<PAGE>
 
                                                                   EXHIBIT 10.17
 
                              INDEMNITY AGREEMENT


        THIS INDEMNITY AGREEMENT ("Agreement") is made as of October 23, 1996,
by and between Sterling Chemicals Holdings, Inc., a Delaware corporation (the
"Company"), and ____________________ ("Indemnitee").

        WHEREAS, the Certificate of Incorporation and Bylaws of the Company
provide for the indemnification of directors, officers and employees of the
Company and its direct and indirect subsidiaries to the maximum extent permitted
from time to time under applicable law and, along with the Delaware General
Corporation Law, contemplate that the Company may enter into agreements with
respect to such indemnification; and

        WHEREAS, the Board of Directors of the Company has concluded that it is
reasonable, prudent and in the best interests of the Company's stockholders for
the Company to contractually obligate itself to indemnify certain of its
Authorized Representatives (defined below) so that they will serve or continue
to serve with greater certainty that they will be adequately protected; and

        WHEREAS, the Board of Directors of the Company has authorized the
Company, acting through the Chairman of the Board or the President, to enter
into an Indemnity Agreement with (i) each director of the Company and its direct
and indirect subsidiaries, (ii) each officer of the Company and its direct and
indirect subsidiaries, and (iii) any employee of the Company or its direct and
indirect subsidiaries as may be determined by the Chairman of the Board or the
President to be appropriate;

        NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Indemnitee hereby agree as follows:

        1.  Definitions.  For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following terms
shall have the following respective meanings:

        "Authorized Representative" means (i) a director, officer, employee,
agent or fiduciary of the Company or any Subsidiary and (ii) a person serving at
the request of the Company or any Subsidiary as a director, officer, employee,
fiduciary or other representative of another Enterprise.

        "Enterprise" means any corporation, partnership, limited liability
company, association, joint venture, trust, employee benefit plan or other
entity.

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        "Expenses" means all expenses, including (without limitation) reasonable
fees and expenses of counsel.

        "Liabilities" means all liabilities, including (without limitation) the
amounts of any judgments, fines, penalties, excise taxes and amounts paid in
settlement.

        "Proceeding" means any threatened, pending or completed claim, action
(including any action by or in the right of the Company), suit or proceeding
(whether formal or informal, or civil, criminal, administrative, legislative,
arbitrative or investigative) in respect of which Indemnitee is, was or at any
time becomes, or is threatened to be made, a party, witness, subject or target,
by reason of the fact that Indemnitee is or was an Authorized Representative or
a prospective Authorized Representative.

        "Subsidiary" means, at any time, (i) any corporation of which at least a
majority of the outstanding voting stock is owned by the Company at such time,
directly or indirectly through subsidiaries, and (ii) any other Enterprise in
which the Company, directly or indirectly, owns more than a 50% equity interest
at such time.

        2.  Interpretation.  (a) In this Agreement, unless a clear contrary
intention appears:

        (i) the singular number includes the plural number and vice versa;

        (ii) reference to any gender includes each other gender;

        (iii)  the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision;

        (iv) unless the context indicates otherwise, reference to any Section
means such Section hereof;  and

        (v) the words "including" (and with correlative meaning "include") means
including, without limiting the generality of any description preceding such
term.

        (b) The Section headings herein are for convenience only and shall not
affect the construction hereof.

        (c) No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.

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        (d) In the event of any ambiguity, vagueness or other similar matter
involving the interpretation or meaning of this Agreement, this Agreement shall
be liberally construed so as to provide to Indemnitee the full benefits
contemplated hereby.

        (e) If the indemnification to which Indemnitee is entitled as respects
any aspect of any claim varies between two or more provisions of this Agreement,
that provision providing the most comprehensive indemnification shall apply.

        3.  Limitation on Personal Liability.  To the fullest extent permitted
by applicable law, Indemnitee shall not be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a director
of the Company, provided that the foregoing shall not eliminate or limit the
liability of Indemnitee (i) for any breach of Indemnitee's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law relating to unlawful
dividend payments and unlawful stock purchases or redemptions, or (iv) for any
transaction from which Indemnitee derived an improper personal benefit.

        4.  Indemnity. (a) Subject to the following provisions of this
Agreement, the Company shall hold harmless and indemnify Indemnitee against all
Expenses and Liabilities actually incurred by Indemnitee in connection with any
Proceeding; provided, however, that no indemnity shall be paid by the Company
pursuant to this Agreement:

        (i) for amounts actually paid to Indemnitee pursuant to one or more
policies of directors and officers liability insurance maintained by the Company
or pursuant to a trust fund, letter of credit or other security or funding
arrangement provided by the Company; provided, however, that if it should
subsequently be determined that Indemnitee is not entitled to retain any such
amount, this clause (i) shall no longer apply to such amount;

        (ii) in respect of remuneration paid to Indemnitee if it shall be
determined by a final judgment or other final adjudication that payment of such
remuneration was in violation of applicable law;

        (iii)  on account of Indemnitee's conduct which is finally adjudged to
constitute willful misconduct or to have been knowingly fraudulent, deliberately
dishonest or from which the Indemnitee derives an improper personal benefit; or

        (iv) on account of any suit in which final judgment is rendered against
Indemnitee for an accounting of profits made from the sale or purchase by
Indemnitee of securities of the 

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Company pursuant to the provisions of Section 16(b) of the Securities Exchange
Act of 1934, as amended.

        (b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for only a portion (but not, however, for the
total amount) of any Expenses or Liabilities actually incurred by Indemnitee in
connection with any Proceeding, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses and Liabilities to which Indemnitee
is entitled.  If the indemnification provided for herein in respect of any
Expenses or Liabilities actually incurred by Indemnitee in connection with any
Proceeding is finally determined by a court of competent jurisdiction to be
prohibited by applicable law, then the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount paid or payable by Indemnitee as a
result of such Expenses and Liabilities in such proportion as is appropriate to
reflect (i) the relative benefits received by the Company on the one hand and
Indemnitee on the other hand from the events, circumstances, conditions,
happenings, actions or transactions from which such Proceeding arose, (ii) the
relative fault of the Company (including its other Authorized Representatives)
on the one hand and of Indemnitee on the other hand in connection with the
events, circumstances and happenings which resulted in such Expenses and
Liabilities, such relative fault to be determined by reference to, among other
things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the events, circumstances and/or happenings
resulting in such Expenses and Liabilities, and (iii) any other relevant
equitable considerations, it being agreed that it would not be just and
equitable if such contribution were determined by pro rata or other method of
allocation which does not take into account the foregoing equitable
considerations.

        (c) The indemnification provided herein shall be applicable only to
Proceedings commenced after the date hereof, regardless, however, of whether
they arise from acts, omissions, facts or circumstances occurring before or
after the date hereof.

        (d) The indemnification provided herein shall be applicable whether or
not negligence of Indemnitee is alleged or proved, and regardless of whether
such negligence be contributory or sole.

        (e) Amounts paid by the Company to Indemnitee under this Section 4 are
subject to refund by Indemnitee as provided in Section 8.

        5.  Notification and Defense of Claims. (a) Promptly after the receipt
by Indemnitee of notice of the commencement of any Proceeding, Indemnitee will,
if a claim in respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement of such Proceeding; provided,
however, that the omission to so notify the Company will not relieve the Company
(i) from any liability which it may have to Indemnitee under this Agreement
unless, and then only to the extent that, such omission results in insufficient
time being available to permit the Company or its counsel to effectively defend

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against or make timely response to any loss, claim, damage, liability or expense
resulting from such Proceeding or otherwise has a material adverse effect on the
Company's ability to promptly deal with such loss, claim, damage, liability or
expense or (ii) from any liability which it may have to Indemnitee otherwise
than under this Agreement.

        (b) The following provisions shall apply with respect to any such
Proceeding as to which Indemnitee notifies the Company of the commencement
thereof:

        (i) The Company shall be entitled to participate therein at its own
expense.

        (ii) Except as otherwise provided below, to the extent it may elect to
do so, the Company (jointly with any other indemnifying party similarly
notified) will be entitled to assume the defense thereof, with counsel of its
own selection reasonably satisfactory to Indemnitee.  After notice from the
Company to Indemnitee of its election so to assume the defense thereof, the
Company will not be liable to Indemnitee under this Agreement for any Expenses
subsequently incurred by Indemnitee in connection with the defense of such
Proceeding other than reasonable costs of investigation or as otherwise provided
below.  Indemnitee shall have the right to employ separate counsel in such
Proceeding but the fees and expenses of such counsel incurred after notice from
the Company of its assumption of the defense thereof shall be at the expense of
Indemnitee unless (1) the employment of separate counsel by Indemnitee has been
authorized by the Company; (2) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of the defense of such Proceeding; or (3) the Company shall not in fact
have employed counsel to assume the defense of such Proceeding, in each of which
cases the reasonable fees and expenses of Indemnitee's counsel shall be borne by
the Company.  The Company shall not be entitled to assume the defense of any
Proceeding brought by or on behalf of the Company or as to which Indemnitee
shall have made the conclusion provided for in (2) above.  Nothing in this
subparagraph (ii) shall affect the obligation of the Company to indemnify
Indemnitee against Expenses and Liabilities paid in settlement for which it is
otherwise obligated hereunder.

        (iii)  The Company shall not be liable to indemnify Indemnitee under
this Agreement for any amounts paid in settlement of any Proceedings or claims
effected without its prior written consent.  The Company shall not settle any
Proceeding or claim in any manner which would impose any penalty or limitation
on Indemnitee without Indemnitee's prior written consent.  Neither the Company
nor Indemnitee will unreasonably withhold or delay its consent to any proposed
settlement.

        6.  Advancement of Expenses, etc.  If requested to do so by Indemnitee
with respect to any Proceeding, the Company shall advance to or for the benefit
of Indemnitee, prior to the final disposition of such Proceeding, the Expenses
actually incurred by Indemnitee in investigating, defending or appealing such
Proceeding.  Any judgments, fines or amounts to be paid in settlement of any
Proceeding shall also be advanced by the Company upon request by 

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Indemnitee. Advances made by the Company under this Section 6 are subject to
refund by Indemnitee as provided in Section 8.

        7.  Right of Indemnitee to Bring Suit. (a) If a claim for
indemnification or a claim for an advance under this Agreement is not paid in
full by the Company within 30 days after receipt by the Company from Indemnitee
of a written request or demand therefor, Indemnitee may bring suit against the
Company to recover the unpaid amount of the claim.  If, in any such action,
Indemnitee makes a prima facie showing of entitlement to indemnification under
this Agreement, the Company shall have the burden of proving that
indemnification is not required under this Agreement.  The only defense to any
such action shall be that indemnification is not required by this Agreement.

        (b) In the event that any action is instituted by Indemnitee to enforce
Indemnitee's rights or to collect monies due to Indemnitee under this Agreement
and if Indemnitee is successful in such action, the Company shall reimburse
Indemnitee for all Expenses incurred by Indemnitee with respect to such action.

        8.  Repayment Obligation of Indemnitee.  If the Company advances or pays
any amount to Indemnitee under Section 4, 6 or 7 and if it shall thereafter be
finally adjudicated that Indemnitee was not entitled to be indemnified hereunder
for all or any portion of such amount, Indemnitee shall promptly repay such
amount or such portion thereof, as the case may be, to the Company.  If the
Company advances or pays any amount to Indemnitee under Section 4, 6 or 7 and if
Indemnitee shall thereafter receive all or a portion of such amount under one or
more policies of directors and officers liability insurance maintained by the
Company or pursuant to a trust fund, letter of credit or other security or
funding arrangement provided by the Company, Indemnitee shall promptly repay
such amount or such portion thereof, as the case may be, to the Company.

        9.  Changes in Law.  If any change after the date of this Agreement in
any applicable law, statute or rule expands the power of the Company to
indemnify Authorized Representatives, such change shall be within the purview of
Indemnitee's rights and the Company's obligations under this Agreement.  If any
change after the date of this Agreement in any applicable law, statute or rule
narrows the right of the Company to indemnify an Authorized Representative, such
change shall, to the fullest extent permitted by applicable law, leave this
Agreement and the parties' rights and obligations hereunder unaffected.

        10. Continuation of Indemnity.  All agreements and obligations of the
Company hereunder shall continue during the period Indemnitee is an Authorized
Representative, and shall continue after Indemnitee has ceased to occupy such
position or have such relationship so long as Indemnitee shall be subject to any
possible Proceeding.

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        11. Nonexclusivity.  The indemnification and other rights provided by
any provision of this Agreement shall not be deemed exclusive of any other
rights to which Indemnitee may be entitled under (i) any statutory or common
law, (ii) the Company's certificate of incorporation, (iii) the Company's
bylaws, (iv) any other agreement or (v) any vote of stockholders or
disinterested directors or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while occupying any of the
positions or having any of the relationships referred to in this Agreement.
Nothing in this Agreement shall in any manner affect, impair or compromise any
indemnification Indemnitee has or may have by virtue of any agreement previously
entered into between Indemnitee and the Company.

        12. Severability.  If any provision of this Agreement shall be held to
be invalid, illegal or unenforceable (i) the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be in any
way affected or impaired thereby and (ii) to the fullest extent possible, the
provisions of this Agreement shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable.  Each
provision of this Agreement is a separate and independent portion of this
Agreement.

        13. Modification and Waiver.  No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties.  No waiver of any of the provisions of this Agreement shall be binding
unless executed in writing by the person making the waiver nor shall such waiver
constitute a continuing waiver.

        14. Notices.  All notices, requests, demands and other communications
hereunder shall be in writing and shall be addressed (i) if to the Company, at
its principal office address as shown on the signature page hereof or such other
address as it may have designated by written notice to Indemnitee for purposes
hereof, directed to the attention of the Secretary and (ii) if to Indemnitee, at
Indemnitee's address as shown on the signature page hereof or to such other
address as Indemnitee may have designated by written notice to the Company for
purposes hereof.  Each such notice or other communication shall be deemed to
have been duly given if (a) delivered by hand and receipted for by the party to
whom said notice or other communication shall have been directed, (b)
transmitted by facsimile transmission, at the time that receipt of such
transmission is confirmed, or (c) mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed.

        15. Governing Law.  This Agreement shall be deemed to be a contract made
under, and shall be governed by and construed and enforced in accordance with,
the internal laws of the State of Delaware without regard to principles of
conflicts of law.

        16. Heirs, Successors and Assigns.  (a)  This Agreement shall be binding
upon, inure to the benefit of and be enforceable by (i) Indemnitee and
Indemnitee's personal or legal representatives, executors, administrators,
heirs, devisees and legatees and (ii) the Company and 

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its successors and assigns. This Agreement shall not inure to the benefit of any
other person or Enterprise.

        (b) The Company agrees to require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.  As used herein, the term "Company" shall include any successor
to its business and/or assets as aforesaid which executes and delivers the
assumption and agreement provided for in this Section 16 or which otherwise
becomes bound by all terms and provisions of this Agreement by operation of law.

        ENTERED into on the day and year first above written.


                              THE COMPANY:
                              ----------- 

                              STERLING CHEMICALS HOLDINGS, INC.



                              By:
                                 ----------------------------------       
Address:  1200 Smith Street       Robert W. Roten
          Suite 1900              President and Chief Executive Officer
          Houston, Texas 77002
          Attn:  General Counsel


                              INDEMNITEE:
                              ---------- 


                              ---------------------------------
Address:  [home address]      [name]
 

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