Exhibit 10.16
 
(STERLING CHEMICALS LOGO) [h79888h7988800.gif]
 
2011 Bonus Plan
 
March 2011
 

 

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

 

Sterling Chemicals, Inc.
2011 Bonus Plan
Introduction:
     Our 2011 Bonus Plan (our “Bonus Plan”) will be made up of the following two
programs (collectively, our “Bonus Programs”) that will provide eligible
salaried employees with opportunities to receive cash compensation in addition
to their salaries:

  •   Corporate Performance Bonus Program — pays bonuses based on our attainment
of environmental and safety goals, our achievement of specified levels of
Operating Cash Flow and on individual performance; and     •   Individual
Performance Bonus Program — pays bonuses based on individual performance,
irrespective of our environmental or safety performance or the amount of
Operating Cash Flow we earn during the year.

All of our salaried personnel (each an “Eligible Employee”), whether exempt or
non-exempt and including our President and Chief Executive Officer, our Senior
Vice Presidents and our Vice Presidents that report directly to one of our
Senior Vice Presidents (our “Executives”), are eligible to receive cash bonuses
under our Bonus Plan. To be paid a bonus, an Eligible Employee must be employed
by us at the time bonuses are paid, unless the employee has retired, died or
become disabled, in which event a pro rata bonus payment will be made based on
full months of service for the relevant year. For purposes of our Bonus Plan,
“retired” means the voluntary cessation of employment with us after attaining
age 55 with at least five years of services or the voluntary cessation of
employment with us after attaining age 65 (with no service restriction), and
“disabled” has the meaning set forth in our disability plan.
Corporate Performance Bonus Program:
General.
     Under our Corporate Performance Bonus Program, the amount of bonus that
each of our Eligible Employees is eligible to earn for any year is determined by
the Eligible Employee’s Bonus Target and performance during that year relative
to our corporate performance goals and his or her individual performance goals.
An Eligible Employee’s “Bonus Target” is a stated percentage of the Eligible
Employee’s annual base salary (set by our Compensation Committee or our Board of
Directors in the case of our Executives and by our Human Resources &
Administration Department in the case of all of our other Eligible Employees).
The maximum amount of bonus that can be earned by an Eligible Employee for any
year is 130% of his or her Bonus Target for performance relative to corporate
performance goals and 70% of his or her Bonus Target for performance relative to
individual performance goals. Attaining threshold level of Operating Cash Flow
will be required for any bonus to be paid relative to corporate performance
goals.

 

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

 

Corporate Performance Goals
     Our corporate performance goals under our Corporate Performance Bonus
Program are based on:

  •   the number of Employee OSHA recordable injuries experienced during the
year;     •   the number of Contractor OSHA recordable injuries experienced
during the year;     •   the number of environmental and process safety
management incidents experienced during the year (subject to meeting all process
safety management regulations); and     •   the amount of “Operating Cash Flow”
earned during the year.

Our Board of Directors has set threshold, target and maximum goals for each of
these categories for performance in 2011 as follows:

                                  Goal   Threshold   Target   Maximum    
Employee OSHA Recordable Injuries(1)
    2       1       0       10 %
Contractor OSHA Recordable Injuries(1)
    2       1       0       10 %
Environmental and Process Safety Incidents(1)(2)
    3       2       1       10 %
Operating Cash Flow(3)
    $(1.0)M     $ 10.0M     $ 25.0M       70 %

 

(1)   No credit if incident results in a fine   (2)   • Environmental Incident
defined as:  

-   A release of chemicals that results in a Superfund reportable event;   -  
Any other environmental incident that requires immediate notification to state
or federal agencies (e.g., fire/explosion with potential impact outside the
facility); or   -   A violation resulting in a Notice of Enforcement that is not
resolved administratively.  

•   Process Safety Incident defined as an incident in which a significant fire,
explosion, chemical release or injury occurred due to the direct involvement of
a chemical process. This includes a fire or explosion causing more than $50K in
direct cost to Sterling, a chemical release to the environment which impacts the
community or a serious injury attributed to such an event resulting in at least
one lost work day.   •   All Process Safety Management regulations must be met
to qualify.   •   All incidents caused by Acts of God are excluded.   (3)
Operating Cash Flow means operating cash flow (from our cash flow statements)
minus maintenance capital expenditures and proceeds from the sale of non-PP&E
assets (excluding net interest payments, effects of bond repurchases, pension
contributions and any costs incurred by any special committees of our Board).

     At the end of each calendar year, the amount of bonus potentially payable
to each Eligible Employee for performance relative to our corporate performance
goals is determined by

-2-

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

 

multiplying that Eligible Employee’s Bonus Target times the aggregate percentage
earned during that year for performance relative to our corporate performance
goals times 65%. The aggregate percentage is determined using the table above
with the relevant percentage from the table being multiplied by 0.5 if Threshold
level is achieved, 1.0 if Target level is achieved and 2.0 if Maximum level is
achieved. Performance relative to our Operating Cash Flow goals that is in
between the established levels is prorated on a straight line basis. As an
example, if an Eligible Employee has a base salary of $50,000 and Bonus Target
of 10% and we achieved Target level for Operating Cash Flow and Maximum level
for Employee OSHA Recordable Injuries, Contractor OSHA Reportable Injuries and
Environmental and Process Safety Incidents, the Eligible Employee’s potential
bonus for performance relative to our corporate performance goals would be:

  •   $50,000 times 10% (or $5,000) times aggregate percentage earned during the
year times 0.65, with the aggregate percentage being:

             
Employee OSHA Recordable Injuries
    20 %   (10% @ 2X = 20%)
Contractor OSHA Recordable Injuries
    20 %   (10% @ 2X = 20%)
Environmental and Process Safety Incidents
    20 %   (10% @ 2X = 20%)
Operating Cash Flow
    70 %   (70% @ 1X = 70%)
 
           
Aggregate Percentage
    130 %    

As a result, the Eligible Employee in the example would be eligible for a bonus
for performance relative to our corporate performance goals of up to $5,000
times 130% times 0.65, or $4,225. On the other hand, if the Threshold level of
Operating Cash Flow was not achieved, the Eligible Employee is not eligible for
any bonus relative to our corporate performance goals regardless of the safety
and environmental metric results.
Individual Performance Goals.
     At the end of each calendar year, the amount of bonus potentially payable
to each Eligible Employee for performance relative to their individual
performance goals is determined by multiplying that Eligible Employee’s Bonus
Target times the aggregate percentage earned during that year for performance
relative to his or her individual performance goals times 35%. As is the case
for our corporate performance goals, the relevant percentage for each individual
performance goal will be multiplied by 0.5 if Threshold level is achieved, 1.0
if Target level is achieved and 2.0 if Maximum level is achieved and those
percentages will then be added together (with the multiplier for the relevant
percentage pro-rated for performance between any two levels on a straight-line
basis for performance goals based on arithmetic calculations).
     Continuing with the example given above, if the same Eligible Employee had
four individual performance goals, with each weighted at 25%, and Target level
was achieved for two individual performance goals and Maximum level was achieved
for two individual performance goals, his or her potential bonus based on his or
her performance relative to his or her individual performance goals would be:

-3-

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

 

      $50,000 times 10% (or $5,000) times aggregate percentage earned during the
year times 0.35, with aggregate percentage being calculated as follows:

             
Goal #1
    25 %   (25% @ 1.0 = 25%)
Goal #2
    25 %   (25% @ 1.0 = 25%)
Goal #3
    50 %   (25% @ 2.0 = 50%)
Goal #4
    50 %   (25% @ 2.0 = 50%)
 
           
Aggregate Percentage
    150 %    

As a result, the Eligible Employee in the example would be eligible to receive a
bonus for his or her performance relative to his or her individual performance
goals of up to $5,000 times 150% times 0.35 (or $2,625) and a total potential
bonus of up to $6,850 ($4,225 based on performance relative to our corporate
performance goals and $2,625 based on performance relative to his or her
individual performance goals). However, if threshold Operating Cash Flow was not
met, the Eligible Employee is eligible to receive a bonus of only $2625.
General Terms:
Total Bonus Calculation and Payment.
     At the end of each year, our performance under each of our corporate
performance goals will be determined. Our financial results will determine the
amount of Operating Cash Flow earned during that year and, consequently, whether
a bonus will be paid under our Corporate Performance Bonus Program or under our
Individual Performance Bonus Program. At the same time, each Eligible Employee’s
performance relative to his or her individual performance goals will be assessed
and the amount of bonus paid to that employee under our Corporate Performance
Bonus Program or Individual Performance Bonus Program, as applicable, will be
determined. If the amount of bonus (prior to any payment reductions) to be paid
to any Eligible Employee (other than employee whose rating is DM) is less than
the amount paid to each hourly employee under our Gainsharing Program, then the
amount of that Eligible Employee’s bonus will be increased to match the amount
paid under our Gainsharing Program. All bonuses will be paid to all Eligible
Employees on or before March 14 in a single lump sum after all taxes have been
withheld. The payment of a bonus does not affect any employee’s base pay in any
manner and has no impact on the amount or level of benefits under any of our
other benefit plans.
Payment Adjustments.
     The amount of bonus paid to an Eligible Employee under our Bonus Plan
assumes continued employment with us in active status throughout the year. For
purposes of our Bonus Plan, active status is made up of regular hours worked,
vacation time, jury duty, service as a witness under court subpoena, funeral
leave and military leave. Non-active status includes all other absences from
work for any reason, including illness, injury, personal business, doctor’s
appointment, excused absence, family illness, leave of absences and personal
leave, etc. Once the amount of bonus to be paid to an Eligible Employee is
determined under our Bonus Plan, that amount may be reduced if the Eligible
Employee has accumulated absences totaling at least 44 working days (352 hours
for shift workers) during the relevant year. The amount of reduction

-4-

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

 

will be 16.67% for the first 44 working days (352 hours for shift workers) of
non-active status plus an additional 8.33% reduction for each additional 22
working days (176 hours for shift workers) of non-active status during the year
for which the bonus is being paid. The amounts of bonuses paid to Eligible
Employees may also be reduced by the Executives or our Board of Directors or
Compensation Committee for various business considerations or adjusted, up or
down, based on additional individual performance factors.
     The bonus paid to any Eligible Employee under our Bonus Plan who was hired
after July 1 of the year during which performance is being assessed will be pro
rated based on the number of full months of service during that year. The amount
of bonus paid to any Eligible Employee who became eligible under our Bonus Plan
in the first half of a year due to a promotion or change in job classification
or being hired will not be pro rated due to such promotion, job reclassification
or hiring (i.e., all months of service with us during the relevant year will be
treated as if they were performed in the Eligible Employee’s most recent
position). The amount of bonus paid to any Eligible Employee who has a change is
status under our Bonus Plan on or after July 1 due to a promotion or change in
job classification will be pro rated based on the number of months of service in
the year in each status. For example, if an Eligible Employee’s salary and bonus
percentage were increased October 1 due to a promotion, 3/4s of such Eligible
Employee’s bonus would be calculated using his or her salary and bonus
percentage prior to such promotion and 1/4 of such Eligible Employee’s bonus
would be calculated using his or her salary and bonus percentage after such
promotion.

-5-