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                                                                    EXHIBIT 10.1


                            STILLWATER MINING COMPANY

                              EMPLOYMENT AGREEMENT


         This Employment Agreement (the "Agreement"), dated as of July 17, 2001,
as amended, is made by and between Stillwater Mining Company, a Delaware
corporation (the "Company"), and Francis McAllister ("Executive") (each
individually a "Party" and collectively, the "Parties").

                                    RECITALS

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

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

         1. Employment; Duties and Scope.

                  (a) Position. Executive shall serve as the Company's Chief
Executive Officer and Chairman of its Board of Directors (the "Board"). For so
long as he is serving on the Board, Executive agrees to serve as a member of any
committee of the Board to which he is elected. In any and all such capacities,
Executive shall report only to the Board. Executive shall have and perform such
duties, responsibilities, and authorities as are customary for the chairman and
chief executive officer of corporations of similar size and businesses as the
Company as they may exist from time to time and as are consistent with such
positions and status.

                  (b) Duties; Obligations to the Company. During the Employment
Term, Executive shall devote his full business efforts and time to the Company
and the Company will be entitled to all of the benefits and profits arising from
or incident to all such work services and advice. Executive shall be responsible
for performing the business and professional services typically performed by the
chief executive officer of any company, or as may reasonably assigned to him by
the Board, subject to the general and customary supervision of the Board.
Executive agrees not to render commercial or professional services of any nature
to any person or organization, whether or not for compensation, during the
Employment Term without advance written approval of the Board, and Executive
will not directly or indirectly engage or participate during the Employment Term
in any business that is competitive in any manner with the Company's business;
provided, however, that this shall not preclude Executive from owning up to two
percent (2%) of the outstanding equity securities of a corporation whose stock
is listed on a national stock exchange or the Nasdaq.

                  (c) No Conflicting Obligations. Executive represents and
warrants to the Company that he is under no obligation or commitment, whether
contractual or otherwise, that is inconsistent with his obligations under this
Agreement. Executive represents and warrants that he will not use or disclose,
in connection with his employment by the Company, any trade secrets or other
proprietary information or intellectual property in which Executive or any other
person has any



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right, title, or interest and that his employment by the Company as contemplated
by this Agreement will not infringe or violate the rights of any other person or
entity. Executive represents and warrants to the Company that he has returned
all property and confidential information belonging to any prior employers.

                  (d) Rank of Executive Within Company. As Chairman of the Board
and Chief Executive Officer of the Company, Executive shall be the Company's
highest-ranking executive.

         2. Employment Term.

                  (a) The Initial Period of Executive's employment pursuant to
this Agreement shall begin February 12, 2001 (the "Commencement Date") and shall
end on February 11, 2004 ("Initial Period"), unless otherwise terminated by
either Party prior to the scheduled termination date as provided in Sections 9
and 10 of this Agreement; provided, however, that following a Change in Control,
(as defined in Section 10(c)(ii) below), the Employment Term (as defined below)
shall continue for no less than twenty-four (24) additional months.

                  (b) The Initial Period shall automatically be extended for
successive one year periods ("Renewal Period"), if not already otherwise
terminated as provided in this Agreement, unless either Party notifies the other
no later than six (6) months prior to the scheduled termination of such Initial
Period or Renewal Period, in which case Executive's employment shall terminate
upon the scheduled termination date of the applicable Initial Period or Renewal
Period.

                  (c) In the event that this Agreement is not renewed because
Executive has given the six-month notice prescribed in Section 2(b) on or before
the expiration of the Initial Period or any Renewal Period, such non-renewal
shall be treated as a Termination for Cause and Executive shall have the same
entitlements as provided in Section 10(b)(iii) below.

                  (d) The entire term of Executive's employment pursuant to this
Agreement from the Commencement Date until the date of expiration or termination
of Executive's employment pursuant to this Agreement shall be referred to herein
as the "Employment Term."

         3. Board Membership. Executive currently serves as Chairman of the
Board. Executive's service on the Board at all times shall be without
additional compensation.

         4. Cash Compensation.

                  (a) Base Salary. During the Employment Term, the Company shall
pay the Executive as compensation for his services a semi-monthly base salary at
the annualized rate of five hundred thousand dollars ($500,000), less applicable
deductions and withholdings. Such base salary shall be paid semi-monthly in
accordance with normal Company payroll practices and procedures. Executive's
base salary shall be reviewed for increase no less than every twelve (12) months
and shall be subject to decrease only in the event (and only to the extent) of
an across-the-board reduction for other senior management employees of the
Company. (The annualized base salary to be paid to Executive pursuant to this
Section 4(a), together with any subsequent modifications thereto, shall be
referred to in this Agreement as the "Base Salary.")



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                  (b) Bonuses. Executive shall be eligible to earn an annual
target bonus equal to 50% of his Base Salary (the "Target Bonus") based upon
satisfaction of criteria determined by the Board and/or its Compensation
Committee for each year during the Employment Term, starting with the year
commencing January 1, 2001 (except that for the year 2001, the Target Bonus
amount shall be $235,750, which is a pro rata portion of the Target Bonus for
such period based on the Commencement Date). Executive shall be eligible to earn
a maximum bonus equal to 100% of his Base Salary. For 2001, the Company shall
provide Executive with written notice of that period's performance goals no
later than March 31, 2001; thereafter, written notice of the performance goals
shall be provided by February 28 of the applicable year.

         5. Employee Benefits.

                  (a) During the Employment Term, Executive shall be eligible to
participate in such other of the Company's employee benefit plans and to receive
such benefits for which his position makes him eligible, in accordance with the
Company's plans and policies as in effect from time to time during the
Employment Term, subject in each case to the generally applicable terms and
conditions of the plan or policy in question and to the determinations of any
person or committee administering such plan or policy.

                  (b) Executive shall be entitled to four (4) weeks of vacation
per year during the Employment Term.

         6. Business Expense Reimbursements. During the Employment Term,
Executive shall be authorized to incur necessary and reasonable travel,
entertainment and other business expenses in connection with the performance of
his duties hereunder. The Company shall reimburse Executive for such expenses
upon presentation of an itemized account and appropriate supporting
documentation, all in accordance with the Company's generally applicable
policies.

         7. Relocation Costs. The Company will reimburse Executive for costs
related to his relocation to Montana, in accordance with Company's standard
relocation policy.

         8. Equity.

                  (a) Subject to Board approval, Executive shall be granted an
option to purchase 75,000 shares of the Company's Common Stock (the "Option
Shares"), at the aggregate Fair Market Value of the Option Shares on the date of
grant, pursuant to the Company's 1998 Equity Incentive Plan. "Fair Market Value"
means as of any given date, the closing sale price per share of the Company's
common stock reported on a consolidated basis for securities listed on the
principal stock exchange or market on which the common stock is traded on the
date as of which such value is being determined or, if there is no sale on that
day, then on the last previous day on which a sale was reported. The grant and
exercise of the Option Shares shall be subject to the terms of the notice of
grant of the Option and the Company's standard form of Non-Qualified Stock
Option Agreement ("Option Agreement"), and shall be contingent upon Executive
executing such Option Agreement and, for exercise, the Company's standard form
of stock purchase agreement. The Option Shares shall have a ten (10) year term
and shall vest in three (3) equal installments on each of the first three (3)
anniversaries of the date of this Agreement, as specified in the Option
Agreement. Executive may only exercise the Option Shares to the extent that they
have vested.



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                  (b) Executive also shall be eligible to participate in annual
option grants, if any, by the Company to its executives. Whether any option is
granted and if so, the number of shares which Executive may be granted the
option to purchase, shall be entirely within the discretion of the Board and/or
its Compensation Committee.

         9. Termination of Employment. Notwithstanding the fixed term of
Executive's employment under this Agreement, the Company and Executive each may
terminate Executive's employment at any time for any or no reason with or
without Cause (as defined in Section 10(b)(ii)), upon written notice to the
other Party. Executive's employment will terminate automatically in the event of
his death. Any payments and/or benefits due Executive from the Company upon
and/or after termination are specified in Section 10.

         10. Termination Payments and Benefits.

                  (a) Payments and Reimbursements Upon Any Termination of
Employment. In the event that Executive's employment terminates for any reason,
the Company shall pay Executive all Base Salary, any accrued but unpaid bonuses
for the period prior to the year of termination of employment, and all accrued
but unpaid vacation earned through the date of termination of employment, each
less applicable withholdings and deductions, and any reimbursement of expenses
owed pursuant to this Agreement within ten (10) days of the date of termination
("Termination Date"). Only the amounts stated in this Section 10(a), and no
severance payments or benefits, shall be due to Executive upon a termination of
his employment on the scheduled termination date of the Initial Period or
Renewal Period.

                  (b) Effect of Termination for Cause.

                           (i) In the event that the Company terminates
         Executive's employment for Cause or Executive terminates employment
         (including any non-renewal) without Good Reason (as defined below):

                                    (A) Executive shall receive all payments
                  provided in Section 10(a) above;

                                    (B) Executive's outstanding vested Option
                  Shares shall be exercisable in accordance with the terms and
                  time limits of the applicable Option Agreement; and

                                    (C) any unvested Option Shares shall be
                  forfeited on the Termination Date.

                           (ii) Definition of Termination for Cause. For the
         purposes of this Agreement, a termination of Executive's employment for
         "Cause" means a termination of Executive's employment by the Company
         based upon a determination that any one or more of the following has
         occurred: (A) misfeasance or nonfeasance of duty by Executive that
         which was intended to or does injure the reputation of Company or its
         business or relationships; (B) conviction of, or plea of guilty or nolo
         contendere by Executive to, any felony or crime involving moral
         turpitude; (C) Executive's willful and continued failure to
         substantially perform his duties under this Agreement (except by reason
         of physical or



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         mental incapacity) after written notice from the Board and 15 days to
         cure such failure; (D) dishonesty by Executive in performance of his
         duties under this Agreement; or (E) willful and material breach of the
         restrictive covenants contained in this Agreement; provided however,
         that definitions (C) through (E) shall not provide Cause for
         termination if such termination occurs within two (2) years following a
         Change in Control. A termination of Executive's employment by the
         Company for any other reason will be a termination without "Cause."

                  (c) Effect of Termination Without Cause or Resignation for
Good Reason Other Than Within Two Years Following A Change in Control.

                           (i) In the event that, at any time other than within
         two (2) years following a Change in Control, the Company terminates
         Executive's employment without Cause or Executive resigns his
         employment for Good Reason, then, contingent upon Executive signing and
         not revoking the Severance Agreement and Release attached hereto as
         Exhibit A, and not breaching the provisions of Section 15 hereof, the
         Company shall provide Executive with the following:

                                    (A) all payments stated in Section 10(a)
                  above;

                                    (B) a pro rata portion of Executive's Target
                  Bonus, less applicable withholdings and deductions, which pro
                  rata portion shall be determined by multiplying the Target
                  Bonus by a fraction, the numerator of which is the number of
                  days elapsed in the calendar year of the date of termination
                  and the denominator of which is 365 (except for 2001, when the
                  numerator equals the number of days elapsed since February 12
                  and the denominator is 322) payable within 10 days of the
                  Termination Date;

                                    (C) an amount equal to the sum of (i)
                  Executive's annual Base Salary, plus (ii) Executive's Target
                  Bonus, each as in effect immediately preceding such
                  termination, divided by 12 ("Monthly Severance Amount"). The
                  Monthly Severance Amount shall be paid to Executive in 24
                  monthly installments, commencing no later than 30 days after
                  the Termination Date, and continuing until all installments
                  due Employee have been paid.

                                    (D) continuation of Executive's medical,
                  health, and life insurance (as in effect immediately prior to
                  the date of termination) for a period of twenty-four (24)
                  months, or if not permissible or commercially reasonable to
                  continue the same coverage of Executive under one or more of
                  the insurance policies or plans, continued payment for a
                  period of twenty-four (24) months of the after-tax cost to the
                  Company of providing such coverage to Executive (as measured
                  immediately prior to the date of termination); provided
                  however, that such benefits or payments shall cease upon the
                  date on which Executive is eligible for similar aggregate
                  coverage from a subsequent employer; and

                                    (E) the applicable accelerated vesting (if
                  any) of the Option Shares, pursuant to the applicable Option
                  Agreement.



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                           (ii) Relevant Definitions.


                                    (A) Change in Control. For the purposes of
                  this Agreement, a "Change in Control" shall mean and shall be
                  deemed to have occurred if any of the following events shall
                  have occurred:

                                            (1) 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 (3) below; or

                                            (2) 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

                                            (3) 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

                                            (4) The consummation of a
                           stockholder-approved sale, transfer, or other
                           disposition by the Company of all or substantially
                           all of the



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

                                            (5) Notwithstanding the foregoing
                           subsections (1) through (4), 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.

                                    (B) Resignation for Good Reason. For the
                  purposes of this Agreement, a resignation for "Good Reason"
                  means a termination of Executive's employment at his
                  initiative following the occurrence, without Executive's
                  written consent, of one or more of the following events
                  (except as a result of a prior termination):

                                            (1) a material diminution or change,
                           adverse to Executive, in Executive's positions,
                           titles, or offices as set forth in Section 1, status,
                           rank, nature of responsibilities, or authority within
                           the Company, or a removal of Executive from or any
                           failure to elect or re-elect or, as the case may be,
                           nominate Executive to any such positions or offices,
                           including as a member of the Board;

                                            (2) the assignment to Executive of
                           any duties that are inconsistent with his status as
                           the Company's Chairman and Chief Executive Officer or
                           other positions held hereunder;

                                            (3) a decrease in Executive's annual
                           Base Salary or Target Bonus award opportunity below
                           50% of Base Salary (other than an across-the-board
                           reduction on a percentage basis for all senior
                           management executives);

                                            (4) a material reduction in the
                           aggregate benefits for which Executive is eligible
                           under the Company's benefit plans (other than an
                           across-the-board reduction in the aggregate benefits
                           for senior management executives);

                                            (5) any other failure by the Company
                           to perform any material obligation under, or breach
                           by the Company of any material provision of, this
                           Agreement that is not cured within 10 business days
                           of receipt of written notice from Executive;



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                                            (6) upon relocation of the Executive
                           outside of the State of Montana;

                                            (7) any failure to secure the
                           agreement of any successor corporation or other
                           entity to the Company to fully assume the Company's
                           obligations under this Agreement; or

                                            (8) the Company and its successor(s)
                           shall discontinue the business of the Company.

                                            (9) Solely for the purposes of
                           Section 10(d) below, any good faith determination of
                           Good Reason made by the Executive shall be
                           conclusive.

                  (d) Effect of Termination Without Cause or Resignation for
Good Reason Within Two (2) Years Following A Change in Control. If, upon or
within two (2) years following a Change in Control, Executive resigns his
employment with the Company for Good Reason or the Company terminates
Executive's employment without Cause, then, in lieu of the severance payments
and benefits stated in Section 10(c) above, and contingent upon Executive
signing and not revoking the Severance Agreement and Release attached hereto as
Exhibit A, and not materially breaching the provisions of Section 15 hereof, the
Company shall provide Executive with the following:

                           (i) all payments stated in Section 10(a) above;

                           (ii) a lump sum, payable within thirty (30) days of
         the Termination Date, equal to three (3) times the sum of (A)
         Executive's Base Salary (or if a reduction of Base Salary is the reason
         for Executive's termination for Good Reason, the Base Salary in effect
         immediately prior to such reduction) plus (B) the greater of (i)
         Executive's Target Bonus, or (ii) the bonus paid to Executive for the
         most recent calendar year, less applicable withholdings and deductions;

                           (iii) continuation of Executive's medical, health,
         and life insurance (as in effect immediately prior to the date of
         termination) for a period of thirty-six (36) months, or if not
         permissible or commercially reasonable to continue the same coverage of
         Executive under one or more of the insurance policies or plans,
         continued payment for a period of thirty-six (36) months of the
         after-tax cost to the Company of providing such coverage to Executive
         (as measured immediately prior to the date of termination); provided
         however, that such benefits or payments shall cease upon the date on
         which Executive is eligible for similar aggregate coverage from a
         subsequent employer; and

                           (iv) immediate accelerated vesting of all Option
         Shares, pursuant to the applicable Option Agreement, with the Option
         Shares remaining exercisable for the balance of the term as determined
         in accordance with the terms of the Option Agreement.

                  (e) Termination of Employment Due to Disability.



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                           (i) In the event that Executive's employment
         terminates due to Disability, Executive shall receive the following:

                                    (A) the payments stated in section 10(a),
                  provided that the Base Salary, less applicable withholdings
                  and deductions, shall be paid at least through the date on
                  which Executive is eligible to receive disability payments;

                                    (B) A pro rata portion of the annual Target
                  Bonus for the year in which Executive's employment terminates,
                  less applicable withholdings and deductions, calculated by
                  multiplying the Target 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 (except
                  for 2001 when numerator equals the number of days elapsed
                  since February 12 and the denominator is 322) payable within
                  10 days of the Termination Date; and

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

                           (ii) A termination of Executive's employment due to
         "Disability" shall mean a termination of Executive's employment by the
         Board because physical or mental incapacity has rendered or will render
         Executive unable to perform his duties as Chief Executive Officer for a
         period of 180 consecutive days. The determination regarding the
         existence and expected or actual duration of such incapacity shall be
         made by a health professional mutually acceptable to the Company and
         Executive. The Company shall provide 30 days' written notice of a
         termination due to Disability, or payment in lieu thereof.

                           (iii) Executive's Option Shares shall vest and become
         exercisable in accordance with the terms of the Option Agreement.

                  (f) Termination of Employment Due to Death.

                           (i) Executive's employment shall terminate
         automatically in the event of his death.

                           (ii) In the event that Executive's employment
         terminates due to his death, Executive (or Executive's estate) shall
         receive the following:

                                    (A) the payments stated in Section 10(a)
                  above, except that the Base Salary, less applicable deductions
                  and withholdings, shall be paid through the 90th day following
                  the date of death;

                                    (B) A pro rata portion of the annual Target
                  Bonus for the year in which Executive's employment terminates,
                  less applicable deductions and withholdings, calculated by
                  multiplying the annual Target 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
                  (except for 2001 when numerator equals the number of days
                  elapsed since February 12 plus 90, and the denominator is 322)
                  payable within 10 days of the Termination Date; and



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                                    (C) Executive's Option Shares shall vest and
                  become exercisable in accordance with the terms of the Option
                  Agreement.

         11. Excise Tax Gross-up.

                  (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 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



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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) 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



                                      -11-
<PAGE>



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.

         12. Indemnification. The Company will hold harmless, indemnify, and
provide a defense to Executive to the fullest extent permitted by Delaware law
with respect to any claims, actions, suits, or proceedings, brought against
Executive by reason of, or arising out of, Executive's service as, or the
performance of Executive's duties as, an employee, director, officer, and/or
agent of the Company, provided that such claims, actions, suites, or proceedings
are not found by a court or arbitrator to have arisen out of employee's
intentional misconduct or gross negligence. The Company will pay, and subject to
any legal limitations, advance all costs, expenses, and losses, including
without limitation reasonable attorneys' fees, costs of settlements, and
consequential damages, actually and necessarily incurred by Executive in
connection with the defense of any such claims, actions, suits, or proceedings,
and in connection with any appeal thereof.

         13. Directors' and Officers' Insurance. The Company shall use
commercially reasonable efforts to obtain and maintain directors' and officers'
liability insurance coverage in an amount equivalent to that of a well-insured
similarly situated company; provided, however, that, the failure to obtain and
maintain such insurance after the Company has exercised such commercially
reasonable efforts shall not be a breach of the Company's obligations under this
Agreement. Any directors' and officers' liability insurance covering Executive
shall continue to apply following the period in which Executive is serving as
officer or director of the Company for actions or omissions during the period in
which Executive was acting as officer or director.

         14. Non-Competition and Non-Solicitation.

                  (a) Necessity of Covenants. The Company and Executive
acknowledge that:

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

                           (ii) The Company maintains Confidential Information
and trade secrets (each described below), as discussed below, all of which are
zealously protected and kept secret by the Company;

                           (iii) In the course of his employment, Executive will
acquire certain of the Company's Confidential Information, and in the event of
any termination of Executive's employment, the Company would be adversely
affected if such information is used for the purposes of competing with the
Company;

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

                           (v) For these reasons, both the Company and Executive
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.

                  (b) Covenant Not to Compete. Executive agrees that from and
after the Termination Date and until one (1) year after the Termination Date, he
will not, without the express



                                      -12-
<PAGE>



written permission of the Company, which may be given or withheld in the
Company's sole and absolute 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 mining or the processing of metals
or minerals in the United States and throughout the world at the time of the
termination of the Employment Term. It is understood and acknowledged by both
Executive and the Company that, because the Company transacts business
worldwide, the term of this Section 15(b) shall be enforced throughout the
United States and in any other country in which the Company is doing business as
of the Termination Date.

                  (c) Covenant Not To Solicit. Executive agrees that from and
after the Commencement Date and until one (1) year after the Termination Date,
he will not, except on behalf of the Company or with the express written
permission of the Company, which may be given or withheld in the Company's sole
discretion, directly or indirectly solicit, or attempt to solicit (on
Executive's own behalf or on behalf of any other person or entity) the
employment or retaining of any employee or consultant of the Company or any of
the Company's affiliates.

                  (d) Disclosure of Outside Activities. Executive, during the
Employment Term, 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.

                  (e) Survival. The terms of this Section shall survive the
expiration or termination for any reason of this Agreement.

         15. Confidential Information and Trade Secrets.

                  (a) Nondisclosure of Confidential Information. Executive has
and will acquire certain "Confidential Information" of the Company throughout
the Employment Term. For purposes of this Agreement, "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 that is
disclosed to Executive by the Company, including information conceived,
discovered, or developed by Executive. "Confidential Information" includes,
without limitation, 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." For purposes of this Agreement, the term "trade secret" shall
include any formula, pattern, device, or compilation of information which is
used in the Company's business, and which provides to the holder of such trade
secret an opportunity to obtain an advantage over competitors who do not know or
use such trade secret.

         Executive agrees that he shall not use for his own benefit such
Confidential Information or trade secrets acquired during the Employment Term
and for three (3) years thereafter. Further, Executive shall not, without the
written consent of the Board 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



                                      -13-
<PAGE>



appropriate in connection with the performance by Executive of his duties, any
Confidential Information or trade secrets obtained by him during the Employment
Term.

                  (b) Return of Confidential Information. Upon any termination
of employment, Executive agrees to deliver any Company property and any
documents, notes, drawings, specifications, computer software, data and other
materials of any nature pertaining to any Confidential Information that are held
by Executive and will not take any of the foregoing, or any reproduction of any
of the foregoing, that is embodied an any tangible medium of expression,
provided that the foregoing shall not prohibit Executive from retaining his
personal phone directories and rolodexes.

                  (c) Exceptions. The restrictions and obligations in Section
15(a) 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 Executive of his obligations under this Agreement; (ii) is disclosed
to Executive without an obligation of confidentiality by a third party that is
not an affiliate of the Company who has the right to make such disclosure; (iii)
is developed by Executive independent of his performance of duties hereunder
without use of or benefit from the Confidential Information; (iv) was in
possession of Executive without obligations of confidentiality prior to receipt
under this Agreement; or (v) is required to be disclosed by law.

                  (d) Survival. The terms of this Section 15 shall survive the
expiration or termination for any reason of this Agreement.

         16. Binding Arbitration.

                  (a) Executive and the Company each agree, to the extent
permitted by law, to arbitrate before a single neutral arbitrator, in accordance
with the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association ("AAA") and Delaware law regarding discovery,
any dispute, claim, or controversy arising out of, relating to, or in connection
with this Agreement, or the interpretation, validity, construction, performance,
breach, or termination thereof, or Executive's employment, recruitment to
employment, or the termination of such employment, whether in tort or contract,
pursuant to current or future statute or regulation, or otherwise, including but
not limited to claims for wrongful termination, breach of contract or
contractual obligation, discrimination, retaliation and harassment based on
race, age, sex, disability, and/or any other basis under Title VII of the Civil
Rights Act of 1964, as amended, and any and all federal, state, and local laws
and regulations, infliction of emotional distress, misrepresentation, fraud, and
claims for wages, commissions, bonuses, severance, stock options, fringe
benefits, and the like, except that the following will not be resolved by
arbitration: any dispute, claim, or controversy regarding workers' compensation
benefits, unemployment insurance benefits, or disability insurance benefits, or
regarding Section 15 of this Agreement, and/or the validity, infringement, or
enforceability of any trade secret, patent right, copyright, trademark, or any
other intellectual property.

                  (b) The Company shall pay the cost of the arbitration filing
and hearing fees and the cost of the arbitrator, and any other expense or cost
that is unique to arbitration or that Executive would not be required to bear if
he were free to bring the dispute or claim in court. All reasonable costs and
expenses (including fees and disbursements of counsel) incurred by Executive



                                      -14-
<PAGE>



pursuant to this Section 16 shall be paid on behalf of or reimbursed to
Executive promptly by the Company; provided, however, that in the event the
arbitrator(s) determine(s) that any of Executive's litigation assertions or
defenses are determined to be in bad faith or frivolous, no such reimbursements
shall be due Executive, and any such expenses already paid to Executive shall be
immediately returned by Executive to the Company. The arbitration shall take
place in the AAA location that is closest to the Company's corporate offices in
Montana. The arbitrator shall apply Delaware law, without reference to rules of
conflicts of law, to the resolution of any dispute. The arbitrator shall issue a
written award that sets forth the essential findings and conclusions on which
the award is based. Judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The award shall be subject to
correction, confirmation, or vacation, as provided by Delaware law and any
applicable Delaware case law setting forth the standard of judicial review of
arbitration awards. Notwithstanding the foregoing, the parties may apply to any
court of competent jurisdiction for preliminary or interim equitable relief, or
to compel arbitration in accordance with this Section 16, without breach of this
Section 16.

                  (c) Executive and the Company each understand and agree that
the arbitration of any dispute or controversy shall be instead of a hearing or
trial before a court or jury. Executive and the Company each understand that
Executive and the Company are expressly waiving any and all rights to a hearing
or trial before a court or jury regarding any dispute or controversy which they
now have or which they may have in the future. Nothing in this Agreement shall
be interpreted as restricting or prohibiting Executive from filing a charge or
complaint with a federal, state, or local administrative agency charged with
investigating and/or prosecuting such charges or complaints under any applicable
federal, state, or municipal law or regulation.

                  (d) The terms of this Section 16 shall survive the expiration
or termination for any reason of this Agreement.

         17. Essential Covenants. The covenants by Executive in Section 15 are
essential elements of this Agreement and without Executive's agreement to comply
with such covenants, the Company would not have entered into this Agreement or
employed Executive.

         18. Injunctive Relief. Executive acknowledges that the injury suffered
as a result of a breach of any provision of this Agreement (including any
provision of Section 15) would be irreparable and that an award of monetary
damages to the Company for such a breach would be an inadequate remedy.
Consequently, Executive agrees that the Company will have the right, in addition
to any other rights it may have, to obtain injunctive relief to restrain any
breach or threatened breach or otherwise to specifically enforce any provision
of this Agreement, and the Company will not be required to post bond or other
security in seeking such relief.

         19. Assignment. The Company shall have the right to assign this
Agreement 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. The term "successors" and "assigns" shall include 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.
This Agreement and all rights of Executive hereunder shall inure to the benefit
of, and be enforceable by, Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees,



                                      -15-
<PAGE>



and legatees. The rights, duties, and covenants of Executive under this
Agreement may not be assigned.

         20. No Waiver. The failure of 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.

         21. Notices. All notices, requests, demands and other communications
called for hereunder shall be in writing and shall be deemed given if (a)
delivered personally or by facsimile, (b) one (1) day after being sent by
Federal Express or a similar commercial overnight service, or (c) three (3) days
after being mailed by registered or certified mail, return receipt requested,
prepaid and addressed to the parties or their successors in interest at the
following addresses, or at such other addresses as the parties may designate by
written notice in the manner aforesaid:

             If to the Company:   Stillwater Mining Company
                                  536 East Pike Avenue
                                  PO Box 1330
                                  Columbus, Montana 59019

             If to Executive:     at the last residential address known by
                                  the Company.

         22. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.

         23. Entire Agreement. This Agreement, together with the Company's
Relocation Policy, and the applicable stock option and stock purchase agreements
and notices of grant referenced herein, represent the entire agreement and
understanding between the Company and Executive concerning Executive's
employment relationship with the Company, and supersede and replace any and all
prior agreements and understandings concerning Executive's employment
relationship with the Company.

         24. No Oral Modification, Cancellation or Discharge. This Agreement may
only be amended, canceled or discharged in a writing signed by Executive and an
authorized member of the Board.

         25. Withholding. The Company shall be entitled to withhold, or cause to
be withheld, from payment any amount of withholding taxes required by law with
respect to payments made to Executive in connection with his employment
hereunder.

         26. Key-Man Insurance. Executive 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 Executive that the Company may deem
necessary or advisable to protect its interests hereunder; and Executive agrees
to submit to any medical or other examination necessary for such



                                      -16-
<PAGE>



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

         27. Attorneys' Fees. Should a dispute arise under this Agreement
following a Change in Control, or should any action or proceeding be commenced
to recover damages as a result of an alleged breach following a Change in
Control of the terms of this Agreement, then the successor to the Company as a
result of the Change in Control shall be required to pay the costs incurred by
Executive in connection therewith, including reasonable attorneys' fees, unless
it is determined that the dispute, action, or proceeding was frivolous or
brought by Executive in bad faith.

         28. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware without reference to rules relating to conflict of law.

         29. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         30. Acknowledgment. Executive acknowledges that he has had the
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement, in the case of
the Company by its duly authorized officer/director, as of July 23, 2001:


STILLWATER MINING COMPANY

/s/ Richard E. Gilbert
------------------------------------

By: Richard E. Gilbert
   ---------------------------------

Title: Chairman of Compensation
       Committee
      ------------------------------



EXECUTIVE

/s/ FRANCIS MCALLISTER
------------------------------------
Francis McAllister





                                      -17-