive officers; provided, however,
that the percentage reduction of Employee's base salary shall not exceed the
highest percentage reduction in base salary of any other executive officer.

         4.2 Incentive Compensation. Employee shall participate in the Company's
incentive compensation plans for executive officers of the Company, as in effect
from time to time during the Employment Term. The Company shall adopt an annual
incentive program for executive officers of the Company that will provide for a
performance based cash bonus of an amount to be determined by the Board of
Directors of the Company (the "Annual Bonus"). Until changed by the Board of
Directors of the Company, the Annual Bonus shall be set at a target of 30% of
the Employee's base salary ("Target"), with a maximum, which shall not exceed
60% of the Employee's base salary. At the discretion of the Board of Directors
all or part on any bonus earned may be paid in Restricted Stock.

         4.3 Employee Benefits. Employee shall be eligible to receive annual
grants of stock options at the discretion of the Board of Directors. Employee
shall be eligible to participate in such other of the Company's employee benefit
plans and to receive such benefits for which his level of employment makes him
eligible, in accordance with the Company's policies as in effect from time to
time during the Employment Term; provided, however, that Employee shall be
entitled to four weeks of vacation during the initial term of this Agreement and
during the term of each extension hereof. Employee acknowledges that he has
received a copy of the foregoing policies.


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<PAGE>


                                    ARTICLE 5
                                   TERMINATION

         5.1 Termination by the Company Without Cause; Termination by Employee
for Good Reason.

                  (a) The Company shall have the right to terminate this
         Agreement without Cause (as defined below) upon thirty (30) days'
         notice to Employee. If Employee's employment hereunder is terminated by
         the Company without Cause or by Employee for "Good Reason" (as defined
         below) (other than a termination involving a Change of Control or by
         reason of death or disability), the Company shall pay to Employee an
         amount equal to the sum of (i) Employee's annual base salary, plus (ii)
         Employee's Target Annual Bonus, each as in effect immediately preceding
         such termination, divided by 12 ("Monthly Severance Amount"). The
         Monthly Severance Amount shall be paid to Employee in 12 monthly
         installments, commencing no later than 30 days after the Termination
         Date, and continuing until all installments due Employee have been
         paid.

                  (b) For purposes of this Agreement, "Good Reason" shall mean:

                           (i) A material reduction in Employee's
                  responsibilities, authorities, or duties;

                           (ii) Employee's job is eliminated other than by
                  reason of promotion or termination for Cause;

                           (iii) The Company fails to pay Employee any amount
                  otherwise vested and due hereunder or under any plan or policy
                  of the Company, which failure is not cured within five (5)
                  business days of receipt by the Company of written notice from
                  Employee which describes in reasonable detail the amount which
                  is due;

                           (iv) A material reduction in Employee's base salary
                  except in the event of an across-the-board salary reduction
                  for all executive officers;

                           (v) A material reduction in Employee's aggregate
                  level of benefits under the Company's pension, life insurance,
                  medical, health and accident, disability, deferred
                  compensation or savings or similar plans, except in the event
                  of an across-the-board reduction in such benefits for all
                  executive officers;

                           (vi) A material reduction in Employee's reasonable
                  opportunity to earn incentive compensation under any plan in
                  which Employee is a participant, except in the event of an
                  across-the-board reduction on a percentage basis in such
                  benefits for all executive officers;

                           (vii) The Company and its successor(s) (as described
                  in subparagraph (viii) below) shall discontinue the business
                  of the Company;


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<PAGE>


                           (viii) The failure of the Company to obtain an
                  agreement to expressly assume this Agreement from any
                  successor to the Company (whether such succession is direct or
                  indirect by purchase, merger, consolidation or otherwise, to
                  substantially all of the business and/or assets of the Company
                  or a controlling portion of the Company's stock); or

                           (ix) Solely after a Change in Control has occurred,
                  upon the relocation of Employee, without Employee's consent,
                  to a location outside of a 35-mile radius of the Employee's
                  then-current location, provided, however, that a relocation to
                  the Company's corporate headquarters in the State of Montana
                  shall not constitute "Good Reason".

                           (x) Solely for the purposes of Section 5.6, any good
                  faith determination of Good Reason made by the Employee shall
                  be conclusive.

         5.2 Termination by the Company for Cause; Voluntary Termination by
Employee.

                  (a) Employee's employment hereunder may be terminated by the
         Company for "Cause." For purposes of this Agreement, a termination of
         Employee for "Cause" means a termination of Employee's employment by
         the Company based upon a determination that any one or more of the
         following has occurred: (i) misfeasance or nonfeasance of duty by
         Employee that which was intended to or does injure the reputation of
         Company or its business or relationships; (ii) conviction of, or plea
         of guilty or nolo contendere by Employee to, any felony or crime
         involving moral turpitude; (iii) Employee's willful and continued
         failure to substantially perform his duties under this Agreement
         (except by reason of physical or mental incapacity) after written
         notice from the Board and 15 days to cure such failure; (iv) dishonesty
         by Employee in performance of his duties under this Agreement; or (v)
         willful and material breach of the restrictive covenants contained in
         this Agreement; provided however, that definitions (iii) through (v)
         shall not provide Cause for termination if such termination occurs
         within two (2) years following a Change in Control. A termination of
         Employee's employment by the Company for any other reason will be a
         termination without "Cause."

                  (b) Employee shall have the right to voluntarily terminate
         this Agreement upon thirty (30) days' notice to the Company.

                  (c) If Employee is terminated for Cause, or if Employee
         voluntarily terminates employment hereunder other than for Good Reason,
         he shall be entitled to receive his base salary through the date of
         termination. All other benefits, if any, payable to Employee following
         such termination of Employee's employment shall be determined in
         accordance with the plans, policies and practices of the Company.

         5.3 Notice of Termination. Any termination by the Company or by the
Employee shall be communicated by Notice of Termination to the other party
hereto given in accordance with Article 18 of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and


                                       4
<PAGE>


circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Termination Date
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than 30 days after the giving
of such notice). The failure by the Employee or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Employee or the Company,
respectively, hereunder or preclude the Employee or the Company, respectively,
from asserting such fact or circumstance in enforcing the Employee's or the
Company's rights hereunder.

         5.4 Termination Date. "Termination Date" means the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be.

         5.5 Termination by Death or Disability.

                  (a) Death. Upon termination of Employee's employment due to
         death of Employee, Employee shall be entitled to

                           (i) his base salary at the rate in effect at the time
                  of Employee's death through the 90th day following his death;

                           (ii) a pro rata portion of the Target Annual Bonus
                  for the year in which Employee's employment terminates, less
                  applicable deductions and withholdings, calculated by
                  multiplying the Target Annual Bonus by a fraction, the
                  numerator of which is the number of days elapsed in the year
                  of termination plus 90, and the denominator of which is 365,
                  payable within 10 days of the Termination Date.

                  (b) Disability. Employee's employment hereunder may be
         terminated by the Company if Employee becomes physically or mentally
         incapacitated and is therefore unable for a period of one hundred
         eighty (180) consecutive days to perform his duties (such incapacity is
         hereinafter referred to as "Disability"). Upon any such termination for
         Disability, Employee shall be entitled to receive the following:

                           (i) his base salary at the rate in effect at the time
                  of Employee's disability, through the Termination Date;

                           (ii) a pro rata portion of the Target Annual Bonus
                  for the year in which Employee's employment terminates, less
                  applicable withholdings and deductions, calculated by
                  multiplying the Target Annual Bonus by a fraction, the
                  numerator of which is the number of days elapsed in the year
                  as of the date of termination, and the denominator of which is
                  365 payable within 10 days of the Termination Date; and

                           (iii) disability benefits in accordance with the
                  Company's long-term disability plan.


                                       5
<PAGE>


         5.6 Termination Following a Change of Control; Benefits.

                  (a) In the event there is a Termination Following a Change of
         Control, this Agreement shall terminate and Employee shall be entitled
         to receive the following severance benefits in a lump sum within 30
         days after the Termination Date:

                           (i) 150 percent of Employee's annual base salary at
                  the rate in effect immediately prior to the Change of Control
                  or on the Termination Date, whichever is higher, payable in a
                  lump sum within thirty (30) days after the Termination Date;

                           (ii) 150 percent of the Employee's Target Annual
                  Bonus in effect immediately prior to the Change of Control (or
                  on the Termination Date, whichever is higher).

                           (iii) The Company shall timely pay or provide to
                  Employee any other amounts or benefits required to be paid or
                  provided or which Employee is eligible to receive under any
                  plan, program, policy, practice, contract or agreement of the
                  Company (other than customary severance pay, office facilities
                  and equity incentive program participation) to the same extent
                  that Employee would be eligible therefor if he were employed
                  on a full-time basis by the Company in the capacity provided
                  for herein for a period of 18 months after the Termination
                  Date, including receiving the full benefit of 18 months of
                  employment at the income levels provided for herein for
                  purposes of any retirement plan utilizing years of service as
                  a criteria in the provision of benefits (such other amounts
                  and benefits shall be hereinafter referred to as the "Other
                  Benefits"); provided, however, that (i) for the purposes of
                  the Company's equity incentive programs, Employee's employment
                  shall be deemed terminated as of the Termination Date
                  hereunder; and (ii) to the extent Employee, following the
                  Termination Date, becomes employed by another employer and
                  becomes entitled to receive health insurance benefits from
                  such employer, the Company's obligation to provide such health
                  insurance benefits hereunder shall be decreased;

                           (iv) All accrued compensation (including base salary
                  and Target Annual Bonus, each prorated through the Termination
                  Date) and unreimbursed expenses through the Termination Date.
                  Such amounts shall be paid to Employee in a lump sum in cash
                  within thirty (30) days after the Termination Date.

                           (v) The Employee shall be free to accept other
                  employment following such termination, and, except as provided
                  herein, there shall be no offset of any employment
                  compensation earned by the Employee in such other employment
                  during such period against payments due Employee hereunder,
                  and there shall be no offset in any compensation received from
                  such other employment against the continued salary set forth
                  above.

                  (b) The following terms shall have the meanings set forth
         below:

                  (i) A "Change in Control" of the Company shall mean and shall
         be deemed to have occurred if any of the following events shall have
         occurred:


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<PAGE>


                                   (A) Any "person" (as such term is used in
                           Sections 13(d) and 14(d) of the Securities Exchange
                           Act of 1934, as amended (the "Exchange Act") becomes
                           the "beneficial owner" (as defined in Rule 13d-3
                           under the Exchange Act), directly or indirectly, of
                           securities of the Company (not including in the
                           securities beneficially owned by such person any
                           securities acquired directly from the Company or its
                           affiliates) representing thirty percent (30%) or more
                           of the combined voting power of the Company's then
                           outstanding voting securities, excluding any person
                           who becomes such a beneficial owner in connection
                           with a transaction described in clause (i) of
                           subsection (C) below; or

                                   (B) A change in the composition of the Board
                           occurring within a two-year period, as a result of
                           which fewer than a majority of the directors are
                           Incumbent Directors. "Incumbent Directors" shall mean
                           directors who either (i) are directors of the Company
                           as of the date hereof, or (ii) are elected, or
                           nominated for election, to the Board with the
                           affirmative votes of at least two-thirds (2/3) of the
                           Incumbent Directors at the time of such election or
                           nomination (but shall not include an individual whose
                           election or nomination is in connection with an
                           actual or threatened election or proxy contest,
                           including but not limited to a consent solicitation
                           relating to the election of directors to the
                           Company); or

                                   (C) The consummation of a merger or
                           consolidation of the Company or any direct or
                           indirect subsidiary of the Company with any other
                           corporation, other than (i) a merger or consolidation
                           which would result in the voting securities of the
                           Company outstanding immediately prior thereto
                           continuing to represent (either by remaining
                           outstanding or by being converted into voting
                           securities of the surviving entity or any parent
                           thereof) at least fifty-five percent (55%) of the
                           combined voting power of the voting securities of the
                           Company or such surviving entity or any parent
                           thereof outstanding immediately after such merger or
                           consolidation, or (ii) a merger or consolidation
                           effected to implement a recapitalization of the
                           Company (or similar transaction) in which no person
                           is or becomes the beneficial owner, directly or
                           indirectly, of securities of the Company (not
                           including in the securities beneficially owned by
                           such person any securities acquired directly from the
                           Company or its affiliates) representing thirty
                           percent (30%) or more of the combined voting power of
                           the Company's then outstanding securities; or

                                   (D) The consummation of a
                           stockholder-approved sale, transfer, or other
                           disposition by the Company of all or substantially
                           all of the Company's assets in complete liquidation
                           or dissolution of the Company, other than a sale,
                           transfer, or other disposition by the Company of all
                           or substantially all of the Company's assets to an
                           entity, at least sixty percent (60%) of the combined
                           voting power of the voting securities of which are
                           owned by stockholders of the Company in substantially
                           the


                                       7
<PAGE>


                           same proportions as their ownership of the Company
                           immediately prior to such sale.

                                   (E) Notwithstanding the foregoing subsections
                           (A) through (D), a Change in Control shall not be
                           deemed to have occurred by virtue of the consummation
                           of any transaction or series of integrated
                           transactions immediately following which the record
                           holders of the common stock of the Company
                           immediately prior to such transaction or series of
                           transactions continue to have substantially the same
                           proportionate ownership in an entity which owns all
                           or substantially all of the assets of the Company
                           immediately following such transaction or series of
                           transactions.

                           (ii) "Termination Following a Change of Control"
                  shall mean a termination of the Employee without Cause by the
                  Company in connection with or within two years following a
                  Change of Control or a termination by the Employee for Good
                  Reason of the Employee's employment with the Company within
                  two years following a Change of Control.

         5.7 Certain Additional Payments by the Company.

                  (a) Subject to Section 11(b) below, if Executive becomes
         entitled to one or more payments (with a "payment" including, without
         limitation, the vesting of an option or other non-cash benefit or
         property), whether pursuant to the terms of this Agreement or any other
         plan, arrangement, or agreement with the Company or any affiliated
         company (the "Total Payments"), which are or become subject to the tax
         imposed by Section 4999 of the Internal Revenue Code of 1986, as
         amended (the "Code") (or any similar tax that may hereafter be imposed)
         (the "Excise Tax"), the Company shall pay to Executive at the time
         specified below an additional amount (the "Gross-up Payment") (which
         shall include, without limitation, reimbursement for any penalties and
         interest that may accrue in respect of such Excise Tax) such that the
         net amount retained by Executive, after reduction for any Excise Tax
         (including any penalties or interest thereon) on the Total Payments and
         any federal, state and local income or employment tax and Excise Tax on
         the Gross-up Payment provided for by this Section 11, but before
         reduction for any federal, state, or local income or employment tax on
         the Total Payments, shall be equal to the sum of (A) the Total
         Payments, and (B) an amount equal to the product of any deductions
         disallowed for federal, state, or local income tax purposes because of
         the inclusion of the Gross-up Payment in Executive's adjusted gross
         income multiplied by the highest applicable marginal rate of federal,
         state, or local income taxation, respectively, for the calendar year in
         which the Gross-up Payment is to be made. For purposes of determining
         whether any of the Total Payments will be subject to the Excise Tax and
         the amount of such Excise Tax:

                           (i) The Total Payments shall be treated as "parachute
                  payments" within the meaning of Section 280G(b)(2) of the
                  Code, and all "excess parachute payments" within the meaning
                  of Section 280G(b)(1) of the Code shall be treated as subject
                  to the Excise Tax, unless, and except to the extent that, in
                  the written


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                  opinion of independent compensation consultants, counsel or
                  auditors of nationally recognized standing ("Independent
                  Advisors") selected by the Company and reasonably acceptable
                  to Executive, the Total Payments (in whole or in part) do not
                  constitute parachute payments, or such excess parachute
                  payments (in whole or in part) represent reasonable
                  compensation for services actually rendered within the meaning
                  of Section 280G(b)(4) of the Code in excess of the base amount
                  within the meaning of Section 280G(b)(3) of the Code or are
                  otherwise not subject to the Excise Tax;

                           (ii) The amount of the Total Payments which shall be
                  treated as subject to the Excise Tax shall be equal to the
                  lesser of (A) the total amount of the Total Payments or (B)
                  the total amount of excess parachute payments within the
                  meaning of Section 280G(b)(1) of the Code (after applying
                  clause (i) above); and

                           (iii) The value of any non-cash benefits or any
                  deferred payment or benefit shall be determined by the
                  Independent Advisors in accordance with the principles of
                  Sections 280G(d)(3) and (4) of the Code. For purposes of
                  determining the amount of the Gross-up Payment, Executive
                  shall be deemed (A) to pay federal income taxes at the highest
                  marginal rate of federal income taxation for the calendar year
                  in which the Gross-up Payment is to be made; (B) to pay any
                  applicable state and local income taxes at the highest
                  marginal rate of taxation for the calendar year in which the
                  Gross-up Payment is to be made, net of the maximum reduction
                  in federal income taxes which could be obtained from deduction
                  of such state and local taxes if paid in such year (determined
                  without regard to limitations on deductions based upon the
                  amount of Executive's adjusted gross income); and (C) to have
                  otherwise allowable deductions for federal, state, and local
                  income tax purposes at least equal to those disallowed because
                  of the inclusion of the Gross-up Payment in Executive's
                  adjusted gross income. In the event that the Excise Tax is
                  subsequently determined to be less than the amount taken into
                  account hereunder at the time the Gross-up Payment is made,
                  Executive shall repay to the Company at the time that the
                  amount of such reduction in Excise Tax is finally determined
                  (but, if previously paid to the taxing authorities, not prior
                  to the time the amount of such reduction is refunded to
                  Executive or otherwise realized as a benefit by Executive) the
                  portion of the Gross-up Payment that would not have been paid
                  if such Excise Tax had been applied in initially calculating
                  the Gross-up Payment, plus interest on the amount of such
                  repayment at the rate provided in Section 1274(b)(2)(B) of the
                  Code. In the event that the Excise Tax is determined to exceed
                  the amount taken into account hereunder at the time the
                  Gross-up Payment is made (including by reason of any payment
                  the existence or amount of which cannot be determined at the
                  time of the Gross-up Payment), the Company shall make an
                  additional Gross-up Payment in respect of such excess (plus
                  any interest and penalties payable with respect to such
                  excess) at the time that the amount of such excess is finally
                  determined.

                  The Gross-up Payment provided for above shall be paid on the
                  30th day (or such earlier date as the Excise Tax becomes due
                  and payable to the taxing authorities)


                                       9
<PAGE>


                  after it has been determined that the Total Payments (or any
                  portion thereof) are subject to the Excise Tax; provided,
                  however, that if the amount of such Gross-up Payment or
                  portion thereof cannot be finally determined on or before such
                  day, the Company shall pay to Executive on such day an
                  estimate, as determined by the Independent Advisors, of the
                  minimum amount of such payments and shall pay the remainder of
                  such payments (together with interest at the rate provided in
                  Section 1274(b)(2)(B) of the Code), as soon as the amount
                  thereof can be determined. In the event that the amount of the
                  estimated payments exceeds the amount subsequently determined
                  to have been due, such excess shall constitute a loan by the
                  Company to Executive, payable on the fifth day after demand by
                  the Company (together with interest at the rate provided in
                  Section 1274(b)(2)(B) of the Code). If more than one Gross-up
                  Payment is made, the amount of each Gross-up Payment shall be
                  computed so as not to duplicate any prior Gross-up Payment.
                  The Company shall have the right to control all proceedings
                  with the Internal Revenue Service that may arise in connection
                  with the determination and assessment of any Excise Tax and,
                  at its sole option, the Company may pursue or forego any and
                  all administrative appeals, proceedings, hearings, and
                  conferences with any taxing authority in respect of such
                  Excise Tax (including any interest or penalties thereon);
                  provided, however, that the Company's control over any such
                  proceedings shall be limited to issues with respect to which a
                  Gross-up Payment would be payable hereunder, and Executive
                  shall be entitled to settle or contest any other issue raised
                  by the Internal Revenue Service or any other taxing authority.
                  Executive shall cooperate with the Company in any proceedings
                  relating to the determination and assessment of any Excise Tax
                  and shall not take any position or action that would
                  materially increase the amount of any Gross-up Payment
                  hereunder.

                                    (B) MODIFIED CUT-BACK. NOTWITHSTANDING THE
                            FOREGOING SECTION 11(A), IF IT SHALL BE DETERMINED
                            THAT THE AMOUNT OF ANY PAYMENT DUE EXECUTIVE
                            PURSUANT TO SECTION 11(A) ABOVE WOULD RESULT IN LESS
                            THAN $20,000 IN NET AFTER-TAX VALUE TO EXECUTIVE,
                            THEN NO GROSS-UP PAYMENT SHALL BE MADE TO EXECUTIVE
                            AND THE TOTAL PAYMENTS DUE EXECUTIVE PURSUANT TO
                            SECTION 11(A) SHALL BE REDUCED TO AN AMOUNT THAT
                            WOULD NOT RESULT IN THE IMPOSITION OF ANY EXCISE
                            TAX.


                                    ARTICLE 6
                                    INSURANCE

                  Employee agrees that the Company may, from time to time, apply
for and take out in its own name and at its own expense, life, health, accident,
or other insurance upon Employee that the Company may deem necessary or
advisable to protect its interests hereunder; and Employee agrees to submit to
any medical or other examination necessary for such purposes and


                                       10
<PAGE>


to assist and cooperate with the Company in preparing such insurance; and
Employee agrees that he shall have no right, title, or interest in or to such
insurance.

                                    ARTICLE 7
                             FACILITIES AND EXPENSES

                  The Company shall make available to Employee such office
space, secretarial services, office equipment and furnishings as are suitable
and appropriate to Employee's title and duties. The Company shall promptly
reimburse Employee for all reasonable expenses incurred in the performance of
his duties hereunder, including without limitation, expenses for entertainment,
travel, management seminars and use of the telephone, subject to the Company's
reasonable requirements with respect to the reporting and documentation of such
expenses.

                                    ARTICLE 8
                                 NONCOMPETITION

         8.1 Necessity of Covenant. The Company and Employee acknowledge that:

                  (a) The Company's business is highly competitive;

                  (b) The Company maintains confidential information and trade
         secrets as described in Article 9, all of which are zealously protected
         and kept secret by the Company;

                  (c) In the course of his employment, Employee will acquire
         certain of the information described in Article 9 and the Company would
         be adversely affected if such information subsequently, and in the
         event of the termination of Employee's employment, is used for the
         purposes of competing with the Company;

                  (d) The Company transacts business throughout the world; and

                  (e) For these reasons, both the Company and Employee further
         acknowledge and agree that the restrictions contained herein are
         reasonable and necessary for the protection of their respective
         legitimate interests and that any violation of these restrictions would
         cause substantial injury to the Company.

         8.2 Covenant Not to Compete. Employee agrees that from and after the
date hereof during the Employment Term and for a period of one (1) year after
the end of the Employment Term, he will not, without the express written
permission of the Company, which may be given or withheld in the Company's sole
discretion, directly or indirectly own, manage, operate, control, lend money to,
endorse the obligations of, or participate or be connected as an officer,
director, 5% or more stockholder of a publicly-held company, stockholder of a
closely-held company, employee, partner, or otherwise, with any enterprise or
individual engaged in a business which is competitive with the Platinum Group
Metals business conducted by the Company. It is understood and acknowledged by
both parties that, inasmuch as the Company transacts business worldwide, this
covenant not to compete shall be enforced throughout the United States and in
any other country in which the Company is doing business as of the date of
Employee's termination of employment.


                                       11
<PAGE>


         8.3 Disclosure of Outside Activities. Employee, during the term of his
employment by the Company, shall at all times keep the Company informed of any
outside business activity and employment, and shall not engage in any outside
business activity or employment which may be in conflict with the Company's
interests.

         8.4 Survival. The terms of this Article 8 shall survive the expiration
or termination of this Agreement for any reason.

                                    ARTICLE 9
                   CONFIDENTIAL INFORMATION AND TRADE SECRETS

         9.1 Nondisclosure of Confidential Information. Employee has acquired
and will acquire certain "Confidential Information" of the Company.
"Confidential Information" shall mean any information that is not generally
known, including trade secrets, outside the Company and that is proprietary to
the Company, relating to any phase of the Company's existing or reasonably
foreseeable business which is disclosed to Employee by the Company including
information conceived, discovered or developed by Employee. Confidential
Information includes, but shall not be limited to, business plans, financial
statements and projections, operating forms (including contracts) and
procedures, payroll and personnel records, marketing materials and plans,
proposals, software codes and computer programs, project lists, project files,
price information and cost information and any other document or information
that is designated by the Company as "Confidential." The term "trade secret"
shall be defined as follows:

                  A trade secret may consist of any formula, pattern, device or
                  compilation of information which is used in one's business,
                  and which provides to the holder an opportunity to obtain an
                  advantage over competitors who do not know or use it.

Accordingly, employee agrees that he shall not, during the Employment Term and
for three (3) years thereafter, use for his own benefit such Confidential
Information or trade secrets acquired during the term of his employment by the
Company. Further, during the Employment Term and for three (3) years thereafter,
Employee shall not, without the written consent of the Board of Directors of the
Company or a person duly authorized thereby, which consent may be given or
withheld in the Company's sole discretion, disclose to any person, other than an
employee of the Company or a person to whom disclosure is reasonably necessary
or appropriate in connection with the performance by Employee of his duties, any
Confidential Information or trade secrets obtained by him while in the employ of
the Company.

         9.2 Return of Confidential Information. Upon termination of employment,
Employee agrees to deliver to the Company all materials that include
Confidential Information or trade secrets, and all other materials of a
confidential nature which belong to or relate to the business of the Company.

         9.3 Exceptions. The restrictions and obligations in Section 9.1 shall
not apply with respect to any Confidential Information which: (i) is or becomes
generally available to the public through any means other than a breach by
Employee of his obligations under this Agreement; (ii) is disclosed to Employee
without obligation of confidentiality by a third party who has the right


                                       12
<PAGE>


to make such disclosure; (iii) is developed independently by Employee without
use of or benefit from the Confidential Information; (iv) was in possession of
Employee without obligations of confidentiality prior to receipt under this
Agreement; or (v) is required to be disclosed to enforce rights under this
Agreement.

         9.4 Survival. The terms of this Article 9 shall survive the expiration
or termination of this Agreement for any reason.

                                   ARTICLE 10
                              JUDICIAL CONSTRUCTION

                  Employee believes and acknowledges that the provisions
contained in this Agreement, including the covenants contained in Articles 8 and
9 of this Agreement, are fair and reasonable. Nonetheless, it is agreed that if
a court finds any of these provisions to be invalid in whole or in part under
the laws of any state, such finding shall not invalidate the covenants, nor the
Agreement in its entirety, but rather the covenants shall be construed and/or
blue-lined, reformed or rewritten by the court as if the most restrictive
covenants permissible under applicable law were contained herein.

                                   ARTICLE 11
                           RIGHT TO INJUNCTIVE RELIEF

                  Employee acknowledges that a breach by Employee of any of the
terms of Articles 8 or 9 of this Agreement will render irreparable harm to the
Company, and that in the event of such breach the Company shall therefore be
entitled to any and all equitable relief, including, but not limited to,
injunctive relief, and to any other remedy that may be available under any
applicable law or agreement between the parties.

                                   ARTICLE 12
                         CESSATION OF CORPORATE BUSINESS

                  This Agreement shall cease and terminate if the Company shall
discontinue its business, and all rights and liabilities hereunder shall cease,
except as provided in Section 5.6 and Article 13.

                                   ARTICLE 13
                                   ASSIGNMENT

         13.1 Permitted Assignment. Subject to the provisions of Section 5.6,
the Company shall have the right to assign this contract to its successors or
assigns, and all covenants or agreements hereunder shall inure to the benefit of
and be enforceable by or against its successors or assigns.

         13.2 Successors and Assigns. The terms "successors" and "assigns" shall
mean any person or entity which buys all or substantially all of the Company's
assets, or a controlling portion of its stock, or with which it merges or
consolidates.


                                       13
<PAGE>


                                   ARTICLE 14
                    FAILURE TO DEMAND, PERFORMANCE AND WAIVER

                  The failure by either party to demand strict performance and
compliance with any part of this Agreement during the Employment Term shall not
be deemed to be a waiver of the rights of such party under this Agreement or by
operation of law. Any waiver by either party of a breach of any provision of
this Agreement shall not operate as or be construed as a waiver of any
subsequent breach thereof.

                                   ARTICLE 15
                                ENTIRE AGREEMENT

                  The Company and Employee acknowledge that this Agreement
contains the full and complete agreement between and among the parties, that
there are no oral or implied agreements or other modifications not specifically
set forth herein, and that this Agreement supersedes any prior agreements or
understandings, if any, between the Company and Employee, whether written or
oral. The parties further agree that no modifications of this Agreement may be
made except by means of a written agreement or memorandum signed by the parties.

                                   ARTICLE 16
                                  GOVERNING LAW

                  The parties hereby agree that this Agreement shall be
construed in accordance with the laws of the State of Montana, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Montana or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Montana.

                                   ARTICLE 17
                                 ATTORNEYS' FEES

                  If either party shall commence any action or proceeding
against the other that arises out of the provisions hereof, or to recover
damages as the result of the alleged breach of any of the provisions hereof, the
prevailing party therein shall be entitled to recover all reasonable costs
incurred in connection therewith, including reasonable attorneys' fees.

                                   ARTICLE 18
                                     NOTICE

                  All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:



If to the Employee:
Ronald W. Clayton
PO Box 322, 33 Henery Street
Absarokee, Montana 59001


                                       14
<PAGE>


-------------------------------

If to the Company:
Vice President, Human Resources
Stillwater Mining Company
536 East Pike Ave.
PO Box 1330
Columbus, Montana  59019

                                   ARTICLE 19
                                  COUNTERPARTS

                  This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one
instrument.


                                       15
<PAGE>


                  IN WITNESS WHEREOF, the Company has hereunto signed its name
and Employee hereunder has signed his name, all as of July 23, 2001.

                                    STILLWATER MINING COMPANY

                                    By: /s/ FRANCIS MCALLISTER
                                        ------------------------------
                                    Name:  Francis McAllister
                                    Title: Chief Executive Officer


                                    EMPLOYEE

                                    /s/ RONALD W. CLAYTON
                                    ----------------------------------
                                    Ronald W. Clayton