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                                                                    EXHIBIT 10.6

                        STERLING CHEMICALS HOLDINGS, INC.
                            STERLING CHEMICALS, INC.

                 SECOND AMENDED AND RESTATED SEVERANCE PAY PLAN


                             PRELIMINARY STATEMENTS

       A.     Sterling Chemicals Holdings, Inc. and Sterling Chemicals, Inc. are
              Delaware corporations.

       B.     On March 8, 2001, the Holdings Board and the Chemicals Board (as
              such terms are defined below) approved a severance pay plan (as
              amended and restated as of July 13, 2001, the "Existing Plan").

       C.     On October 31, 2001, the United States Bankruptcy Court for the
              Southern District of Texas entered an order (the "Court Order")
              approving the Existing Plan, subject to certain modifications
              negotiated and agreed to by the Company (as defined below), the
              Official Committee of Unsecured Creditors, The Bank of New York,
              as Indenture Trustee, and the Ad Hoc Committee of holders of
              Chemicals' 12-3/8% Senior Secured Notes due 2006.

       D.     The Holdings Board and the Chemicals Board desire to formally
              amend the Existing Plan to incorporate the modifications required
              by the Court Order 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:

              "Applicable Multiplier" has the meaning specified in Section
       2.02(a).

              "Base Salary" has the meaning specified in Section 2.02(a).

              "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 Holdings or

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       any Subsidiary, including those relating to bonuses, incentive
       compensation, retirement benefits, stock options, stock ownership or
       stock awards, healthcare and medical benefits, disability benefits, death
       benefits, disability, life, accident and travel insurance, sick leave,
       vacation pay or termination pay, as amended, or any successor to any of
       such plans.

              "Change of Control" means the occurrence of any of the following
       events: (i) Holdings shall not be the surviving entity in any merger,
       consolidation or other reorganization (or survives only as a subsidiary
       of an entity other than a previously wholly-owned Subsidiary); (ii)
       Holdings or Chemicals is dissolved and liquidated; (iii) Chemicals sells,
       leases or exchanges all of its assets or a Substantial Part of its Assets
       (other than in the ordinary course of business) to any other person or
       entity (other than Holdings or another wholly-owned Subsidiary); (iv)
       Chemicals ceases to be a wholly-owned Subsidiary of Holdings for any
       reason other than a merger, consolidation or other reorganization in
       which Holdings or a wholly-owned Subsidiary is the surviving entity; (v)
       any "person" (as that term is used in Sections 13(d) and 14(d) of the
       Securities Exchange Act of 1934, as amended) other than one or more of
       the Excluded Holders, is or becomes the beneficial owner (as defined in
       Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as
       amended, except that a person will be deemed to have "beneficial
       ownership" of all shares that such person has the right to acquire,
       whether such right is exercisable immediately or only after the passage
       of time), directly or indirectly, of more than 50% of the then
       outstanding shares of Holdings' that are normally entitled to vote in the
       election of directors (based upon voting power); (vi) individuals who as
       of March 8, 2001 constituted the Holdings Board (together with any new
       directors whose election by the Holdings Board or whose nomination for
       election by the stockholders of Holdings was approved by a majority of
       the directors of Holdings then still in office who were either directors
       at the beginning of such period or whose election or nomination for
       election was previously so approved) cease for any reason to constitute a
       majority of the Holdings Board then in office; or (vii) the Company
       sells, leases or exchanges all or substantially all of the assets or
       capital securities of any of its SBUs to any other person or entity
       (other than Holdings or another wholly-owned Subsidiary); provided,
       however, that any such sale, lease or exchange shall not constitute a
       "Change of Control" for purposes of this clause (vii) with respect to any
       Participant who was not assigned to work on a full-time basis in the
       relevant SBU at the time of such sale, lease or exchange and, provided
       further, that the sale, lease or exchange of all or substantially all of
       the assets or capital securities of Sterling Fibers, Inc. or Sterling
       Chemicals Acquisitions, Inc. (or any of its direct or indirect
       subsidiaries) shall not constitute a "Change of Control" with respect to
       any Participant.

              "Chemicals" means Sterling Chemicals, Inc. and any Successor.

              "Chemicals Board" means the Board of Directors of Chemicals.

              "COBRA" means the Consolidated Omnibus Budget Reconciliation Act
       of 1985, as amended. Reference in this Plan to COBRA shall be deemed to
       include any amendments or successor provisions to COBRA and any
       regulations thereunder.


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<PAGE>

              "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 Holdings and the Subsidiaries, including
       Chemicals.

              "Compensation Committee" means the Compensation Committee of
       Holdings.

              "Disability" means, with respect to any Participant, a physical or
       mental condition of such Participant that results in such Participant
       becoming eligible for long term disability benefits under the Company's
       long term disability Benefit Plan.

              "Effective Date" means October 31, 2001.

              "Excluded Holders" means the parties, as of March 8, 2001, to that
       certain Sterling Chemicals Holdings, Inc. Stockholders Agreement dated
       effective as of August 21, 1996, as amended.

              "Existing Plan" has the meaning specified in the Preliminary
       Statements of this Plan.

              "Good Reason" means, with respect to any Participant, any of the
       following actions or failures to act, but in each case only if it occurs
       (a) on or after the date that is 180 days prior to the date on which a
       Change of Control occurs and (b) while such Participant is employed by
       Holdings or any Subsidiary, and then only if it is not consented to by
       such Participant in writing:

              (i)   a material reduction by the Company in such Participant's
                    total compensation in effect immediately prior to the
                    effective date of such reduction;

             (ii)   the failure of the Company to continue such Participant's
                    eligibility for participation in employee benefit plans,
                    programs, arrangements and practices providing benefits
                    that, in the aggregate, are at least as favorable to such
                    Participant as those provided under the Benefit Plans in
                    which he or she was a participant immediately prior to the
                    effective date of such failure;

            (iii)   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; or

             (iv)   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.


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       For purposes of this definition, any action or failure to act described
       in clauses (i) through (iv) above shall cease to be a Good Reason with
       respect to any Participant on the date which is 30 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 2.05. 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 (i) above or the aggregate value or level of any of
       such Participant's benefits for purposes of clause (ii) or (iii) 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. In case of any dispute
       regarding the amount of total compensation of a Participant or the value
       or level of a Participant's benefits, the burden of proof shall rest with
       the 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. In case of any claim that
       such firm did not act in good faith, the burden of proof shall rest with
       the person or entity claiming the absence of good faith.

              "Holdings" means Sterling Chemicals Holdings, Inc. and any
       Successor.

              "Holdings Board" means the Board of Directors of Holdings.

              "Misconduct" means, with respect to any Participant:

              (i)   the commission by such Participant of acts that are both
                    dishonest and demonstrably injurious to the Company
                    (monetarily or otherwise) in any material respect;

             (ii)   the failure of such Participant to observe and comply with
                    the Company's published policies relating to alcohol and
                    drugs, harassment or compliance with applicable laws;

            (iii)   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


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                    for more than 30 days after written notice thereof is given
                    to such Participant by Holdings or Chemicals;

             (iv)   the willful failure of such Participant to observe and
                    comply with all lawful and ethical directions and
                    instructions of the Holdings Board, any person to whom such
                    Participant reports or any person who has greater authority
                    than such Participant with respect to the relevant
                    directions or instructions;

              (v)   the 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 than 30 days;

             (vi)   the conviction of such Participant for a felony offense; or

            (vii)   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.

       If any Participant is a party to a written employment agreement with the
       Company, then clause (iv) above shall not apply to any directions or
       instructions that are contrary to or inconsistent with any of the
       positions, functions, duties or reporting responsibilities of such
       Participant as set forth in such written employment agreement or that
       violate any of such Participant's rights, privileges or immunities under
       such employment agreement. In case of any dispute regarding whether or
       not any conduct by a Participant meets any of the standards set forth in
       clauses (i) through (vii) above, the burden of proof shall rest with the
       Company.

              "Participants" means all non-union employees of the Company
       (salaried and hourly) who are based in the United States; provided,
       however, that no employee of the Company that was given notice of his or
       her termination or layoff, or proposed termination or layoff, prior to
       April 1, 2001 shall be a Participant hereunder and, provided further,
       that, except as the Compensation Committee may otherwise provide in
       writing, any individual who is not paid through the Company's payroll
       system, or who is classified by the Company for purposes of this Plan as
       an independent contractor (or some other non-common law employee
       category), shall not be a "Participant" under this Plan, notwithstanding
       such individual's subsequent or retroactive (i) payment through the
       Company's payroll system or (ii) classification or reclassification for
       tax or other purposes.

              "Pension Plans" means the Sterling Chemicals, Inc. Amended and
       Restated Salaried Employees' Pension Plan (effective as of May 1, 1996),
       as amended, and the Sterling Chemicals, Inc. Hourly Paid Employees'
       Pension Plan (effective as of May 1, 1996), as amended, or any successor
       to either of such plans.


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              "Plan" means this Second Amended and Restated Severance Pay Plan,
       as amended, supplemented or modified from time to time in accordance with
       its terms.

              "SBU" means a strategic business unit of the Company.

              "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 Holdings.

              "Substantial Part of its Assets" means (i) all or substantially
       all of the assets of the Company comprising its Texas City, Texas
       facility or (ii) all or substantially all of the assets of the Company
       comprising its pulp chemicals business.

              "Successor" means (i) with respect to all Participants, a
       successor to all or substantially all of the business, operations or
       assets of the Company or any Substantial Part of its Assets (whether
       direct or indirect, by purchase, merger, consolidation or otherwise), and
       (ii) with respect to any Participant as to whom a Change of Control is
       deemed to have occurred pursuant to clause (vii) of the definition of
       Change of Control, the person or entity to or with whom the Company sold,
       leased or exchanged all or substantially all of the assets or capital
       securities of the relevant SBU.

              "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 2.05 or the actual
       date of termination of such Participant's employment by the Company for
       any reason other than Misconduct or Disability.

              "Termination Notice" means, with respect to any Participant, a
       notice from such Participant to Holdings purporting to terminate such
       Participant's employment for Good Reason in accordance with Section 2.05.

              "Years of Service" means, with respect to any Participant, the
       number of years of service as of such Participant's Termination Date
       which is recognized by the Company for such Participant for vesting
       purposes under the Pension Plan in which such Participant participates as
       of such Participant's Termination Date; provided, however, that any
       fractional Year of Service shall be rounded up to the next full Year of
       Service.

              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.


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                                   ARTICLE II

                            Eligibility and Benefits

              Section 2.01.Eligible Employees. 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.

              Section 2.02.Description of Benefits. (a) Subject to Section 2.03,
each Participant shall be entitled to receive the benefits described below if
(i) a Change of Control occurs after April 1, 2001 and (ii) during the period
commencing 180 days prior to the date on which such Change of Control occurs and
ending 180 days after the date on which such Change of Control occurs, either
such Participant terminates or has terminated his or her employment for Good
Reason in accordance with Section 2.05 or the Company terminates or has
terminated such Participant's employment for any reason other than a termination
for Misconduct or Disability:

              (i) 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 such
       Participant's Base Salary times such Participant's Applicable Multiplier
       (the "Severance Amount"); and

             (ii) for a period of six months following such Participant's
       Termination Date, the COBRA premium required to be paid by such
       Participant for coverage under the Company's medical and dental insurance
       plans shall not exceed the regular premiums required to be paid by active
       employees for similar coverage under such plans; provided, however, that
       the benefits provided under this clause (ii) shall only be available to
       such Participant if such Participant (or his or her qualified
       beneficiaries) makes a timely COBRA election on or after such
       Participant's Termination Date to continue coverage under such medical
       and dental insurance plans and pays the regular employee premium required
       by such plans and, provided further, that during such six-month period,
       the Company shall not amend any such medical or dental insurance plan to
       decrease or restrict eligibility for the benefits available thereunder or
       terminate any such medical or dental insurance plan without establishing
       a successor plan providing benefits that are at least equal to the
       benefits provided under the terminated plan.

For purposes of this Plan, "Base Salary" means, with respect to any Participant,
such Participant's annual base salary immediately prior to the earlier of (A)
the date on which an event occurs that results in such 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, and "Applicable Multiplier" means, with respect to any Participant,
the greater of (x) 0.5 and (y) such Participant's Years of Service as of the
earlier of (1) the date on which an event occurs that results in such
Participant terminating his or her employment for


                                      -7-
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Good Reason and (2) the actual date of such Participant's termination by the
Company for any reason other than Misconduct or Disability times a fraction
having a numerator of two and a denominator of 52; provided, however, that no
Participant's Applicable Multiplier shall exceed 1.0.

              (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 such Change of Control occurred (i) while such Participant was employed
by the Company or (ii) within 180 days after such Participant's Termination Date
unless the Company terminates such Participant's employment prior to such Change
of Control and such termination was directly or indirectly related to, connected
with, in anticipation of, in furtherance of, pursuant to the terms of or during
the pendency of such Change of Control or is for the purpose of directly or
indirectly encouraging or facilitating such Change of Control.

              (c) Notwithstanding anything to the contrary contained in this
Plan, the benefits made available under this Plan to Participants expressly
exclude outplacement services and financial counseling.

              (d) Participation in this Plan is voluntary. The Company may
require that each eligible employee execute a participation agreement as a
condition to becoming a Participant hereunder. By agreeing to participate in
this Plan, or by accepting any benefits under this Plan, a Participant
unconditionally agrees for all purposes under this Plan to be bound by all of
the terms and conditions of this Plan, including the provisions of Article III
hereof.

              Section 2.03.Additional Provisions Relating to Benefits under
Sections 2.02. (a) Notwithstanding anything to the contrary contained in this
Plan, 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 ceases
to be eligible to continue group health plan coverage under COBRA.

              (b) Notwithstanding anything to the contrary contained in this
Plan, no Participant shall be entitled to receive any benefits under this Plan
in connection with any Change of Control and termination of the employment of
such Participant by the Company or a Successor if (i) the Company emerges from
bankruptcy as a reorganized entity and, in connection with such emergence,
either the Company or its Successor assumes this Plan as it pertains to such
Participant, as applicable, and (ii) prior to or immediately following such
termination, the Company or such Successor, as the case may be, offers such
Participant employment at the same job position with substantially equivalent
compensation and benefits; provided, however, that the failure or refusal of the
Company or such Successor, as applicable, to assume this Plan shall not impair
the right of any Participant to receive any benefits, or otherwise reduce or
diminish the benefits received by such Participant, pursuant to this Plan.

              (c) Notwithstanding anything to the contrary contained in this
Plan, the amount of the Severance Amount payable to any Participant under this
Plan shall be reduced, dollar for dollar, by the aggregate amount of all
separation, severance or termination payments paid or payable to such
Participant under (i) any Benefit Plan (other than this Plan and the Pension


                                      -8-
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Plans), including the Company's Amended and Restated Key Employee Protection
Plan, (ii) any agreement between such Participant and the Company or (iii) any
applicable law, statute, rule, regulation, order or decree (or other
pronouncement having the effect of law) of any nation or governmental authority,
including the Worker Adjustment and Retraining Notification Act.

              (d) Notwithstanding anything to the contrary contained in this
Plan, no Participant whose employment is terminated by the Company or a
Successor shall be entitled to receive his or her Severance Amount unless and
until such Participant agrees in writing that such Participant will repay to the
Company or its Successor, as the case may be, a Pro Rata Portion of any
Severance Amount received by such Participant if such Participant is offered and
accepts reemployment by the Company or its Successor within 90 days after such
Participant's Termination Date. For purposes of this Plan, "Pro Rata Portion"
means, with respect to any Participant, (i) the Severance Amount received by
such Participant times a fraction, (A) the numerator of which is the number of
days from such Participant's reemployment date to the date which is 90 days
after such Participant's Termination Date, and (B) the denominator of which is
90, minus (ii) such amount as may be required to ensure that the net after tax
amount retained by such Participant after any repayment to the Company pursuant
to this paragraph (d) is equivalent to the net after tax amount that would have
been retained by such Participant had such Participant originally received and
paid taxes on an amount equal to the Severance Amount received by such
Participant minus the amount determined under clause (i) of this definition.

              Section 2.04.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.

              Section 2.05.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
Holdings or Chemicals, which notice shall be in writing and signed by such
Participant, shall be dated the date it is given to Holdings or Chemicals, shall
specify the termination date, shall state that the termination is for a Good
Reason and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for such Good Reason.

                                   ARTICLE III

                     Claims Procedure and Dispute Resolution

              Section 3.01.Claims for Benefits. Any claim relating to benefits
under this Plan shall be submitted in writing to the Compensation Committee in
such manner as it may direct. If the Compensation Committee determines that any
claimant is not entitled to receive all or part of the benefits claimed, it will
mail or deliver written notice to such claimant of (a) its determination and the
reasons therefor, with appropriate references to pertinent Plan provisions,


                                      -9-
<PAGE>
and (b) the procedure for review of its determination. Such notice shall, if
appropriate, also explain how a claimant may perfect the claim and why
submission of additional information is necessary to do so. Such notice shall be
provided within 90 days after submission of the claim. If the claimant does not
receive notice of a decision within such 90-day period, the claimant's claim
shall be deemed denied.

              Section 3.02.Administrative Appeal. An applicant for benefits
whose claim has been denied in whole or in part, or the duly authorized
representative of such claimant, may, within 60 days after receipt of written
notice of such denial (or after the claim is deemed denied), request a review
thereof and submit to the Compensation Committee in writing such additional
information as the claimant desires. A claimant who submits a claim for review
shall have a reasonable opportunity to submit issues and comments in writing and
to review pertinent documents. The Compensation Committee will then render its
final decision with the specific reasons therefore (including references to
pertinent Plan provisions) and notify the claimant in writing of such decision
within 60 days after the submission of such request for review. If the claimant
does not receive notice of such decision within such 60-day period, the claim
for review shall be deemed denied.

              Section 3.03.Negotiation. Subject to Section 3.05, 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 or a benefit
claim for which a final administrative appeal has been denied (or deemed denied)
pursuant to Section 3.02, 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 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 3.05, either disputant may initiate
arbitration of the matter as provided in Section 3.04. All negotiations pursuant
to this Section 3.03 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 3.04.Arbitration. Subject to Section 3.05, any dispute or
controversy (a) which arises out of or relates to this Plan or a benefit claim
for which a final administrative appeal has been denied (or deemed denied)
pursuant to Section 3.02 and (b) which has not been resolved by negotiations in
accordance with Section 3.03 within 30 days of the effective date of the Dispute
Notice shall, upon the 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.


                                      -10-
<PAGE>

              Section 3.05.Exclusivity, etc. The dispute resolution procedures
set forth in Sections 3.03 and 3.04 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 unless and until
the Compensation Committee, accounting firm or employee benefits firm issues its
decision (in the case of the Compensation Committee, in accordance with Sections
3.01 and 3.02). Any such determination by the Compensation Committee or an
accounting firm or employee benefits firm shall be final and may not be
overturned unless such determination is found to be arbitrary and capricious or
an abuse of discretion. No legal action may be brought with respect to this Plan
except for the purpose of specifically enforcing the provisions of this Article
III or for the purpose of enforcing any arbitration award made pursuant to
Section 3.04.

                                   ARTICLE IV

                            Miscellaneous Provisions

              Section 4.01.Cumulative Benefits. Except as provided in Section
2.03(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 4.02.No Mitigation or Offset. 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. Except as otherwise provided in
Section 2.03(a), 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.

              Section 4.03.Amendment and Termination. (a) The Holdings Board and
the Chemicals Board shall be entitled to amend or terminate this Plan at any
time and for any reason; provided, however, that no amendment or termination 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.

              (b) Notwithstanding the foregoing, no termination of this Plan,
and no amendment to this Plan that decreases or restricts benefits or
eligibility hereunder, 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 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 during the period commencing 180 days prior the date on
which


                                      -11-
<PAGE>
any Change of Control occurs and ending 180 days after the date on which such
Change of Control occurs.

              Section 4.04.Administration. (a) The Compensation Committee is, as
respects the rights and obligations of all parties with an interest in this
Plan, given the powers, rights and duties specifically stated elsewhere in this
Plan and, in addition, is given full power and final discretionary authority to:

              (i) make determinations with respect to the administration of this
       Plan, construe and interpret its provisions, take all other actions
       deemed necessary or advisable for the proper administration of this Plan
       and determine all questions arising under this Plan, including the power
       to determine the rights or eligibility of Participants and any other
       persons, and the amounts of their benefits under this Plan, and to remedy
       ambiguities, inconsistencies or omissions;

              (ii) adopt such rules of procedure and regulations as in its
       opinion may be necessary for the proper and efficient administration of
       this Plan;

            (iii) enforce this Plan in accordance with its terms and in
       accordance with any rules of procedure and regulations adopted by the
       Compensation Committee pursuant to clause (ii) above; and

             (iv) employ agents, attorneys, accountants or other persons (who
       also may be employed by the Company), and allocate, delegate or
       reallocate to them such powers, rights and duties as the Compensation
       Committee may consider necessary or advisable to properly carry out the
       administration of this Plan; provided, however, that such allocation or
       delegation and the acceptance thereof by such agents, attorneys,
       accountants or other persons are in writing.

              (b) Subject to applicable law, any determination, construction or
interpretation of the provisions of this Plan, and any decision on any matter
within the discretion of the Compensation Committee, that is made by the
Compensation Committee in good faith shall be binding on all persons. In case of
any claim that the Compensation Committee (or any member thereof) did not act in
good faith, the burden of proof shall rest with the person or entity claiming
the absence of good faith.

              (c) 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.

              (d) 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 constituting the negligence of such member in the


                                     -12-
<PAGE>
performance of such functions or responsibilities, but excluding expenses and
liabilities that are caused by or result from such member's own gross negligence
or willful misconduct. Expenses against which such member shall be indemnified
hereunder shall include, without limitation, 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 4.05.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 Holdings, in which he or she unconditionally and irrevocably
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, but excluding, however, any claims,
demands and causes of action pertaining to (a) any benefits that are to be
provided after the date of such agreement pursuant to the terms of this Plan,
(b) such Participant's rights, if any, under the Company's Amended and Restated
Key Employee Protection Plan (as the same may hereafter be amended or modified
in accordance with its terms) or (c) such Participant's rights, if any, under
any employment agreement between such Participant and the Company.

              Section 4.06.Assignability. The Company shall have the right to
assign this Plan and to delegate its duties and obligations hereunder, but not
otherwise; provided, however, that no such assignment 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. Except as otherwise provided by law, no benefit, right or
interest of any Participant under this Plan shall be subject to pledge,
encumbrance or charge, seizure, attachment or legal, equitable or other process,
or be liable for, or subject to, debts, liabilities or other obligations.

              Section 4.07.Consolidations, Mergers, Etc. Each of Holdings and
Chemicals 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 Holdings or Chemicals, as the case may be, would be
required to perform hereunder if no such succession had taken place.

              Section 4.08.Benefit and Burden. 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
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.


                                      -13-
<PAGE>

              Section 4.09.Notices. All notices and other communications
provided for in this Plan shall be in writing and shall be sent, delivered or
mailed, addressed (a) if to Holdings, Chemicals or any other Subsidiary, at
Holdings' principal office address or such other address as Holdings may have
designated by written notice to all Participants for purposes hereof, directed
to the attention of the Treasurer, and (b) if to any Participant, at his or her
residence address on the records of Holdings or to such other address as he or
she may have designated to Holdings 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 4.10.Withholdings. The Company shall have the right to
deduct from any payment hereunder all taxes (federal, state or other) and other
payments which it is required to withhold therefrom.

              Section 4.11.No Employment Rights Conferred. Nothing contained in
this Plan shall (i) confer upon any Participant any right with respect to
continuation of employment with the Company or (ii) 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 4.12.Governing Law. This Plan shall be governed in
accordance with the laws of the State of Texas (without giving effect to
conflicts of laws principles thereof) and applicable federal law.

              IN WITNESS WHEREOF, and as conclusive evidence of the adoption of
this Plan by the Holdings Board and the Chemicals Board, Holdings and Chemicals
have each caused this Plan to be duly executed in its name and behalf by its
proper officer thereunto duly authorized as of March 8, 2001.

                                        STERLING CHEMICALS HOLDINGS, INC.



                                        By:
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                                        Printed Name:
                                                     --------------------------
                                        Title:
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                                        STERLING CHEMICALS, INC.



                                        By:
                                           ------------------------------------
                                        Printed Name:
                                                     --------------------------
                                        Title:
                                              ---------------------------------


                                      -14-