Document:

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                                                                    EXHIBIT 10.2

                              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 HARRY SMITH ("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
President and Chief Operating Officer 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
twenty-four (24) 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."

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                                   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
Three Hundred Thousand Dollars ($300,000) 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 40% of
the Employee's base salary ("Target"), with a maximum which shall not exceed 80%
of the Employee's base salary.

         4.3 Employee Benefits. 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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                                   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 ninety (90) 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 Employee:

                           (i) base salary through the Termination Date;

                           (ii) a pro rata portion of Employee's Target Annual
                  Bonus, less applicable withholdings and deductions, which pro
                  rata portion shall be determined by multiplying the Target
                  Annual 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, payable
                  within 10 days of the Termination Date;

                           (iii) an amount equal to the sum of (A) Employee's
                  annual Base Salary, plus (B) 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 Executive in 12 monthly
                  installments, commencing no later than 30 days after the
                  Termination Date, and continuing until all installments due
                  Employee have been paid.

                            (iv) continuation of Employee's medical, health, and
                  life insurance (as in effect immediately prior to the date of
                  termination) for a period of twelve (12) months, or if not
                  permissible or commercially reasonable to continue the same
                  coverage of Employee under one or more of the insurance
                  policies or plans, continued payment for a period of twelve
                  (12) 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 Employee is
                  eligible for similar aggregate coverage from a subsequent
                  employer.

                  (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

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                  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 on
                  a percentage basis 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 on a
                  percentage basis 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 (ix) below) shall discontinue the business of
                  the Company;

                           (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 Section 5.1, "Cause" shall mean
         (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

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         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
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

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         (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.

         5.6 Termination Following a Change of Control; Benefits.

                  (a) In the event there is a Termination Following a Change of
         Control, the Agreement shall terminate and Employee shall be entitled
         to the following severance benefits:

                           (i) 200 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) 200 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 24 months after the Termination
                  Date, including receiving the full benefit of 24 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;

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                           (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:

                                    (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

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                           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 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

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         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 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

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                  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.

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                           (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 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

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                  (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.

         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

                                       12
<PAGE>
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 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.

                                       13
<PAGE>

                                   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.

                                   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.

                                       14
<PAGE>

                                   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:

                           Harry Smith
                           2006 Eastridge Drive
                           Billings, Montana  59102

                  If to the Company:

                           Vice President, Human Resources
                           Stillwater Mining Company
                           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/ HARRY SMITH
                                       ------------------------------------
                                       Harry Smith

                                       16<PAGE>
                                                                    EXHIBIT 10.3

                              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 JAMES A. SABALA
("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 and Chief Financial Officer 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
twenty-four (24) 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
Two Hundred Thousand Dollars ($200,000) 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 35% of
the Employee's base salary ("Target"), with a maximum which shall not exceed 70%
of the Employee's base salary.

         4.3 Employee Benefits. 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.

                                       2
<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 ninety (90) 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 Employee:

                           (i) base salary through the Termination Date;

                           (ii) a pro rata portion of Employee's Target Annual
                  Bonus, less applicable withholdings and deductions, which pro
                  rata portion shall be determined by multiplying the Target
                  Annual 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 payable within
                  10 days of the Termination Date;

                           (iii) an amount equal to the sum of (A) Employee's
                  annual Base Salary, plus (B) 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 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.

                           (iv) continuation of Employee'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 Employee 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 Employee is eligible for similar aggregate
                  coverage from a subsequent employer.

                  (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;

                                       3
<PAGE>

                           (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 on
                  a percentage basis 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 on a
                  percentage basis 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 (ix) below) shall discontinue the business of
                  the Company;

                           (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 Section 5.1, "Cause" shall mean
         (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

                                       4
<PAGE>

         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
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.

                                       5
<PAGE>

                  (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.

         5.6 Termination Following a Change of Control; Benefits.

                  (a) In the event there is a Termination Following a Change of
         Control, the Agreement shall terminate and Employee shall be entitled
         to the following severance benefits:

                           (i) 200 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) 200 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 24 months after the Termination
                  Date, including receiving the full benefit of 24 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;

                                       6
<PAGE>

                  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:

                                    (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

                                       7
<PAGE>

                           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 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

                                       8
<PAGE>

         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 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

                                       9
<PAGE>

                  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

                                       10
<PAGE>

                  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 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

                                       11
<PAGE>

         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.

         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:

                                       12
<PAGE>

         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 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

                                       13
<PAGE>

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.

                                   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

                                       14
<PAGE>

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:
James A. Sabala
3560 Masterson Circle
Billings, Montana  59106

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

If to the Company:
Vice President, Human Resources
Stillwater Mining Company
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/ JAMES A. SABALA
                                          --------------------------------------
                                          James A. Sabala

                                       16

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