Exhibit 10.2
Sterling Chemicals, Inc.
Fifth Amended and Restated Key Employee Protection Plan
Preliminary Statements

  A.   The Board (as defined below) of Sterling Chemicals, Inc., a Delaware
corporation, has previously adopted that certain Fourth Amended and Restated Key
Employee Protection Plan (the “Existing Plan”).     B.   The Board desires to
amend the Existing Plan in certain respects and to restate the Existing Plan as
so amended in its entirety.

          Now, Therefore, the Existing Plan is hereby amended and restated,
effective as of the Effective Date (as defined below), to read in its entirety
as follows:
Article I
Definitions and Interpretations
          Section 1.01. Definitions. Capitalized terms used in this Plan shall
have the following respective meanings, except as otherwise provided or as the
context shall otherwise require:
     “Annual Compensation” means, as of the Date of Computation with respect to
any Participant, the sum of (a) the highest annual base salary of such
Participant in effect at any time during the three-year period ending
immediately prior to the Date of Computation plus (b) the Targeted Bonus, if
any, of such Participant in effect immediately prior to the Date of Computation.
     “Applicable Multiplier” means (a) with respect to any Existing Participant,
the number set forth opposite such Existing Participant’s name on Exhibit B
attached hereto under the heading “Applicable Multiplier” and (b) with respect
to any other Participant, the multiplier specified in the Instrument of
Designation executed and delivered by the Company and such Participant in
accordance with Section 2.01(b); provided, however, that in no event shall the
Applicable Multiplier of any Participant be less than 0.50 (except as provided
in Section 2.03) or greater than 3.00.
     “Benefit Plan” means any employee benefit plan (including any employee
benefit plan within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974), program, arrangement or practice maintained,
sponsored or provided by the Company or any Subsidiary, including those relating
to bonuses, incentive compensation, retirement benefits, stock options, stock
ownership or stock awards, healthcare or medical

 

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benefits, disability benefits, death benefits, disability, life, accident or
travel insurance, sick leave, vacation pay or termination pay.
     “Board” means the Board of Directors of the Company.
     “Change of Control” means the occurrence of any of the following events:
     (a) the acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) (a “Person”), other than Resurgence Asset
Management, L.L.C. and/or any of its or its affiliates’ managed funds or
accounts (“Resurgence”), of Company securities if, immediately thereafter, such
Person is the beneficial owner (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or more of the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the “Outstanding Company Voting Securities”);
provided, however, that the following acquisitions shall not constitute a Change
of Control: (A) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its affiliates; or (B) any
acquisition by any corporation pursuant to a transaction that complies with
subclauses (c)(i), (c)(ii) and (c)(iii) of this definition;
     (b) the time at which individuals who, within any 12 month period,
constitute the Board (the “Incumbent Board”) cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual whose
election, or nomination for election by the Company’s stockholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board;
     (c) consummation of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving the Company or any of
its subsidiaries, a disposition of assets by the Company or the acquisition of
assets or stock of another entity by the Company or any of its subsidiaries
(each, a “Business Combination”), in each case unless, following such Business
Combination, (i) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of the then-outstanding voting securities entitled to
vote generally in the election of directors of the corporation resulting from
such Business Combination (including a corporation that, as a result of such
transaction, owns the Company or has purchased the Company’s assets in a
disposition of assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Company Voting Securities,

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(ii) no Person (excluding Resurgence or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 50% or more of the
combined voting power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board providing for such Business Combination;
or
     (d) approval by the stockholders or other relevant stakeholders of the
Company of a complete liquidation or dissolution of the Company.
     “Code” means the Internal Revenue Code of 1986, as amended. Reference in
this Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to such section and any regulations under such section.
     “Company” means Sterling Chemicals, Inc. and any Successor.
     “Compensation Committee” means the Compensation Committee of the Board.
     “Date of Computation” means the earlier of (a) the date on which an event
occurs that results in a Participant terminating his or her employment for Good
Reason and (b) the actual date of such Participant’s termination by the Company
for any reason other than Misconduct or Disability.
     “Disability” means, with respect to any Participant, a physical or mental
condition of such Participant that, in the opinion of a licensed physician
reasonably acceptable to the Company and such Participant or his or her legal
representative, (a) prevents such Participant from being able to perform the
services required of him or her as an employee of the Company , (b) has
continued for at least 180 days during any period of 12 consecutive months and
(c) is reasonably expected to continue.
     “Effective Date” means March 12, 2004.
     “Excise Tax” has the meaning specified in Section 2.05.
     “Existing Participants” means the Participants in this Plan as of the
Effective Date, each of whom is listed on Exhibit B attached hereto.
     “Existing Plan” has the meaning specified in the Preliminary Statements.
     “Good Reason” means, with respect to any Participant, any of the following
actions or failures to act:

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  (i)   if (but only if) such Participant has an Applicable Multiplier of 2.00
or higher, a material change in such Participant’s reporting responsibilities,
titles or elected or appointed offices as in effect immediately prior to the
effective date of such change, including any change caused by the removal of
such Participant from, or the failure to re-elect such Participant to, any
material corporate office of the Company held by such Participant immediately
prior to such effective date but excluding any such change that occurs in
connection with such Participant’s death, disability or retirement;     (ii)  
if (but only if) such Participant has an Applicable Multiplier of 2.00 or
higher, the assignment to such Participant of duties and/or responsibilities
that are materially inconsistent with such Participant’s status, positions,
duties, responsibilities and functions with the Company immediately prior to the
effective date of such assignment;     (iii)   a material reduction by the
Company in such Participant’s total compensation in effect immediately prior to
the effective date of such reduction;     (iv)   the failure of the Company to
maintain employee benefit plans, programs, arrangements and practices entitling
such Participant to benefits that, in the aggregate, are at least as favorable
to such Participant as those available to such Participant under the Benefit
Plans in which he or she was a participant immediately prior to the effective
date of such failure: provided, however, that the amendment, modification or
discontinuance of any or all such employee benefit plans, programs, arrangements
or practices by the Company shall not constitute “Good Reason” hereunder if such
amendment, modification or discontinuance applies generally to the Company’s
salaried work force and does not single out such Participant for disparate
treatment;     (v)   any change of more than 75 miles (or, in the case of any
Participant for whom the Compensation Committee has approved a shorter distance,
such shorter distance) in the location of the principal place of employment of
such Participant immediately prior to the effective date of such change;    
(vi)   any purported termination of such Participant’s employment for Misconduct
or Disability not in accordance with the provisions of Section 3.02; or    
(vii)   any purported termination of such Participant’s participation in this
Plan not in accordance with the provisions of Section 2.01(c).

For purposes of this definition, none of the actions described in clauses
(i) through (iii) above shall constitute a Good Reason with respect to any
Participant if it was an isolated and inadvertent action not taken in bad faith
by the Company and if it is remedied by the Company promptly after receipt of
notice thereof given by such Participant. For purposes of this definition, any
action or failure to act described in clauses (i) through (viii) above shall
cease to be a Good Reason with respect to any Participant on the date which is
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days after such Participant acquires actual knowledge of such action or failure
to act unless, prior to such date, such Participant gives a Termination Notice
pursuant to Section 3.01. In the event of any dispute between the Company, on
the one hand, and any Participant, on the other hand, with respect to the amount
of total compensation of such Participant for purposes of clause (iii) above or
the aggregate value or level of any of such Participant’s benefits for purposes
of clause (iv) above, the Company and such Participant shall use their best
efforts to resolve such dispute themselves. If they are unable to resolve the
dispute within 15 business days, Deloitte & Touche L.L.P., or such other
nationally recognized accounting firm or employee benefits firm acceptable to
the Company and such Participant, shall be engaged by the Company to make its
own determination with respect to the dispute and the determination by such firm
shall be final and binding on the Company (including the Compensation Committee)
and such Participant. If any firm is engaged with respect to any dispute as
aforesaid, (A) such firm shall be instructed to make its determination as soon
as practicable and to use such materiality standard as such firm may determine
to be reasonable under the circumstances and (B) the disputants shall provide
such firm with all books, records and other information relevant to such dispute
as such firm may reasonably request. No firm engaged as aforesaid shall be
liable or responsible to the Company (including the Compensation Committee) or
any Participant for any determination made by such firm in good faith.
     “Gross-Up Payment” has the meaning specified in Section 2.05.
     “Misconduct” means, with respect to any Participant:

  (a)   the commission by such Participant of acts of dishonesty or gross
misconduct which are demonstrably injurious to the Company (monetarily or
otherwise) in any material respect;     (b)   the failure of such Participant to
observe and comply in all material respects with the Company’s published
policies relating to alcohol and drugs, harassment or compliance with applicable
laws;     (c)   the failure of such Participant to observe and comply with any
other lawful published policy of the Company, but, in the case of any such
failure that is capable of being remedied, only if such failure shall have
continued unremedied for more than 30 days after written notice thereof is given
to such Participant by the Company;     (d)   the willful failure of such
Participant to observe and comply with all lawful and ethical directions and
instructions of the Board or the Chief Executive Officer of the Company;     (e)
  the refusal or willful failure of such Participant to perform, in any material
respect, his or her duties with the Company, but only if such failure was not
caused by disability or incapacity and shall have continued unremedied for more

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      than 30 days after written notice thereof is given to such Participant by
the Company;

  (f)   the conviction of such Participant for a felony offense; or     (g)  
any willful conduct on the part of such Participant that prejudices, in any
material respect, the reputation of the Company in the fields of business in
which it is engaged or with the investment community or the public at large, but
only if such Participant knew, or should have known, that such conduct could
have such result.

For purposes of clauses (d), (e) and (g) above, no act or failure to act on the
part of any Participant shall be considered “willful” if such act or failure to
act was done or omitted to be done by such Participant in good faith and with
the reasonable belief that such Participant’s action or omission was in the best
interest of the Company. In case of any dispute regarding whether or not any
conduct by a Participant meets any of the standards set forth in clauses
(a) through (g) above, the burden of proof shall rest with the Company.
     “Participants” means, except as otherwise provided in Section 2.01(c), the
Existing Participants and those employees of the Company or any Subsidiary who
are from time to time designated by the Compensation Committee as Participants
in accordance with Section 2.01(b).
     “Plan” means this Fourth Amended and Restated Key Employee Protection Plan,
as amended, supplemented or modified from time to time in accordance with its
terms.
     “Protection Period” means (a) with respect to any Participant having an
Applicable Multiplier that is greater than or equal to 1.5, the period
commencing 180 days prior to the date on which the relevant Change of Control
occurs and ending two years after the date on which such Change of Control
occurs, and (b) with respect to any Participant having an Applicable Multiplier
that is less than 1.5, the period commencing 180 days prior to the date on which
the relevant Change of Control occurs and ending 18 months after the date on
which such Change of Control occurs.
     “Severance Amount” has the meaning specified in Section 2.02(a)(i).
     “Subsidiary” means any corporation, limited partnership, general
partnership, limited liability company or other form of entity, a majority of
any class of voting stock or other voting rights of which is owned, directly or
indirectly, by the Company.
     “Successor” means a successor to all or substantially all of the capital
stock, business, operations or assets of the Company (whether direct or
indirect, by purchase, merger, consolidation or otherwise).
     “Targeted Bonus” means, with respect to any Participant, the amount
determined by multiplying (a) the annual base salary of such Participant in
effect immediately prior to the

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Date of Computation times (b) such Participant’s Bonus Percentage, if any, in
effect at the “Target Payout Level” (i.e., 1x level) on the Date of Computation
under the Company’s bonus plan for salaried employees.
     “Termination Date” means, with respect to any Participant, the termination
date specified in the Termination Notice delivered by such Participant to the
Company in accordance with Section 3.01 or the actual date of termination of
such Participant’s employment by the Company for any reason other than
Misconduct or Disability, as applicable.
     “Termination Notice” means, as appropriate, (a) a notice from a Participant
to the Company purporting to terminate such Participant’s employment for Good
Reason in accordance with Section 3.01 or (b) a notice from the Company to a
Participant purporting to terminate such Participant’s employment for Misconduct
or Disability in accordance with Section 3.02.
     “Triggering Payment” has the meaning specified in Section 2.05.
          Section 1.02. Interpretation. In this Plan, unless a clear contrary
intention appears, (a) the words “herein,” “hereof” and “hereunder” and other
words of similar import refer to this Plan as a whole and not to any particular
Article, Section or other subdivision, (b) reference to any Article or Section,
means such Article or Section hereof and (c) the words “including” (and with
correlative meaning “include”) means including, without limiting the generality
of any description preceding such term. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
Article II
Eligibility and Benefits
          Section 2.01. Eligible Employees. (a) This Plan is only for the
benefit of Participants, and no other employees or personnel shall be eligible
to participate in this Plan or to receive any rights or benefits hereunder.
          (b) In addition to the Existing Participants, the Compensation
Committee shall be authorized from time to time after the Effective Date to
designate one or more employees of the Company as Participants. Each such
designation shall be evidenced by an Instrument of Designation signed by the
Company and such Participant substantially in the form of Exhibit A hereto. Each
such Instrument of Designation, and the designation evidenced thereby, shall be
binding on the Company.
          (c) In the event that the Compensation Committee determines in good
faith that any Participant is no longer a key employee of the Company and thus
should not continue to participate in this Plan, the Compensation Committee
shall be permitted, subject to the limitations set forth below, to terminate
such Participant’s participation in this Plan on such date as shall be specified
in a written notice delivered to such Participant not less than 60 days prior to

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the date so specified, which notice shall state that it is a termination notice
given pursuant to this Section 2.01(c). Upon the effective date of such
termination, such Participant shall cease to be a Participant and, accordingly,
such Participant shall no longer be entitled to receive any rights or benefits
hereunder; provided, however, that such termination shall not affect the rights
or benefits of such Participant or the obligations of the Company accrued under
this Plan as of the effective date of such termination or the rights or benefits
of such Participant or the obligations of the Company accruing under this Plan
after the effective date of such termination on account of any Change of Control
that occurred on or before such effective date or that occurs within 180 days
after such effective date. Notwithstanding the foregoing, the Compensation
Committee shall not be permitted to terminate any Participant’s participation in
this Plan unless the sole reason therefor is that, in the good faith opinion of
the Compensation Committee, such Participant has ceased to be a key employee of
the Company and thus should not continue to participate in this Plan. Without
limitation of the foregoing, the Compensation Committee may not terminate any
Participant’s participation in this Plan if such termination is directly or
indirectly related to, connected with, in anticipation of, in furtherance of,
pursuant to the terms of or during the pendency of any Change of Control or is
for the purpose of directly or indirectly encouraging or facilitating a Change
of Control. In case of any dispute regarding whether or not any purported
termination of any Participant’s participation in this Plan is permitted by, or
satisfies any of the requirements of, this paragraph (c), the burden of proof
shall rest with the Company.
          Section 2.02. Description of Benefits Triggered by Termination During
the Protection Period. (a) Each Participant shall be entitled to receive the
benefits described below if a Change of Control occurs and if, during the
Protection Period for such Participant, either such Participant terminates or
has terminated his or her employment for Good Reason in accordance with
Section 3.01 or the Company terminates or has terminated such Participant’s
employment for any reason other than Misconduct or Disability in accordance with
Section 3.02:
     (i) subject to paragraph (c) below, the Company shall pay to such
Participant, within 30 days after such Participant’s Termination Date or, in the
event that such Participant’s Termination Date occurred within the 180-day
period immediately preceding the occurrence of a Change of Control, within
30 days after such Change of Control, a lump sum cash payment equal to the sum
of (A) an amount (the “Severance Amount”) equal to (subject to Section 2.04(b))
such Participant’s Annual Compensation as of the applicable Date of Computation
times such Participant’s Applicable Multiplier as of the applicable Date of
Computation, plus (B) all unused vacation time accrued by such Participant as of
such Participant’s Termination Date under the Company’s vacation policy, plus
(C) all accrued but unpaid compensation earned by such Participant as of such
Participant’s Termination Date, plus (D) all unpaid vested benefits earned or
accrued by such Participant as of such Participant’s Termination Date under any
Benefit Plan (other than a “qualified plan” within the meaning of section 401(a)
of the Code) in effect immediately prior to the date on which the Change of
Control occurs; provided, however, that (x) any amounts payable to any
Participant pursuant to this clause (i) shall be reduced by an amount equal to
the aggregate amount previously paid to such Participant by the Company as
severance (including payments previously made by the Company pursuant to this
Section 2.02(a)(i) or Section 2.03) and (y) if a Participant becomes entitled to
benefits under this Plan with respect to the Change of Control that occurred on
December 19, 2002,

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such Participant’s Severance Amount due in respect of such Change in Control
shall be equal to the greater of (1) the amount which would have been payable to
the Participant under the Existing Plan or (2) the amount which would be payable
to such Participant pursuant to Section 2.03, determined as if such Change of
Control had not occurred.
     (ii) for a period of 24 months (including 18 months of COBRA coverage)
following such Participant’s Termination Date (including any period during which
such Participant was covered by such plans and programs pursuant to
Section 2.03), such Participant shall continue to be covered by all life, health
care, medical and dental insurance plans and programs (excluding disability) of
the Company by which he or she was covered on his or her Termination Date
notwithstanding any subsequent termination or amendment of any such plan or
programs and notwithstanding any eligibility provisions thereof to the contrary,
provided that (A) such Participant makes a timely COBRA election following such
Participant’s Termination Date and (B) such Participant pays the regular
employee premium required by such plans and programs or by COBRA, as the case
may be.
          (b) No Participant shall be entitled to receive any of the benefits
described in this Section 2.02 on account of any Change of Control unless
(i) such Change of Control occurred (A) while such Participant was employed by
the Company or (B) within 180 days after such Participant’s Termination Date and
(ii) either such Participant terminates or has terminated his or her employment
for Good Reason in accordance with Section 3.01 or the Company terminates or has
terminated such Participant’s employment for any reason other than Misconduct or
Disability in accordance with Section 3.02, in each case, during the Protection
Period for such Participant.
          (c) Notwithstanding anything to the contrary contained in this
Section 2.02, if a Participant who has an Applicable Multiplier of 2.00 or
higher is entitled to receive a Severance Amount pursuant to Section 2.02(a), up
to 50% of the Severance Amount paid to such Participant shall be subject to
repayment by such Participant if, within one year after the date of termination
of such Participant’s employment with the Company, such Participant owns,
manages, operates or controls (or joins in the ownership, management, operation
or control of), or becomes employed by or connected in any manner with, any
business engaged in the manufacture or sale of styrene, acrylonitrile or acetic
acid anywhere in the world (each, a “Competitive Position”). In the event that a
Participant is required to repay any portion of his or her Severance Amount
pursuant to this paragraph (c), such portion shall be determined by multiplying
50% of his or her Severance Amount by a fraction, the numerator of which is the
number of days from the date such Participant begins in such Competitive
Position until the first anniversary of the date of termination of such
Participant’s employment with the Company, and the denominator of which is 365.
This paragraph (c) shall not be applicable to any Severance Amount paid to a
Participant pursuant to Section 2.03 unless such Severance Amount is later
increased due to the subsequent occurrence of a Change of Control within the
relevant Participant’s Protection Period to the Severance Amount determined by
using 100% of such Participant’s Applicable Multiplier.
          Section 2.03. Description of Benefits Triggered by Termination Outside
the Protection Period. If any Participant terminates his or her employment for
Good Reason in accordance with Section 3.01 or the Company terminates such
Participant’s employment for any

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reason other than Misconduct or Disability in accordance with Section 3.02, and
such termination does not occur within such Participant’s Protection Period,
then such Participant shall be entitled to receive, and the Company shall be
obligated to pay and provide, all the benefits described in Section 2.02 to the
same extent as if a Change of Control had occurred on the date which is 60 days
prior to the relevant Termination Date; provided, however, that, for purposes of
calculating the Severance Amount payable to such Participant under this
Section 2.03, the Applicable Multiplier of such Participant shall be reduced by
50%. In the case of each termination of employment covered by this Section 2.03,
a Change of Control shall be deemed to have occurred on the date which is 60
days prior to the relevant Termination Date and, accordingly, all other
provisions of this Plan shall be construed as if a Change of Control had
actually occurred on such date.
          Section 2.04. Additional Provisions Relating to Benefits under
Sections 2.02 and 2.03. (a) Anything in this Plan to the contrary
notwithstanding, the Company’s obligation to continue the benefits described in
Section 2.02(a)(ii) for any Participant shall cease if and when such Participant
becomes employed, on a full-time basis, by a third party which provides such
Participant with substantially similar benefits.
          (b) Notwithstanding anything to the contrary contained in this Plan,
the Severance Amount payable to any Participant under this Plan shall be reduced
by the aggregate amount of all separation, severance or termination payments due
to such Participant under (i) any Benefit Plan (other than this Plan), (ii) any
agreement between such Participant and the Company or (ii) any applicable law,
statute, rule, regulation, order or decree (or other pronouncement having the
effect of law) of any nation or governmental authority.
          Section 2.05. Certain Additional Payments by the Company. Anything in
this Plan to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution to or for the benefit of any Participant under
this Plan (“Triggering Payment”) would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest or penalties, being
collectively referred to below as the “Excise Tax”), then such Participant shall
be entitled to receive from the Company an additional payment (the “Gross-Up
Payment”) in an amount equal to the lesser of (a) an amount such that after
payment by such Participant of all taxes (including any interest or penalties
imposed with respect to such taxes) including any Excise Tax imposed on the
Gross-Up Payment, such Participant retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Triggering Payment, and (b) 25% of such
Participant’s Annual Compensation. If a Participant is entitled to a Gross-Up
Payment under this Section 2.05, the Company shall pay the Participant his or
her Gross-Up Payment on or before March 15 of the calendar year immediately
following the calendar year in which the Participant’s employment was
terminated. All determinations required to be made under this Section 2.05 with
respect to a particular Participant shall be made by the independent accounting
firm then retained by the Company in the ordinary course of business (which firm
shall provide detailed supporting calculations to the Company and such
Participant) and such determination shall be final and binding on the Company
(including the Compensation Committee) and all Participants.

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          Section 2.06. Cost of Plan; Plan Unfunded; Participant’s Rights
Unsecured. The entire cost of this Plan shall be borne by the Company, and no
contributions shall be required of the Participants. The Company shall not be
required to establish any special or separate fund or make any other segregation
of funds or assets to assure the payment of any benefit hereunder. The right of
any Participant to receive the benefits provided for herein shall be an
unsecured claim against the general assets of the Company.
Article III
Termination Notices
          Section 3.01. Termination Notices from Participants. For purposes of
this Plan, in order for any Participant to terminate his or her employment for
Good Reason, such Participant must give a written notice of termination to the
Company, which notice shall (a) be in writing and signed by such Participant,
(b) specify the termination date, (c) state that the termination is for a Good
Reason and (d) set forth in reasonable detail the facts and circumstances
claimed to provide a basis for such Good Reason. Any Termination Notice given by
a Participant that is not in compliance, in all material respects, with the
foregoing requirements shall be invalid and ineffective for purposes of this
Plan. If the Company receives from any Participant a Termination Notice that it
believes is invalid and ineffective as aforesaid, it shall promptly notify such
Participant of such belief and the reasons therefor.
          Section 3.02. Termination Notices from Company. For purposes of this
Plan, in order for the Company to terminate any Participant’s employment for
Misconduct, the Company must give a written notice of termination to such
Participant, which notice shall (a) specify the termination date, (b) state that
the termination is for Misconduct and (c) set forth in reasonable detail the
facts and circumstances claimed to provide a basis for such termination for
Misconduct. For purposes of this Plan, in order for the Company to terminate any
Participant’s employment for Disability, the Company must give a written notice
of termination to such Participant, which notice shall (i) specify the
termination date, (ii) state that the termination is for Disability and (iii)
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for such termination for Disability. Any Termination Notice given by the
Company that is not in compliance, in all material respects, with the foregoing
requirements shall be invalid and ineffective for purposes of this Plan. Any
Termination Notice purported to be given by the Company to any Participant after
the death or retirement of such Participant shall be invalid and ineffective.
Article IV
Dispute Resolution
          Section 4.01. Negotiation. Subject to Section 4.03, in case a dispute
or controversy shall arise between any Participant (or any person claiming by,
through or under any Participant) and the Company (including the Compensation
Committee) relating to or arising out of this Plan, either disputant may give
written notice to the other disputant (“Dispute Notice”) that it wishes to
resolve such dispute or controversy by negotiations, in which event the
disputants shall attempt

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in good faith to negotiate a resolution of such dispute or controversy. If the
dispute or controversy is not so resolved within 30 days after the effective
date of the Dispute Notice, subject to Section 4.03, either disputant may
initiate arbitration of the matter as provided in Section 4.02. All negotiations
pursuant to this Section 4.01 shall be held at the Company’s principal offices
in Houston, Texas (or such other place as the disputants shall mutually agree)
and shall be treated as compromise and settlement negotiations for the purposes
of the federal and state rules of evidence and procedure.
          Section 4.02. Arbitration. Subject to Section 4.03, any dispute or
controversy arising out of or relating to this Plan which has not been resolved
by negotiations in accordance with Section 4.01 within 30 days of the effective
date of the Dispute Notice shall, upon the written request of either disputant,
be finally settled by arbitration conducted expeditiously in accordance with the
labor arbitration rules of the American Arbitration Association. The arbitrator
shall be not empowered to award damages in excess of compensatory damages and
each disputant shall be deemed to have irrevocably waived any damages in excess
of compensatory damages. The arbitrator’s decision shall be final and legally
binding on the disputants and their successors and assigns. The fees and
expenses of the arbitrator shall be borne solely by the prevailing disputant or,
in the event there is no clear prevailing disputant, as the arbitrator deems
appropriate. All arbitration conferences and hearings shall be held in Houston,
Texas.
          Section 4.03. Exclusivity, etc. The dispute resolution procedures set
forth in Sections 4.01 and 4.02 shall not apply to any matter which, by the
express provisions of this Plan, is to be finally determined by the Compensation
Committee or by an accounting firm or employee benefits firm. No legal action
may be brought with respect to this Plan except for the purpose of specifically
enforcing the provisions of this Article IV or for the purpose of enforcing any
arbitration award made pursuant to Section 4.02.
Article V
Miscellaneous Provisions
          Section 5.01. Cumulative Benefits. Except as provided in
Section 2.04(b), the rights and benefits provided to any Participant under this
Plan are cumulative of, and are in addition to, all of the other rights and
benefits provided to such Participant under any Benefit Plan or any agreement
between such Participant and the Company.
          Section 5.02. No Mitigation. No Participant shall be required to
mitigate the amount of any payment provided for in this Plan by seeking or
accepting other employment following a termination of his or her employment with
the Company or otherwise. The amount of any payment provided for in this Plan
shall not be reduced by any compensation or benefit earned by a Participant as
the result of employment by another employer or by retirement benefits. The
Company’s obligations to make payments to any Participant required under this
Plan shall not be affected by any set off, counterclaim, recoupment, defense or
other claim, right or action that the Company may have against such Participant.

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          Section 5.03. Amendment and Termination. (a) The Board shall be
entitled to terminate this Plan at any time and for any reason; provided,
however, that in no event shall such termination become effective with respect
to any Participant prior to 90 days after notice of such termination is given to
such Participant.
          (b) The Board shall be entitled to amend this Plan at any time and for
any reason; provided, however, that no amendment that would effectively reduce,
alter, suspend or otherwise impair or prejudice the rights and benefits (whether
accrued or unaccrued) of any Participant in any material respect (a “Material
Amendment”) shall become effective with respect to any Participant prior to
90 days after notice of such amendment is given to such Participant. For
purposes of this paragraph (b), the termination of a Participant’s participation
in this Plan in accordance with Section 2.01(c) shall not be deemed to be an
amendment of this Plan.
          (c) Notwithstanding the foregoing, no termination of this Plan and no
Material Amendment shall be effective with respect to, binding upon or reduce
any benefits payable hereunder to any person who at the time is a Participant if
such termination or Material Amendment is (i) directly or indirectly related to,
connected with, in anticipation of, in furtherance of, pursuant to the terms of
or during the pendency of any Change of Control or is for the purpose of
directly or indirectly encouraging or facilitating a Change of Control or
(ii) made on, after or within 180 days prior to the date of any Change of
Control.
          (d) No termination or amendment of this Plan shall affect the rights
or benefits of any Participant or the obligations of the Company accrued under
this Plan as of the effective date of such termination or amendment or any of
the rights or benefits of such Participant or the obligations of the Company
accruing under this Plan after the effective date of such termination or
amendment on account of any Change of Control that occurred prior to such
effective date or within 180 days after such effective date. If any Participant
shall become entitled to benefits under this Plan during the term of this Plan,
then, notwithstanding the termination or amendment of this Plan, the benefits
payable hereunder to such Participant shall be paid in full.
          (e) In case of any dispute regarding whether or not any purported
termination or amendment of this Plan is permitted by, or satisfies any of the
requirements of, this Section 5.03, the burden of proof shall rest with the
Company.
          Section 5.04. Enforceability. The provisions of this Plan (a) are for
the benefit of, and may be enforced directly by, each Participant the same as if
the provisions of this Plan were set forth in their entirety in a written
instrument executed and delivered by the Company and such Participant and
(b) constitute a continuing offer to all present and future Participants. The
Company, by its adoption of this Plan, (i) acknowledges and agrees that each
present and future Participant has relied upon and will continue to rely upon
the provisions of this Plan in becoming, and serving as, an employee of the
Company, (ii) waives reliance upon, and all notices of acceptance of, this Plan
by the Participants and (iii) acknowledges and agrees that no present or future
Participant shall be prejudiced in his or her right to enforce directly the
provisions of this Plan in accordance with its terms by any act or failure to
act on the part of the Company.

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          Section 5.05. Administration. (a) The Compensation Committee shall
have full and final authority to make determinations with respect to the
administration of this Plan, to construe and interpret its provisions and to
take all other actions deemed necessary or advisable for the proper
administration of this Plan, but such authority shall be subject to the
provisions of this Plan. No discretionary action by the Compensation Committee
shall amend or supersede the express provisions of this Plan.
          (b) The members of the Compensation Committee shall receive no
additional compensation for their services relating to this Plan. Any expenses
properly incurred by the Compensation Committee incident to this Plan, including
the cost of any bond required by applicable law, shall be paid by the Company.
          (c) The Company shall indemnify and hold harmless each member of the
Compensation Committee against and all expenses and liabilities arising out of
his or her administrative functions or fiduciary responsibilities, including any
expenses and liabilities that are caused by or result from an act or omission of
such member acting in good faith in the performance of such functions or
responsibilities. Expenses against which such member shall be indemnified
hereunder shall include the amounts of any settlement or judgment, costs,
counsel fees and related charges reasonably incurred in connection with a claim
asserted or a proceeding brought or settlement thereof.
          Section 5.06. Release of Claims. As a condition to receipt of the
benefits under this Plan, a Participant will be required to sign an agreement,
to be prepared by the Company, in which he or she releases the Company and its
successors, assigns, divisions, subsidiaries, representatives, agents, officers,
directors, stockholders and employees from any claims, demands and causes of
action relating to or arising out of the termination of his or her employment
with the Company, including any statutory claims under the Age Discrimination in
Employment Act of 1967, the Americans with Disabilities Act of 1990, the Civil
Rights Acts of 1964 and 1991 and the Texas Commission on Human Rights Act.
          Section 5.07. Assignability. The Company shall have the right to
assign this Plan and to delegate its duties and obligations hereunder; provided,
however, that no such assignment or delegation shall relieve or discharge the
Company of or from any of its obligations under this Plan. Unless otherwise
approved by the Compensation Committee, no Participant shall transfer or assign
any of his or her rights under this Plan except by will or the laws of descent
and distribution.
          Section 5.08. Consolidations, Mergers, Etc. The Company will require
any person, firm or entity which becomes its Successor to expressly assume and
agree to perform this Plan in writing, in the same manner and to the same extent
that the Company would be required to perform hereunder if no such succession
had taken place.
          Section 5.09. Successors and Assigns. This Plan shall be binding upon
and inure to the benefit of the Company and its successors and assigns. This
Plan and all rights of each Participant shall inure to the benefit of and be
enforceable by such Participant and his or her personal or legal
representatives, executors, administrators, heirs and permitted assigns. If any

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Participant should die while any amounts are due and payable to such Participant
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Plan to such Participant’s devisees, legatees
or other designees or, if there be no such devisees, legatees or other
designees, to such Participant’s estate.
          Section 5.10. Notices. All notices and other communications provided
for in this Plan shall be in writing and shall be sent, delivered or mailed,
addressed as follows: (a) if to the Company or any Subsidiary, at the Company’s
principal office address or such other address as the Company may have
designated by written notice to all Participants for purposes hereof, directed
to the attention of the General Counsel, and (b) if to any Participant, at his
or her residence address on the records of the Company or to such other address
as he or she may have designated to the Company in writing for purposes hereof.
Each such notice or other communication shall be deemed to have been duly given
or mailed by United States registered mail, return receipt requested, postage
prepaid, except that any change of notice address shall be effective only upon
receipt.
          Section 5.11. Tax Withholdings. The Company shall have the right to
deduct from any payment hereunder all taxes (federal, state or other) that it is
required to withhold therefrom.
          Section 5.12. No Employment Rights Conferred. Nothing contained in
this Plan shall (a) confer upon any Participant any right with respect to
continuation of employment with the Company or (b) subject to the rights and
benefits of any Participant hereunder, interfere in any way with the right of
the Company to terminate such Participant’s employment at any time.
          Section 5.13. Governing Law. This Plan shall be governed in accordance
with the laws of the State of Texas and applicable federal law.
          In Witness Whereof, and as conclusive evidence of the adoption of this
Plan by the Board, the Company has caused this Plan to be duly executed in its
name and behalf by its proper officer thereunto duly authorized as of the
Effective Date.

                  Sterling Chemicals, Inc.
 
           
 
  By:                       Printed Name:    
 
           
 
  Title:                  

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Exhibit A
Sterling Chemicals, Inc.
Instrument of Designation
          This Instrument Of Designation is intended to evidence the designation
by the Compensation Committee of the Board of Directors of Sterling Chemicals,
Inc., a Delaware corporation (the “Corporation”), of the undersigned employee as
a “Participant” within the meaning of that certain Fourth Amended and Restated
Key Employee Protection Plan of the Corporation, with an Applicable Multiplier
(as defined therein) of                     .
          In Witness Whereof, the Corporation has caused its duly authorized
officer to execute this Instrument of Designation effective as of the date set
forth below.

                      Dated:           Sterling Chemicals, Inc.
 
 
 
               
 
                   
 
          By:                                       Printed Name:    
 
                   
 
          Title:                          

Employee:

               
Printed Name:
       
 
 
 
   

 A-i

 

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Exhibit B
Participants as of the Effective Date

         
Name
  Applicable Multiplier
Richard K. Crump
    2.75  
Paul G. Vanderhoven
    2.00  
Kenneth M. Hale
    2.00  
John Beaver
    1.00  
Eugene Kenyon
    2.00  
Wayne R. Parker
    2.00  
John S. Land
    1.00  
Paul C. Rostek
    1.00  
Robert W. Fransham
    1.00  
Daniel R. Withers
    1.00  
Walter B. Treybig
    2.00  

 B-i