<PAGE>
 
                                                                    EXHIBIT 10.6
 
                            STERLING CHEMICALS ESOP
<PAGE>
 
                               TABLE OF CONTENTS
 
Section                                         Page
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ARTICLE I 
     DEFINITIONS.................................I-1
 
ARTICLE II
     ADMINISTRATION.............................II-1
     2.1   ASSIGNMENT AND DESIGNATION OF 
                ADMINISTRATIVE AUTHORITY........II-1
     2.2   ALLOCATION AND DELEGATION OF 
                RESPONSIBILITIES................II-1
     2.3   POWERS AND DUTIES OF THE 
                ADMINISTRATOR...................II-2
     2.4   RECORDS AND REPORTS..................II-3
     2.5   AUDIT................................II-3
     2.6   APPOINTMENT OF ADVISORS..............II-4
     2.7   INFORMATION FROM EMPLOYER............II-4
     2.8   PAYMENT OF EXPENSES..................II-4
     2.9   ACTIONS BY ADMINISTRATOR.............II-4
     2.10  CLAIMS PROCEDURE.....................II-5
     2.11  CLAIMS REVIEW PROCEDURE..............II-5
 
ARTICLE III
     ELIGIBILITY...............................III-1
     3.1   CONDITIONS OF ELIGIBILITY...........III-1
     3.2   EFFECT OF PARTICIPATION UPON THE 
                ACCEPTANCE OF ANY BENEFITS 
                UNDER THIS PLAN................III-1
     3.3   DETERMINATION OF ELIGIBILITY........III-1
     3.4   TERMINATION OF ELIGIBILITY..........III-1
     3.5   OMISSION OF ELIGIBLE EMPLOYEE.......III-1
     3.6   INCLUSION OF INELIGIBLE EMPLOYEE....III-1
 
ARTICLE IV
     CONTRIBUTION AND ALLOCATION................IV-1
     4.1   EMPLOYER'S CONTRIBUTION..............IV-1
     4.2   TIME OF PAYMENT OF EMPLOYER'S 
                CONTRIBUTION....................IV-1
     4.3   ALLOCATION OF CONTRIBUTION, 
                FORFEITURES AND EARNINGS........IV-1
     4.4   MAXIMUM ANNUAL ADDITIONS.............IV-5
     4.5   ADJUSTMENT FOR EXCESSIVE ANNUAL 
                ADDITIONS.......................IV-9
     4.6   DIRECTED DIVERSIFICATION............IV-10
     4.7   SUSPENSE ACCOUNT....................IV-11
 


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ARTICLE V
     FUNDING AND INVESTMENT POLICY...............V-1
     5.1   INVESTMENT POLICY.....................V-1
     5.2   APPLICATION OF CASH...................V-1
     5.3   TRANSACTIONS INVOLVING COMPANY STOCK..V-1
     5.4   LOANS TO THE TRUST....................V-2
 
ARTICLE VI
     VALUATIONS.................................VI-1
     6.1   VALUATION OF THE TRUST FUND..........VI-1
     6.2   METHOD OF VALUATION..................VI-1
 
ARTICLE VII
     DETERMINATION AND DISTRIBUTION OF 
                BENEFITS.......................VII-1
     7.1   BENEFITS UPON RETIREMENT............VII-1
     7.2   BENEFITS UPON DEATH.................VII-1
     7.3   BENEFITS UPON DISABILITY............VII-2
     7.4   BENEFITS UPON TERMINATION...........VII-2
     7.5   DISTRIBUTION OF BENEFITS............VII-5
     7.6   HOW PLAN BENEFITS WILL BE 
                DISTRIBUTED....................VII-7
     7.7   DISTRIBUTION FOR MINOR BENEFICIARY..VII-9
     7.8   LOCATION OF PARTICIPANT OR 
                BENEFICIARY UNKNOWN............VII-9
     7.9   RIGHT OF FIRST REFUSAL..............VII-9
     7.10  STOCK CERTIFICATE LEGEND...........VII-10
     7.11  PUT OPTION.........................VII-10
     7.12  NONTERMINABLE PROTECTIONS AND 
                RIGHTS........................VII-12
     7.13  LIMITATIONS ON BENEFITS AND 
                DISTRIBUTIONS.................VII-12
     7.14  PAYMENT OF DISTRIBUTION DIRECTLY TO
                ELIGIBLE RETIREMENT PLAN......VII-13
     7.15  30-DAY WAIVER......................VII-14
 
ARTICLE VIII
     TRUSTEE..................................VIII-1
     8.1   BASIC RESPONSIBILITIES OF THE 
                TRUSTEE.......................VIII-1
     8.2   VOTING COMPANY STOCK...............VIII-1
 
ARTICLE IX
     AMENDMENT, TERMINATIONS, AND MERGERS.......IX-1
     9.1   AMENDMENT............................IX-1
     9.2   TERMINATION..........................IX-1
     9.3   MERGER OR CONSOLIDATION..............IX-2



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ARTICLE X
     MISCELLANEOUS.............................. X-1
     10.1  PARTICIPANT'S RIGHTS..................X-1
     10.2  ALIENATION............................X-1
     10.3  CONSTRUCTION OF PLAN..................X-1
     10.4  GENDER AND NUMBER.....................X-1
     10.5  LEGAL ACTION..........................X-2
     10.6  PROHIBITION AGAINST DIVERSION OF 
                FUNDS............................X-2
     10.7  BONDING...............................X-2
     10.8  RECEIPT AND RELEASE FOR PAYMENTS......X-3
     10.9  ACTION BY THE EMPLOYER................X-3
     10.10 NAMED FIDUCIARIES AND ALLOCATION OF 
                RESPONSIBILITY...................X-3
     10.11 HEADINGS..............................X-3
     10.12 APPROVAL BY INTERNAL REVENUE SERVICE..X-3
     10.13 UNIFORMITY............................X-4
     10.14 SECURITIES AND EXCHANGE COMMISSION 
                APPROVAL.........................X-4
     10.15 INDEMNIFICATION.......................X-4
     10.16 CONTROLLING LAW.......................X-4
 
ARTICLE XI
     PARTICIPATING EMPLOYERS....................XI-1
     11.1  ADOPTION BY OTHER EMPLOYERS..........XI-1
     11.2  REQUIREMENTS OF PARTICIPATING 
                EMPLOYERS.......................XI-1
     11.3  DESIGNATION OF AGENT.................XI-2
     11.4  EMPLOYEE TRANSFERS...................XI-2
     11.5  PARTICIPATING EMPLOYER'S 
                CONTRIBUTION....................XI-2
     11.6  AMENDMENT............................XI-2
     11.7  DISCONTINUANCE OF PARTICIPATION......XI-2
     11.8  ADMINISTRATOR'S AUTHORITY............XI-3
     11.9  PARTICIPATING EMPLOYER CONTRIBUTION 
                FOR AFFILIATE...................XI-3
 
ARTICLE XII
     TOP-HEAVY STATUS..........................XII-1
     12.1  ARTICLE CONTROLS....................XII-1
     12.2  DEFINITIONS.........................XII-1
     12.3  TOP-HEAVY STATUS....................XII-2
     12.4  TERMINATION OF TOP-HEAVY STATUS.....XII-3
     12.5  EFFECT OF ARTICLE...................XII-3



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                            STERLING CHEMICALS ESOP


                              W I T N E S S E T H:
                              - - - - - - - - - - 

          WHEREAS, the Company desires to recognize the contributions employees
of the Employers will make to the successful operation of its parent corporation
and to reward such contributions by means of an employee stock ownership plan
for those employees who qualify as Participants hereunder; and

          WHEREAS, contributions to the Plan will be made by the Employers and
such contributions made to the Plan's trust will be invested primarily in
Company Stock;

          NOW, THEREFORE, as of the Effective Date the Company hereby
establishes this ESOP for the exclusive benefit of its Participants and their
Beneficiaries under the following terms:
<PAGE>
 
                                   ARTICLE I
                                  DEFINITIONS

     1.1  "Act" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.

     1.2  "Administrator" means the person designated by the Chief Executive
Officer of the Company pursuant to Section  to administer the Plan or, in the
absence of any such designation, the Company.

     1.3  "Affiliated Employer" means the Employer and any corporation which is
a member of a controlled group of corporations (as defined in Code Section
414(b)) which include the Employer; any trade or business (whether or not
incorporated) which is under common control (as defined in Code Section 414(c))
with the Employer; any organization (whether or not incorporated) which is a
member of an affiliated service group (as defined in Code Section 414(m)) which
includes the Employer; and any other entity required to be aggregated with the
Employer pursuant to Regulations under Code Section 414(o).

     1.4  "Anniversary Date" means the last day of each Plan Year.

     1.5  "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
7.2 and 7.6.

     1.6  "Benefit Commencement Date" means with respect to each Participant or
Beneficiary, the first date on which all events have occurred which entitle such
Participant or Beneficiary to such benefits.

     1.7  "Code" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.

     1.8  "Company" means STX Chemicals Corp., to be renamed Sterling Chemicals,
Inc. on the Effective Date (or its successor).

     1.9  "Company Stock" means common stock issued by STX Acquisition Corp., to
be renamed Sterling Chemicals Holding, Inc. ("Holdco"), (or by an Employer)
which is readily tradeable on an established securities market.  If there is no
common stock which meets the foregoing requirement, the term "Company Stock"
means common stock issued by Holdco (or by an Employer) having a combination of
voting power and dividend rights equal to or in excess of: (A) that class of
common stock of Holdco (or of an Employer) having the greatest voting power, and
(B) that class of stock of the Employer (or of any other such corporation)
having the greatest dividend rights.  Preferred Stock shall be deemed to be
"Company Stock" if such stock is convertible at any time into stock which
constitutes "Company Stock" hereunder and if such conversion is at a conversion
price which (as of the date of the acquisition by the Trust) is reasonable.

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     1.10 "Company Stock Account" means the account of a Participant which is
credited with the shares of Company Stock purchased and paid for by the Trust
Fund or contributed to the Trust Fund.

     1.11 "Compensation" with respect to any Participant means such
Participant's base Compensation (before any Employee elective salary reductions
pursuant to a Section 125 or 401(k) plan of the Employers) paid from the
Employers for that portion of the Plan Year during which he is an Eligible
Employee and a Participant in the Plan and shall not include any other forms of
compensation, including, without limitation, severance pay, overtime or profit
sharing amounts.

     In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, the annual
Compensation of each Employee taken into account under the Plan shall not exceed
the "OBRA '93 Annual Compensation Limit."  The "OBRA '93 Annual Compensation
Limit" is $150,000, as adjusted for increases in the cost of living in
accordance with Code Section 401(a)(17)(B).  The cost of living adjustment in
effect for a calendar year applies to any period, not exceeding 12 months, over
which Compensation is determined ("Determination Period") beginning in such
calendar year.  If a Determination Period consists of fewer than 12 months, the
"OBRA '93 Annual Compensation Limit" will be multiplied by a fraction, the
numerator of which is the number of months in the Determination Period, and the
denominator of which is 12.  Any reference in this Plan to the limitation under
Code Section 401(a)(17) shall mean the "OBRA '93 Annual Compensation Limit" set
forth in this Section.

     1.12 "Current Obligations" means Trust obligations arising from extension
of credit to the Trust and payable in cash within one year from the date an
Employer Contribution is due.

     1.13 "Effective Date" means date of the closing of the acquisition of "old"
Sterling Chemicals, Inc. by STX Acquisition Corp.

     1.14 "Eligible Employee" means any Employee of an Employer who (1) is not
(i) a Leased Employee or (ii) a nonresident alien and (2) has satisfied the
provisions of Section 3.1; provided, however, Employees whose employment is
governed by the terms of a collective bargaining agreement between employee
representatives (within the meaning of Code Section 7701(a)(46)) and the
Employer will not be eligible to participate in this Plan unless such agreement
expressly provides for such coverage in this Plan.

     1.15 "Employee" means any person who is a common law employee of the
Employer or an Affiliated Employer.  Employee shall also include Leased
Employees, except when they are not required to be treated as employees for Plan
purposes by the Code.

     1.16 "Employer" means the Company and any Participating Employer (as
defined in Section 11.1) which shall adopt this Plan, and any successor which
shall maintain this Plan.

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     1.17 "Employer Contributions" means the Employer's contributions to the
Plan pursuant to Section 4.1(a).

     1.18 "ESOP" means an employee stock ownership plan that meets the
requirements of Code Section 4975(e)(7) and Regulations 54.4975-11.  This Plan
is intended to be an ESOP.

     1.19 "Exempt Loan" means a loan made to the Plan by a disqualified person
or a loan to the Plan which is guaranteed by a disqualified person and which
satisfies the requirements of Section 2550.408b-3 of the Department of Labor
Regulations, Section 54.4975-7(b) of the Treasury regulations and Section 5.4
hereof.

     1.20 "Family Member" means an individual described in Code Section
414(q)(6)(B).

     1.21 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan.

     1.22 "Forfeiture" means that portion of a Participant's Account that is not
Vested in accordance with the provisions of Section 7.4, on account of the
Participant's termination of employment before full vesting.

     1.23 "Former Participant" means a person who has been a Participant, but
who has ceased to be a Participant for any reason.  For purposes of Section
1.29, a "Former Participant" shall be treated as a Highly Compensated
Participant if such "Former Participant" was a Highly Compensated Participant
when he separated from service with the Employer or was a Highly Compensated
Participant at any time after attaining age 55.

     1.24 "415 Compensation" means compensation as defined in Section 4.4(e).

     1.25 "Highly Compensated Employee" means any Employee or former Employee
who is a highly compensated employee as defined in Code Section 414(q) and the
Regulations thereunder. Generally, any Employee or former Employee is considered
a Highly Compensated Employee if such Employee or former Employee performed
services for the Employer during the "determination year" and is one or more of
the following groups:

     (a) Employees who at any time during the "determination year" or "look-back
year" were "five percent owners" as defined in Section 1.29(c).

     (b) Employees who received "415 Compensation" during the "look-back year"
from the Employer in excess of $75,000.  In determining whether an individual
has "415

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<PAGE>
 
Compensation" of more than $75,000, "415 Compensation" from each employer
required to be aggregated under Code Sections 414(b), (c), (m) and (o) shall be
taken into account.

     (c) Employees who received "415 Compensation" during the "look-back year"
from the Employer in excess of $50,000 and were in the top-paid group of
Employees for the Plan Year. An Employee is in the top-paid group of Employees
for any Plan Year if such Employee is in the group consisting of the top 20% of
the Employees when ranked on the basis of "415 Compensation" paid during the
Plan Year. In determining whether an individual has "415 Compensation" of more
than $50,000, "415 Compensation" from each employer required to be aggregated
under Code Section 414(b), (c), (m) and (o) shall be taken into account.

     (d) Employees who during the "look-back year" were officers as defined in
Section 1.29(a) and received "415 Compensation" during the "look-back year" from
the Employer greater than 50% of the limit in effect under Code Section
415(b)(1)(A) for any such Plan Year. The number of officers shall be limited to
the lesser of (i) 50 employees; or (ii) the greater of 3 employees or 10% of all
employees. For the purpose of determining the number of officers, the following
Employees shall be excluded:

         (1) Employees with less than six months of service;

         (2) Employees who normally work less than 17 1/2 hours per week;

         (3) Employees who normally work less than six months during a year; and

         (4) Employees who have not yet attained age 21.

     However, such Employees shall still be considered for the purpose of
identifying the particular Employees who are officers.  If the Employer does not
have at least one officer whose annual "415 Compensation" is in excess of 50% of
the Code Section 415(b)(1)(A) limit, then the highest paid officer of the
Employer will be treated as a Highly Compensated Employee.

     (e) Employees who are in the group consisting of the 100 Employees paid the
greatest "415 Compensation" during the "determination year" and are also
described in (b), (c) or (d) above when these paragraphs are modified to
substitute "determination year" for "look-back year."

     The "look-back year" shall be the calendar year ending with or within the
Plan Year for which testing is being performed, and the "determination year" (if
applicable) shall be the period of time, if any, that extends beyond the "look-
back year" and ends on the last day of the Plan Year for which testing is being
performed (the "lag period").  If the "lag period" is less than twelve months

                                      I-4
<PAGE>
 
long, the threshold amounts specified in (b), (c), and (d) above shall be
prorated based upon the number of months in the "lag period."

     For purposes of this Section, the determination of "415 Compensation" shall
be based only on "415 Compensation" which is actually paid and shall be made by
including amounts which are contributed by the Employer pursuant to a salary
reduction agreement and which are not includible in the gross income of the
Participant under Code Sections 125, 402(e)(3) or 402(g) and Employee
contributions described in Code Section 414(h)(2) that are treated as Employer
contributions. Additionally, the dollar threshold amounts specified in (b) and
(c) above shall be adjusted at such time and in such manner as is provided in
Regulations.  In the case of such an adjustment, the dollar limits which shall
be applied are those for the calendar year in which the "determination year" or
"look-back year" begins.

     In determining who is a Highly Compensated Employee, Employees who are non-
resident aliens and who received no earned income (within the meaning of Code
Section 911(d)(2)) from the Employer constituting United States source income
within the meaning of Code Section 861(a)(3) shall not be treated as Employees.
Additionally, all Affiliated Employers shall be taken into account as a single
employer and Leased Employees within the meaning of Code Sections 414(n)(2) and
414(o)(2) shall be considered Employees unless such Leased Employees are covered
by a plan described in Code Section 414(n)(5) and are not covered in any
qualified plan maintained by the Employer.  The exclusion of Leased Employees
for this purpose shall be applied on a uniform and consistent basis for all of
the Employer's retirement plans

     1.26 "Highly Compensated Participant" means any Highly Compensated Employee
who is eligible to participate in the Plan.

     1.27 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
or an Affiliated Employer for the performance of duties during the applicable
computation period; (2) each hour for which an Employee is directly or
indirectly compensated or entitled to compensation by the Employer or an
Affiliated Employer (irrespective of whether the employment relationship has
terminated) for reasons other than performance of duties (such as vacation,
holidays, sickness, jury duty, disability, lay-off, military duty, or leave of
absence) during the applicable computation period; and (3) each hour for which
back pay is awarded or agreed to by the Employer or Affiliated Employer without
regard to mitigation of damages.  An Employee shall be credited with 95 Hours of
Service for each semimonthly period the Employee is credited with at least one
Hour of Service.

     Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's

                                      I-5
<PAGE>
 
compensation, or unemployment compensation or disability insurance laws; (iii)
Hours of Service are not required to be credited for a payment which solely
reimburses an Employee for medical or medically related expenses incurred by the
Employee; and (iv) Hours of Service recognized by "old" Sterling Chemicals, Inc.
for purposes of its qualified ESOP immediately prior to the Effective Date shall
be recognized under this Plan.

     For purposes of this Section, a payment shall be deemed to be made by or
due from the Employer or Affiliated Employer regardless of whether such payment
is made by or due from the Employer directly, or indirectly through, among
others, a trust fund, or insurer, to which the Employer or Affiliated Employer
contributes or pays premiums and regardless of whether contributions made or due
to the trust fund, insurer, or other entity are for the benefit of particular
Employees or are on behalf of a group of Employees in the aggregate.

     An Hour of Service must be counted for the purpose of determining a Year of
Service, a 1-Year Break in Service, and employment commencement date (or
reemployment commencement date).  The provisions of Department of Labor
regulations 2530.200b-2(b) and (c) are incorporated herein by reference.

     1.28 "Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility
to the Plan in writing.  Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company.

     1.29 "Key Employee" means an Employee as defined in Code Section 416(i) and
the Regulations thereunder.  Generally, any Employee or Former Employee (as well
as each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year or any of the preceding four Plan Years, has been included
in one of the following categories:

          (a) an officer of the Employer (as that term is defined within the
    meaning of the Regulations under Code Section 416) having annual "415
    Compensation" greater than 50% of the amount in effect under Code Section
    415(b)(1)(A) for any such Plan Year;

          (b) one of the ten Employees having annual "415 Compensation" from the
    Employer for a Plan Year greater than the dollar limitation in effect under
    Code Section 415(c)(1)(A) for the calendar year in which such Plan Year ends
    and owning (or considered as owning within the meaning of Code Section 318)
    both more than one-half percent interest and the largest interests in the
    Employer;

          (c) a "five percent owner" of the Employer.  "Five percent owner"
    means any person who owns (or is considered as owning within the meaning of
    Code Section 318) more than 5% of the outstanding stock of the Employer or
    stock possessing more than 5% of the total combined voting power of all
    stock of the Employer, or, in the case of an unincorpo rated business, any
    person who owns more than 5% of the capital or profits interest in the

                                      I-6
<PAGE>
 
     Employer. In determining percentage ownership hereunder, Employers that
     would otherwise be aggregated under Code Sections 414(b), (c), (m) and (o)
     shall be treated as separate employers; or

          (d) a "one percent owner" of the Employer having an annual "415
     Compensation" from the Employer of more than $150,000. "One percent owner"
     means any person who owns (or is considered as owning within the meaning of
     Code Section 318) more than 1% of the outstanding stock of the Employer or
     stock possessing more than 1% of the total combined voting power of all
     stock of the Employer, or, in the case of an unincorporated business, any
     person who owns more than 1% of the capital or profits interest in the
     Employer. In determining percentage ownership hereunder, Employers that
     would otherwise be aggregated under Code Sections 414(b), (c), (m) and (o)
     shall be treated as separate Employers. However, in determining whether an
     individual has "415 Compensation" of more than $150,000, "415 Compensation"
     from each employer required to be aggregated under Code Sections 414(b),
     (c), (m) and (o) shall be taken into account.

     For purposes of this Section, the determination of "415 Compensation" shall
be based only on "415 Compensation" which is actually paid and shall be made by
including amounts which are contributed by the Employer pursuant to a salary
reduction agreement and which are not includible in the gross income of the
Participant under Code Sections 125, 402(e)(3), 402(h), 403(b) or 457, and
Employee contributions described in Code Section 414(h)(2) that are treated as
Employer contributions.

     1.30 "Leased Employee" means any person who would be within the meaning of
Code Section 414(n)(2) unless such Leased Employee is covered by a plan
described in Code Section 414(n)(5) and such Leased Employee does not constitute
more than 20% of the recipient's nonhighly compensated work force.

     1.31 "Non-Highly Compensated Employee" means any Employee or former
Employee who is not a Highly Compensated Employee nor a Family Member.

     1.32 "Non-Highly Compensated Participant" means any Participant or Former
Participant who is neither a Highly Compensated Participant nor a Family Member.

     1.33 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.

     1.34 "Normal Retirement Age" means the later of the Participant's 65th
birthday or the fifth anniversary of the date his participation in the Plan
commenced.

     1.35 "1-Year Break in Service" means the applicable computation period of
12 consecutive months during which an Employee fails to complete more than 500
Hours of Service.  Further, solely for the purpose of determining whether a
Participant has incurred a 1-Year Break in Service, Hours

                                      I-7
<PAGE>
 
of Service shall be recognized for "authorized leaves of absence" and "maternity
and paternity leaves of absence."

     An Employee shall not be deemed to have incurred a 1-Year Break in Service
if he completes an Hour of Service within 12 months following the last day of
the month during which his employment terminated.

     "Authorized leave of absence" means an unpaid, temporary cessation from
active employment with the Employer or Affiliated Employer pursuant to an
established nondiscriminatory policy, whether occasioned by illness, military
service, or any other reason.

     A "maternity or paternity leave of absence" means an absence from work for
any period by reason of the Employee's pregnancy, birth of the Employee's child,
placement of a child with the Employee in connection with the adoption of such
child, or any absence for the purpose of caring for such child for a period
immediately following such birth or placement.  For this purpose, Hours of
Service shall be credited for the computation period in which the absence from
work begins, only if credit therefore is necessary to prevent the Employees from
incurring a 1-Year Break in Service, or, in any other case, in the immediately
following computation period.

     1.36 "Other Investments Account" means the account of a Participant which
is credited with his share of the net gain (or loss) of the Plan, Forfeitures
and Employer Contributions and which is not invested in Company Stock.

     1.37 "Participant" means any Eligible Employee who participates in the Plan
pursuant to Section 3.1.

     1.38 "Participant's Accounts" means the accounts established and maintained
by the Administrator for each Participant with respect to his total interest in
the Plan and Trust resulting from Employer Contributions, which shall include
the Company Stock Account and the Other Investment Account.

     1.39 "Plan" means this instrument, including all amendments thereto.

     1.40 "Plan Year" means the calendar year, which shall also be the
limitation year for purposes of Code Section 415; provided, however, the initial
Plan Year shall be a short year beginning on the Effective Date.

     1.41 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.

     1.42 "Retirement" means a Participant's ceasing to be an Employee (i) on or
after reaching his Normal Retirement Age or (ii) in connection with his
retirement under a defined benefit plan of the Employer that is qualified under
Code Section 401(a).

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<PAGE>
 
     1.43 "Top Heavy Plan" means a plan described in Article XII.

     1.44 "Top Heavy Plan Year" means a Plan Year during which the Plan is a Top
Heavy Plan.

     1.45 "Total and Permanent Disability" means, as determined by the
Administrator, a Participant's complete inability to substantially perform each
of the material duties of any gainful occupation for which the Participant is
reasonably qualified by reason of his education, training or experience, which
condition is reasonably expected to continue for an extended period of time.

     1.46 "Trust" means the trust established under the Trust Agreement to hold
and invest contributions made under the Plan and from which the Plan benefits
will be distributed.

     1.47 "Trust Agreement" means the agreement entered into between the Company
and the Trustee establishing a trust to hold and invest contributions made under
the Plan and from which benefits will be distributed.

     1.48 "Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.

     1.49 "Trustee" means the person or entity named as trustee herein or in any
separate trust forming a part of this Plan, and any successors.

     1.50 "Unallocated Company Stock Suspense Account" means an account
containing Company Stock acquired with the proceeds of an Exempt Loan and which
has not been released from such account and allocated to the Participants'
Company Stock Accounts.

     1.51 "Valuation Date" means the last day of each Plan Year and any other
date(s) established by the Administrator.

     1.52 "Vested" means the portion of a Participant's Account that is
nonforfeitable.

     1.53 "Year of Service" means the computation period of 12 consecutive
months, herein set forth, during which an Employee has at least 1,000 Hours of
Service.

          (a) For purposes of determining an Employee's eligibility to
     participate in the Plan, the computation period shall be the 12 consecutive
     month period beginning on the date the Employee first performs an Hour of
     Service for an Affiliated Employer; however, succeeding eligibility periods
     after the initial eligibility period shall be the Plan Year, and an
     Employee who is credited with 1,000 or more Hours of Service in both the
     initial eligibility period and the first Plan Year beginning prior to the
     anniversary of the Employee's initial period shall be credited with two
     Years of Service for eligibility purposes, and

                                      I-9
<PAGE>
 
          (b) For purposes of determining an Employee's vested percentage under
     Section 7.4, the computation period shall be the Plan Year. Notwithstanding
     the foregoing, for any short Plan Year, the determination of whether an
     Employee has completed a Year of Service shall be made in accordance with
     Department of Labor regulation 2530.203-2(c).

          (c) Years of Service recognized under the "old" Sterling Chemicals,
     Inc.'s ESOP immediately prior to the Effective Date shall be recognized
     under this Plan.

                                     I-10
<PAGE>
 
                                 ARTICLE II
                                 ADMINISTRATION

     2.1  ASSIGNMENT AND DESIGNATION OF ADMINISTRATIVE AUTHORITY

          (a) The Chief Executive Officer of the Company ("CEO") may appoint one
     or more persons to be the Administrator. Any person, including, but not
     limited to, the Employees, shall be eligible to serve as an Administrator.
     Any person so appointed shall signify his acceptance by filing written
     acceptance with the Company. An Administrator may resign by delivering his
     written resignation to the Company or be removed by the CEO by delivery of
     written notice of removal, to take effect at a date specified therein, or
     upon delivery to the CEO if no date is specified.

          (b) The CEO, upon the resignation or removal of an appointed
     Administrator, may designate in writing a successor to this position. If
     the CEO does not appoint an Administrator, the Company will function as the
     Administrator.

          (c) The CEO shall be empowered to appoint and remove an appointed
     Administrator from time to time as it deems necessary for the proper
     administration of the Plan to assure that the Plan is being operated for
     the exclusive benefit of the Participants and their Beneficiaries in
     accordance with the terms of the Plan, the Code, and the Act.

          (d) The CEO shall periodically review the performance of the
     Administrator or other person to whom duties have been delegated or
     allocated by it under the provisions of this Plan or pursuant to procedures
     established hereunder. This requirement may be satisfied by formal periodic
     review by the CEO or by a qualified person specifically designated by the
     CEO, through day-to-day conduct and evaluation, or through any other
     appropriate method.

          (e) The Administrator will furnish Plan Fiduciaries and Participants
     with notices and information statements when voting rights must be
     exercised pursuant to Section 8.2.

     2.2  ALLOCATION AND DELEGATION OF RESPONSIBILITIES

     If more than one person is appointed as Administrator, the CEO may
designate the responsibilities of each Administrator as may be specified by the
CEO and accepted in writing by each Administrator.  In the event that no such
delegation is made by the CEO, the Administrators may allocate the
responsibilities among themselves, in which event the Administrators shall
notify the CEO and the Trustee in writing of such action and specify the
responsibilities of each Administrator.  The Trustee thereafter shall accept and
rely upon any documents executed by the appropriate Administrator until such
time as the CEO or the Administrators file with the Trustee a written revocation
of such designation.


                                     II-1
<PAGE>
 
     2.3  POWERS AND DUTIES OF THE ADMINISTRATOR

     The primary responsibility of the Administrator is to administer the Plan
for the exclusive benefit of the Participants and their Beneficiaries, subject
to the specific terms of the Plan.  The Administrator shall administer the Plan
in accordance with its terms and shall have the power to determine all questions
arising in connection with the administration, interpretation, and application
of the Plan.  Any such determination by the Administrator shall be conclusive
and binding upon all persons.  The Administrator may establish procedures,
correct any defect, supply any information, or reconcile any inconsistency in
such manner and to such extent as shall be deemed necessary or advisable to
carry out the purpose of the Plan; provided, however, that any procedure,
discretionary act, interpretation or construction shall be done in a
nondiscriminatory manner based upon uniform principles consistently applied and
shall be consistent with the intent that the Plan shall continue to be deemed a
qualified plan under the terms of Code Section 401(a), and shall comply with the
terms of the Act and all regulations issued pursuant thereto.  The Administrator
shall have all powers necessary or appropriate to accomplish his duties under
this Plan.

     The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:

          (a) to determine all questions relating to the eligibility of
     Employees to participate or remain a Participant hereunder;

          (b) to compute, certify, and direct the Trustee with respect to the
     amount and the kind of benefits to which any Participant shall be entitled
     hereunder;

          (c) to authorize and direct the Trustee with respect to all
     disbursements from the Trust;

          (d) to maintain all necessary records for the administration of the
     Plan;

          (e) to interpret the provisions of the Plan and to make and publish
     such rules for regulation of the Plan as are consistent with the terms
     hereof;

          (f) to determine the size and type of any contract to be purchased
     from any insurer, and to designate the insurer from which such contract
     shall be purchased;

          (g) to compute and certify to the Employer from time to time the sums
     of money necessary or desirable to be contributed to the Trust Fund;

          (h) to establish a "funding policy and method", i.e., it shall consult
     with the Employer, and it shall determine whether the Plan has a short
     range need for liquidity (e.g., to pay benefits) or whether liquidity is a
     long range goal and investment growth (and stability of same) is a more
     current need, or shall appoint a qualified person to do so. Such "funding

                                     II-2
<PAGE>
 
     policy and method" shall be consistent with the objectives of this Plan and
     with the requirements of Title I of the Act;

          (i) to establish and communicate to Participants a procedure and
     method to insure that each Participant will vote Company Stock allocated to
     such Participant's Company Stock Account pursuant to Section 8.2; and

          (j) to assist any Participant regarding his rights, benefits, or
     elections available under the Plan.

     2.4  RECORDS AND REPORTS

     The Administrator shall keep a record of all actions taken and shall keep
all other books of account, records, and other data that may be necessary for
proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.

     2.5  AUDIT

          (a) If an audit of the Plan's records shall be required by the Act and
     the regulations thereunder for any Plan Year, the Administrator shall
     appoint an independent qualified public accountant for that purpose. Such
     accountant shall, after an audit of the books and records of the Plan in
     accordance with generally accepted auditing standards, within a reasonable
     period after the close of the Plan Year, furnish to the Administrator and
     the Trustee a report of his audit setting forth his opinion as to whether
     each of the following statements, schedules or lists, or any others that
     are required by Section 103 of the Act or the Secretary of Labor to be
     filed with the Plan's annual report, are presented fairly and in conformity
     with generally accepted accounting principles applied consistently:

              (1) statement of the assets and liabilities of the Plan;

              (2) statement of changes in net assets available to the Plan;

              (3) statement of receipts and disbursements, a schedule of all
          assets held for investment purposes, a schedule of all loans or fixed
          income obligations in default at the close of the Plan Year;

              (4) a list of all leases in default or uncollectible during the
          Plan Year;

              (5) the most recent annual statement of assets and liabilities of
          any bank common or collective trust fund in which Plan assets are
          invested or such information regarding separate accounts or trusts
          with a bank or insurance company as the Administrator deems necessary;
          and

                                     II-3
<PAGE>
 
              (6) a schedule of each transaction or series of transactions
          involving an amount in excess of 5% of Plan assets.

          All auditing and accounting fees shall be an expense of and may, at
     the election of the Administrator, be paid from the Trust Fund.

          (b) If some or all of the information necessary to enable the
     Administrator to comply with Section 103 of the Act is maintained by a
     bank, insurance company, or similar institution, regulated and supervised
     and subject to periodic examination by a state or federal agency, it shall
     transmit and certify the accuracy of that information to the Administrator
     as provided in Section 103(b) of the Act within 120 days after the end of
     the Plan Year or such other date as may be prescribed under regulations of
     the Secretary of Labor.

     2.6 APPOINTMENT OF ADVISORS

     The Administrator may appoint counsel, specialists, advisors, and other
persons as the Administrator deems necessary or desirable in connection with the
administration of this Plan.

     2.7 INFORMATION FROM EMPLOYER

     To enable the Administrator to perform his functions, the Employer shall
supply full and timely information to the Administrator on all matters relating
to the Compensation of all Participants, their Hours of Service, their Years of
Service, their retirement, death, disability, or termination of employment, and
such other pertinent facts as the Administrator may require; and the
Administrator shall advise the Trustee of such of the foregoing facts as may be
pertinent to the Trustee's duties under the Plan.  The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.

     2.8 PAYMENT OF EXPENSES

     All expenses of administration may be paid out of the Trust Fund unless
voluntarily paid by the Employer.  Such expenses shall include any expenses
incident to the functioning of the Administrator, including, but not limited to,
fees of accountants, counsel, the Trustee and other specialists and their
agents, and other costs of administering the Plan and/or the Trust.  Until paid,
the expenses shall constitute a liability of the Trust Fund.  However, the
Employer may reimburse the Trust Fund for any administration expense incurred.
Any administration expense paid to the Trust Fund as a reimbursement shall not
be considered an Employer contribution.

     2.9 ACTIONS BY ADMINISTRATOR

     The Administrator shall hold meetings upon such notice and at such time and
places as it may from time to time determine.  Notice to a member shall not be
required if waived in writing by that member.  A majority of the members of the
Administrator duly appointed shall constitute a quorum

                                     II-4
<PAGE>
 
for the transaction of business.  All resolutions or other actions taken by the
Administrator at any meeting where a quorum is present shall be by vote of a
majority of those present at such meeting and entitled to vote.  Resolutions may
be adopted or other action taken without a meeting upon written consent signed
by all of the Administrators.

     2.10 CLAIMS PROCEDURE

     Claims for benefits under the Plan must be filed with the Administrator in
writing.  Written notice of the disposition of a claim shall be furnished to the
claimant within 90 days after the application is filed.  In the event the claim
is denied, the reasons for the denial shall be specifically set forth in the
notice in language calculated to be understood by the claimant, pertinent
provisions of the Plan shall be cited, and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided.  In addition, the
claimant shall be furnished with an explanation of the Plan's claims review
procedure.

     2.11 CLAIMS REVIEW PROCEDURE

     Any Employee, Former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.10
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator (on a form which may be obtained from
the Administrator) a request for a hearing. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.10. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.


                                     II-5
<PAGE>
 
                                  ARTICLE III
                                  ELIGIBILITY

     3.1  CONDITIONS OF ELIGIBILITY

     Each Employee who is an Eligible Employee on the Effective Date shall
automatically participate in the Plan commencing on the Effective Date.  All
other Employees shall automatically become Participants as of the date they
become an Eligible Employee.

     3.2  EFFECT OF PARTICIPATION UPON THE ACCEPTANCE OF ANY BENEFITS 
          UNDER THIS PLAN

     An Eligible Employee shall automatically be bound by the terms and
conditions of the Plan and all amendments hereto.

     3.3  DETERMINATION OF ELIGIBILITY

     The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer.
Such determination shall be conclusive and binding upon all persons, as long as
the same is made pursuant to the Plan and the Act.  Such determination shall be
subject to review as provided for in Section 2.8 and 2.9.

     3.4  TERMINATION OF ELIGIBILITY

     In the event a Participant shall go from a classification of an Eligible
Employee to a noneligible Employee, such Former Participant shall continue to
vest in his interest in the Plan for each Year of Service completed while a
noneligible Employee, until such time as his Participant's Account shall be
forfeited or distributed pursuant to the terms of the Plan. Additionally, his
interest in the Plan shall continue to share in the earnings/losses of the Trust
Fund.

     3.5  OMISSION OF ELIGIBLE EMPLOYEE

     If, in any Plan Year, any Employee who should be included as a Participant
in the Plan is erroneously omitted and discovery of such omission is not made
until after a contribution by his Employer for the year has been made, the
Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the Employer would have contributed with respect to
him had he not been omitted. Such contribution shall be made regardless of
whether or not it is deductible in whole or in part in any taxable year under
applicable provisions of the Code.

     3.6  INCLUSION OF INELIGIBLE EMPLOYEE

     If, in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a


                                     III-1
<PAGE>
 
contribution for the year has been made, the Employer shall not be entitled to
recover the contribution made with respect to the ineligible person regardless
of whether or not a deduction is allowable with respect to such contribution.
In such event, the amount contributed with respect to the ineligible person
shall constitute a Forfeiture for the Plan Year in which the discovery is made.

                                     III-2
<PAGE>
 
                                  ARTICLE IV
                          CONTRIBUTION AND ALLOCATION

     4.1  EMPLOYER'S CONTRIBUTION
 
          (a) For each Plan Year, the Employer shall contribute to the Plan such
     amount as may be determined by the Company's Board of Directors or its
     delegatees, but, subject to (b) below, such amount as is necessary to meet
     the Plan's Current Obligations.

          (b) The Employer Contribution for any Plan Year shall not exceed the
     maximum amount allowable as a deduction to the Employer under the
     provisions of Code Section 404.

          (c) However, to the extent necessary to provide the top heavy minimum
     allocations, the Employer shall make a contribution even if it exceeds the
     amount which is deductible under Code Section 404.

     4.2  TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION

     Employer Contributions will be paid in cash and/or in Company Stock as the
Company's Board of Directors or its delegatees may from time to time determine.
Company Stock will be valued at its then fair market value.  Notwithstanding the
above, to the extent that the Plan has Current Obligations, the Employer
Contribution will be paid to the Plan in cash. The Employer Contribution with
respect to a Plan Year will be paid to the Plan at such times as may be required
to meet any obligations under an Exempt Loan, and in all events on or before the
date required to make such contribution a deduction on the Employer's federal
income tax return for the year.

     4.3  ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS

          (a) The Administrator shall establish and maintain an account in the
     name of each Participant to which the Administrator shall credit as of each
     Valuation Date all amounts allocated to each such Participant as set forth
     herein. However, the Administrator may separately account for that portion
     of each Participant's Account attributable to Top Heavy Plan Years.

          (b) The Employer shall provide the Administrator with all information
     required by the Administrator to make a proper allocation of the Employer
     Contribution for each Plan Year. As soon as reasonably practicable after
     the date of receipt by the Administrator for such information, the
     Administrator shall, with respect to the Employer Contribution pursuant to
     4.1(a), allocate such Employer Contribution to each eligible Participant's
     Account in the same proportion that each such Participant's Compensation
     for the Plan Year bears to the total Compensation of all eligible
     Participants for such Plan Year.


                                     IV-1
<PAGE>
 
          A Participant who is not an Employee on the last day of the Plan Year
     shall not be an "eligible Participant", i.e., eligible to share in the
     Employer Contribution or Forfeitures for that year, unless required
     pursuant to Section 4.3(i) or 4.3(n).

          (c) Stock dividends on Company Stock held in a Participant's Company
     Stock Account shall be credited to his Company Stock Account when paid.
     Cash dividends on Company Stock held in his Company Stock Account shall be
     used to repay an Exempt Loan, if one exists at such time, and, if no Exempt
     Loan exists, may, in the sole discretion of the Administrator, be credited
     to his Participants Other Investments Account or distributed to the
     Participant.

          Company Stock acquired by the Plan with the proceeds of an Exempt Loan
     shall only be allocated to each Participant's Company Stock Account upon
     release from the Unallocated Company Stock Suspense Account as provided in
     Section 4.3(g) herein. Company Stock acquired with the proceeds of an
     Exempt Loan shall be an asset of the Trust Fund and maintained in the
     Unallocated Company Stock Suspense Account.

          Company Stock received by the Trust during a Plan Year with respect to
     a contribution by the Employer for the preceding Plan Year shall be
     allocated to the accounts of Participants as of the Anniversary Date of
     such preceding Plan Year.

          (d) As of each Anniversary Date or, if applicable, as of an earlier
     Valuation Date, before allocation of Employer Contributions and Forfeitures
     for such Plan Year, any earnings or losses (net appreciation or net
     depreciation) of the Trust Fund shall be allocated in the same proportion
     that each Participant's and Former Participant's Other Investment Accounts
     (other than each Participant's Company Stock Account) bear to the total of
     all Participants' and Former Participants' Other Investment Accounts (other
     than Participants' Company Stock Accounts) as of such date. Earnings or
     losses include the increase (or decrease) in the fair market value of
     assets of the Trust Fund (other than Company Stock in the Participants'
     Company Stock Accounts) since the preceding Anniversary Date (or applicable
     Valuation Date).

          Earnings or losses do not include the interest paid under any
     installment contract for the purchase of Company Stock by the Trust Fund or
     on any Exempt Loan used by the Trust Fund to purchase Company Stock, nor
     does it include income received by the Trust Fund with respect to Company
     Stock acquired with the proceeds of an Exempt Loan to the extent such
     income is used to repay the loan; all income received by the Trust Fund
     from Company Stock acquired with the proceeds of an Exempt Loan shall be
     used to repay such loan.

          (e) The Administrator shall establish accounting procedures for the
     purpose of making the allocations, valuations and adjustments to
     Participants' Accounts provided for in this Section. Should the
     Administrator determine that the strict application of its accounting
     procedures shall not result in an equitable and nondiscriminatory
     allocation

                                     IV-2
<PAGE>
 
     among the Participants' Accounts, it may modify its procedures for the
     purpose of achieving an equitable and nondiscriminatory allocation in
     accordance with the general concepts of the Plan and the provisions of this
     Section, provided, however, that such adjustments to achieve equity shall
     not reduce the Vested portion of a Participant's Account.

          (f) Separate accounts shall be maintained for all inactive
     Participants who have a Vested interest in the Plan. Such separate accounts
     shall not require a segregation of the Plan assets and no Participant shall
     acquire any right to or interest in any specific asset of the Trust as a
     result of the allocations provided for in the Plan. All allocations shall
     be made as of the Anniversary Date referred to in this Section.

          (g) All Company Stock acquired by the Plan with the proceeds of an
     Exempt Loan must be added to and maintained in the Unallocated Company
     Stock Suspense Account. For each Plan Year during the duration of the loan,
     the number of shares of Company Stock released shall equal the number of
     encumbered shares held immediately before release for the current Plan Year
     multiplied by a fraction, the numerator of which is the amount of principal
     paid for the Plan Year and the denominator of which is the sum of the
     numerator plus the principal to be paid for all future Plan Years (or, if
     the requirements of Treas. Reg. Section 54.4975-7(b)(8)(ii) are not met,
     then "principal and interest" shall be substituted for "principal" in
     determining the fraction). As of each Anniversary Date, the Plan must
     consistently allocate to each Participant's Account pursuant to Section
     4.3(b), shares and fractional shares of Company Stock representing each
     Participant's interest in the shares withdrawn from the Unallocated Company
     Stock Suspense Account; provided, however, to the extent any cash dividends
     on allocated shares of Company Stock have been applied to repay the loan
     that year, the number of shares released shall first be allocated to the
     accounts of those Participants equal in amount to the cash dividends
     diverted from such accounts for repayment of the Exempt Loan. Income earned
     with respect to Company Stock in the Unallocated Company Stock Suspense
     Account shall be used to repay the Exempt Loan or used to purchase such
     Company Stock. Any income which is not so used must be allocated as income
     of the Plan.

          (h) As of each Anniversary Date any amounts which became Forfeitures
     since the last Anniversary Date shall first be made available to reinstate
     previously forfeited account balances of Former Participants, if any. The
     remaining Forfeitures, if any, shall be allocated among the Participants'
     Accounts of those Participants who are entitled to receive an Employer
     Contribution for such Plan Year in the same proportion that each such
     eligible Participant's Compensation for the year bears to the total
     Compensation of all eligible Participants for the year. In the event the
     allocation of Forfeitures provided herein shall cause the "annual addition"
     (as defined in Section 4.4) to any Participant's Account to exceed the 
     amount allowable by the Code, the excess shall be reallocated in 
     accordance with Section 4.5.

                                     IV-3
<PAGE>
 
          (i) Minimum Allocations Required for Top Heavy Plan Years:
     Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of the
     Employer Contributions and Forfeitures allocated to the Participant's
     Account for each Non-Key Employee shall be equal to at least 3% of such 
     Non-Key Employee's "415 Compensation" (reduced by contributions and
     forfeitures, if any, allocated to each Non-Key Employee in any defined
     contribution plan included with this plan in a Required Aggregation Group).
     However, if (i) the sum of the Employer Contributions and Forfeitures
     allocated to the Participant's Account of each Key Employee for such Top
     Heavy Plan Year is less than 3% of each Key Employee's "415 Compensation"
     and (ii) this Plan is not required to be included in an Aggregation Group
     to enable a defined benefit plan to meet the requirements of Code Sections
     401(a)(4) or 410, the sum of the Employer Contributions and Forfeitures
     allocated to the Participant's Account of each Non-Key Employee shall be
     equal to the largest percentage allocated to the Participant's Account of
     any Key Employee.

          Except, however, no such minimum allocation shall be required in this
     Plan for any Non-Key Employee who participates in another defined
     contribution plan subject to Code Section 412 providing such benefits
     included with this Plan in a Required Aggregation Group.

          (j) For purposes of the minimum allocations set forth above the
     percentage allocated to the Participant's Account of any Key Employee shall
     be equal to the ratio of the sum of the Employer Contributions and
     Forfeitures allocated on behalf of such Key Employee divided by the "415
     Compensation" for such Key Employee.

          (k) For any Top Heavy Plan Year, the minimum allocations set forth
     above shall be allocated to the Participant's Account of all Non-Key
     Employees who are Participants and who are employed by the Employer on the
     last day of the Plan Year, including Non-Key Employees who have (1) failed
     to complete a Year of Service; (2) declined to make mandatory contributions
     (if required) or elective deferrals to the Plan; and (3) been excluded from
     participation because of their level of Compensation.

          (l) In lieu of the above, in any Plan Year in which a Non-Key Employee
     is a Participant in both this Plan and a defined benefit pension plan
     included in a Required Aggregation Group which is top heavy, the Employer
     shall not be required to provide such Non-Key Employee with both the full
     separate defined benefit plan minimum benefit and the full separate defined
     contribution plan minimum allocation.

          Therefore, for any Plan Year when the Plan is a Top Heavy Plan, Non-
     Key Employees who are participating in this Plan and a defined benefit plan
     maintained by the Employer shall receive a minimum monthly accrued benefit
     in the defined benefit plan equal to the product of (1) 1/12th of "415
     Compensation" averaged over a five consecutive "limitation years" (or
     actual "limitation years" if less) which produce the highest average and
     (2) the lesser of (i) 2% multiplied by Years of Service when the plan is
     top heavy or (ii) 20%.

                                     IV-4
<PAGE>
 
          (m) For the purposes of this Section, "415 Compensation" shall be as
     defined in Section 4.4(e), and shall be limited to $150,000 in all Plan
     Years (unless adjusted in such manner as permitted under Code Section
     401(a)(17).

          (n) Notwithstanding anything herein to the contrary, Participants
     terminating for reasons of death, Total and Permanent Disability or
     Retirement shall share in the allocations of Employer Contributions and
     Forfeitures provided for in this Section for such Plan Year of termination
     regardless of whether they are employed by an Affiliated Employer at the
     end of the Plan Year.

          (o) If a Former Participant is reemployed after five consecutive 
     1-Year Breaks in Service, then separate accounts shall be maintained as
     follows:

              (1) one account for nonforfeitable benefits attributable to pre-
          break service; and

              (2) one account representing his status in the Plan attributable
          to post-break service.

     4.4  MAXIMUM ANNUAL ADDITIONS

          (a) Notwithstanding the foregoing, the maximum "annual additions"
     credited to a Participant's accounts for any "limitation year" shall equal
     the lesser of: (1) $30,000 (or, if greater, one-fourth of the dollar
     limitation in effect under Code Section 415(b)(1)(A)) or (2) 25% of the
     Participant's "415 Compensation" for such "limitation year".

          (b) For purposes of applying the limitations of Code Section 415,
     "annual additions" means the sum credited to a Participant's accounts for
     any "limitation year" of (1) Employer Contributions, (2) Employee
     contributions, (3) Forfeitures, (4) amounts allocated, after March 31,
     1984, to an individual medical account, as defined in Code Section
     415(l)(2) which is part of a pension or annuity plan maintained by the
     Employer and (5) amounts derived from contributions paid or accrued after
     December 31, 1985, in taxable years ending after such date, which are
     attributable to post-retirement medical benefits allocated to the separate
     account of a key employee (as defined in Code Section 419A(d)(3)) under a
     welfare benefit plan (as defined in Code Section 419(e)) maintained by the
     Employer. Except, however, the "415 Compensation" percentage limitation
     referred to in paragraph (a)(2) above shall not apply to: (1) any
     contribution for medical benefits (within the meaning of Code
     Section 419A(f)(2)) after separation from service which is otherwise
     treated as an "annual addition", or (2) any amount otherwise treated as an
     "annual addition" under Code Section 415(l)(1).

          (c) For purposes of applying the limitations of Code Section 415, the
     transfer of funds from one qualified plan to another is not an "annual
     addition." In addition, the

                                     IV-5
<PAGE>
 
     following are not Employee contributions for the purposes of
     Section 4.4(b)(2): (1) rollover contributions (as defined in Code
     Sections 402(a)(5), 403(a)(4), 403(b)(8) and 408(d)(3)); (2) repayments of
     loans made to a Participant from the Plan; (3) repayments of distributions
     received by an Employee pursuant to Code Section 411(a)(7)(B) (cash-outs);
     (4) repayments of distributions received by an Employee pursuant to Code
     Section 411(a)(3)(D) (mandatory contributions); and (5) Employee
     contributions to a simplified employee pension excludable from gross income
     under Code Section 408(k)(6).

          (d) If no more than one-third of the Employer Contributions to this
     Plan for a Plan Year which are deductible under Code Section 404(a)(9) are
     allocated to Highly Compensated Employees, the limitations of paragraph (a)
     shall not apply to:

              (1) Forfeitures of Company Stock which were acquired with the
          proceeds of an Exempt Loan, or

              (2) Employer Contributions to this Plan which are deductible under
          Code Section 404(a)(9)(B) and charged against the Participant's
          accounts.

          (e) For purposes of applying the limitations of Code Section 415, "415
     Compensation" shall include the Participant's wages, salaries, fees for
     professional services, and other amounts received for personal services
     actually rendered in the course of employment with an Employer maintaining
     the Plan (including, but not limited to, commissions paid salesmen,
     compensation for services on the basis of a percentage of profits,
     commissions on insurance premiums, tips, bonuses, fringe benefits, and
     reimbursements or other expense allowances under a nonaccountable plan (as
     described in Regulation 1.62-2(c)) for a Plan Year.

          "415 Compensation" shall exclude (1)(A) contributions made by the
     Employer to a plan of deferred compensation to the extent that, before the
     application of the Code Section 415 limitations to the Plan, the
     contributions are not includable in the gross income of the Employee for
     the taxable year in which contributed, (B) Employer contributions made on
     behalf of an Employee to a simplified employee pension plan described in
     Code Section 408(k) to the extent such contributions are excludable from
     the Employee's gross income, (C) any distributions from a plan of deferred
     compensation; (2) amounts realized from the exercise of a non-qualified
     stock option or when restricted stock (or property) held by an Employee
     either becomes freely transferable or is no longer subject to a substantial
     risk of forfeiture; (3) amounts realized from the sale, exchange, or other
     disposition of stock acquired under a qualified stock option; and (4) other
     amounts that receive special tax benefits, such as premiums for group term
     life insurance (but only to the extent that the premiums are not includable
     in the gross income of the Employee), or contributions made by the Employer
     (whether or not under a salary reduction agreement) towards the purchase of
     any annuity contract described in Code Section 403(b) (whether or not the
     contributions are excludable from the gross income of the Employee). "415
     Compensation" shall be

                                     IV-6
<PAGE>
 
     limited to $150,000 (unless adjusted in the same manner as permitted under
     Code Section 415(d)).

          (f) For purposes of applying the limitations of Code Section 415, the
     "limitation year" shall be the Plan Year.

          (g) The dollar limitation under Code Section 415(b)(1)(A) stated in
     paragraph (a)(1) above shall be adjusted annually as provided in Code
     Section 415(d) pursuant to the Regulations. The adjusted limitation is
     effective as of January 1st of each calendar year and is applicable to
     "limitation years" ending with or within that calendar year.

          (h) For the purpose of this Section, all qualified defined benefit
     plans (whether terminated or not) ever maintained by the Employer shall be
     treated as one defined benefit plan, and all qualified defined contribution
     plans (whether terminated or not) ever maintained by the Employer shall be
     treated as one defined contribution plan.

          (i) For the purpose of this Section, if the Employer is a member of a
     controlled group of corporations, trades or businesses under common control
     (as defined by Code Section 1563(a) or Code Section 414(b) and (c) as
     modified by Code Section 415(h)), is a member of an affiliated service
     group (as defined by Code Section 414(m)), or is a member of a group of
     entities required to be aggregated pursuant to Regulations under Code
     Section 414(o), all Employees of such Employers shall be considered to be
     employed by a single Employer.

          (j) For the purpose of this Section, if this Plan is a Code Section
     413(c) plan, all Employers of a Participant who maintain this Plan will be
     considered to be a single Employer.

          (k) (1) If a Participant participates in more than one defined
          contribution plan maintained by the Employer which have different
          Anniversary Dates, the maximum "annual additions" under this Plan
          shall equal the maximum "annual additions" for the "limitation year"
          minus any "annual additions" previously credited to such Participant's
          accounts during the "limitation year."

              (2) If a Participant participates in both a defined contribution
          plan subject to Code Section 412 and a defined contribution plan not
          subject to Code Section 412 maintained by the Employer which have the
          same Anniversary Date, "annual additions" will be credited to the
          Participant's accounts under the defined contribution plan subject to
          Code Section 412 prior to crediting "annual additions" to the
          Participant's accounts under the defined contribution plan not subject
          to Code Section 412.


                                     IV-7
<PAGE>
 
              (3) If a Participant participates in more than one defined
          contribution plan not subject to Code Section 412 maintained by the
          Employer which have the same Anniversary Date, the maximum "annual
          additions" under this Plan shall equal the product of (A) the maximum
          "annual additions" for the "limitation year" minus any "annual
          additions" previously credited under subparagraphs (1) or (2) above,
          multiplied by (B) a fraction (i) the numerator of which is the "annual
          additions" which would be credited to such Participant's accounts
          under this Plan without regard to the limitations of Code Section 415
          and (ii) the denominator of which is such "annual additions" for all
          plans described in this subparagraph.

          (l) If an Employee is (or has been) a Participant in one or more
     defined benefit plans and one or more defined contribution plans maintained
     by the Employer, the sum of the defined benefit plan fraction and the
     defined contribution plan fraction for any "limitation year" may not exceed
     1.0.

          (m) The defined benefit plan fraction for any "limitation year" is a
     fraction, the numerator of which is the sum of the Participant's projected
     annual benefits under all the defined benefit plans (whether or not
     terminated) maintained by the Employer, and the denominator of which is the
     lesser of 125 percent of the dollar limitation determined for the
     "limitation year" under Code Sections 415(b) and (d) or 140 percent of the
     highest average compensation, including any adjustments under Code Section
     415(b).

          Notwithstanding the above, if the Participant was a Participant as of
     the first day of the first "limitation year" beginning after December 31,
     1986, in one or more defined benefit plans maintained by the Employer which
     were in existence on May 6, 1986, the denominator of this fraction will not
     be less than 125 percent of the sum of the annual benefits under such plans
     which the Participant had accrued as of the close of the last "limitation
     year" beginning before January 1, 1987, disregarding any changes in the
     terms and conditions of the plan after May 5, 1986. The preceding sentence
     applies only if the defined benefit plans individually and in the aggregate
     satisfied the requirements of Code Section 415 for all "limitation years"
     beginning before January 1, 1987.

          (n) The defined contribution plan fraction for any "limitation year"
     is a fraction, the numerator of which is the sum of the annual additions to
     the Participant's Account under all the defined contribution plans (whether
     or not terminated) maintained by the Employer for the current and all prior
     "limitation years" (including the annual additions attributable to the
     Participant's nondeductible Employee contributions to all defined benefit
     plans, whether or not terminated, maintained by the Employer, and the
     annual additions attributable to all welfare benefit funds, as defined in
     Code Section 419(e), and individual medical accounts, as defined in Code
     Section 415(l)(2), maintained by the Employer), and the denominator of
     which is the sum of the maximum aggregate amounts for the current and all
     prior "limitation years" of service with the Employer (regardless of
     whether a defined contribution plan was maintained by the Employer). The
     maximum aggregate amount in any "limitation year" is

                                     IV-8
<PAGE>
 
     the lesser of 125 percent of the dollar limitation determined under Code
     Sections 415(b) and (d) in effect under Code Section 415(c)(1)(A) or 35
     percent of the Participant's Compensation for such year.

          If the Employee was a Participant as of the end of the first day of
     the first "limitation year" beginning after December 31, 1986, in one or
     more defined contribution plans maintained by the Employer which were in
     existence on May 6, 1986, the numerator of this fraction will be adjusted
     if the sum of this fraction and the defined benefit fraction would
     otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an
     amount equal to the product of (1) the excess of the sum of the fractions
     over 1.0 times (2) the denominator of this fraction, will be permanently
     subtracted from the numerator of this fraction. The adjustment is
     calculated using the fractions as they would be computed as of the end of
     the last "limitation year" beginning before January 1, 1987, and
     disregarding any changes in the terms and conditions of the Plan made after
     May 5, 1986, but using the Code Section 415 limitation applicable to the
     first "limitation year" beginning on or after January 1, 1987. The annual
     addition for any "limitation year" beginning before January 1, 1987 shall
     not be recomputed to treat all Employee contributions as annual additions.

          (o) Notwithstanding the foregoing, for any "limitation year" in which
     the Plan is a Top Heavy Plan, 100 percent shall be substituted for 125
     percent in paragraph (l) and (m) unless the extra minimum allocation is
     being provided pursuant to Section 4.3(i). However, for any "limitation
     year" in which the Plan is a Super Top Heavy Plan, 100 percent shall be
     substituted for 125 percent in any event.

          (p) If the sum of the defined benefit plan fraction and the defined
     contribution plan fraction shall exceed 1.0 in any "limitation year" for
     any Participant in this Plan, the Administrator shall limit, to the extent
     necessary, the "annual additions" to such Participant's accounts for such
     "limitation year." If, after limiting the "annual additions" to such
     Participant's accounts for the "limitation year," the sum of the defined
     benefit plan fraction and the defined contribution plan fraction still
     exceed 1.0, the Administrator shall then adjust the numerator of the
     defined benefit plan fraction so that the sum of both fractions shall not
     exceed 1.0 in any "limitation year" for such Participant.

          (q) Notwithstanding anything contained in this Section to the
     contrary, the limitations, adjustments and other requirements prescribed in
     this Section shall at all times comply with the provisions of Code Section
     415 and the Regulations thereunder, the terms of which are specifically
     incorporated herein by reference.

     4.5  ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS

          (a) If, as a result of the allocation of Forfeitures, a reasonable
     error in estimating a Participant's Compensation or other facts and
     circumstances to which Regulation 1.415-6(b)(6) shall be applicable, the
     "annual additions" under this Plan would

                                     IV-9
<PAGE>
 
     cause the maximum "annual additions" to be exceeded for any Participant,
     the Administrator shall (1) hold any "excess amount" remaining after the
     return of any voluntary Employee contributions in a "Section 415 suspense
     account" (2) allocate and reallocate the "Section 415 suspense account" in
     the next "limitation year" (and succeeding "limitation years" if necessary)
     to all Participants in the Plan before any Employer or Employee
     contributions which would constitute "annual additions" are made to the
     Plan for such "limitation year" or (3) reduce Employer Contributions to the
     Plan for such "limitation year" by the amount of the "Section 415 suspense
     account" allocated and reallocated during such "limitation year".
     Notwithstanding the foregoing, if the Company maintains another defined
     contribution plan, the annual addition excess amount shall be "cured" under
     such other plan first.

          (b) For purposes of this Article, "excess amount" for any Participant
     for a "limitation year" shall mean the excess, if any, of (1) the "annual
     additions" which would be credited to his account under the terms of the
     Plan without regard to the limitations of Code Section 415 over (2) the
     maximum "annual additions" determined pursuant to Section 415.

          (c) For purposes of this Section, "Section 415 suspense account" shall
     mean an unallocated account equal to the sum of "excess amounts" for all
     Participants in the Plan during the "limitation year". The "Section 415
     suspense account" shall not share in any earnings or losses of the Trust
     Fund.

          (d) The Plan may not distribute "excess amounts" to Participants or
     Former Participants.

     4.6  DIRECTED DIVERSIFICATION

          (a) Each "Qualified Participant" may elect within 90 days after the
     close of each Plan Year during the "Qualified Election Period" to direct
     the Administrator in writing to transfer in cash (such election must be
     accompanied by an appropriate reinvestment direction) 25 percent of the
     Participant's Company Stock Account (to the extent such portion exceeds the
     amount to which a prior election under this subparagraph applies) to the
     Employer's qualified 401(k) plan, provided that such plan offers at least
     three investment options, other than a Company stock fund, that qualify for
     diversification purposes under Section 401(a)(28) of the Code. In the case
     of the election year in which the Qualified Participant can make his last
     election, the preceding sentence shall be applied by substituting "50
     percent" for "25 percent". If the "Qualified Participant" elects to direct
     the Administrator to transfer and reinvest his Company Stock Account, such
     direction shall be effective no later than 180 days after the close of the
     Plan Year to which such direction applies. In lieu of so directing the
     Administrator, the "Qualified Participant" may elect a distribution of the
     portion of his Company Stock Account covered by the election within

                                     IV-10
<PAGE>
 
     90 days after the last day of the period during which the election can be
     made. Any such distribution of Company Stock shall be subject to Section 
     7.11. 

          (b) For the purposes of this Section the following definitions shall
     apply:

              (1) "Qualified Participant" means any Participant or Former
          Participant who has completed 10 Years of Service as a Participant in
          this Plan (or the Employer's predecessor ESOP terminated in 1996) and
          has attained age 55.

              (2) "Qualified Election Period" means the five Plan Year period
          beginning with the Plan Year after the Plan Year in which the
          Participant attains age 55 (or, if later, beginning with the Plan Year
          after the first Plan Year in which the Participant first became a
          "Qualified Participant").

     4.7  SUSPENSE ACCOUNT

     All Employer Contributions, Forfeitures and net income (or net loss) of the
Trust Fund shall be held in a suspense account until allocated to the applicable
Participants' Accounts.

                                     IV-11
<PAGE>
 
                                   ARTICLE V
                         FUNDING AND INVESTMENT POLICY

     5.1  INVESTMENT POLICY

          (a) The Plan is designed to invest primarily in Company Stock.

          (b) With due regard to subparagraph (a) above, the Administrator may
     direct the Trustee to invest funds under the Plan in other property as
     described in the Trust Agreement or direct the Trustee to hold such funds
     in cash or cash equivalents.

          (c) The Plan may not obligate itself to acquire Company Stock from a
     particular holder thereof at an indefinite time determined upon the
     happening of an event such as the death of the holder.

          (d) The Plan may not obligate itself to acquire Company Stock under a
     put option binding upon the Plan. However, at the time a put option is
     exercised, the Plan may be given an option to assume the rights and
     obligations of the Employer under a put option binding upon the Employer.

          (e) All purchases or sales of Company Stock and the price of such
     purchases or sales shall be made as the Administrator instructs the
     Trustee. All purchases of Company Stock shall be made at a price which, in
     the judgment of the Administrator, does not exceed the fair market value
     thereof. All sales of Company Stock shall be made at a price which, in the
     judgment of the Administrator, is not less than the fair market value
     thereof. The valuation rules set forth in Article VI shall be applicable.

     5.2  APPLICATION OF CASH

     Employer Contributions received by the Trust Fund in cash shall first be
applied to pay any required obligations under an Exempt Loan.

     5.3  TRANSACTIONS INVOLVING COMPANY STOCK

          (a) No portion of the Trust Fund attributable to (or allocable in lieu
     of) Company Stock acquired by the Plan in a sale to which Code Section 1042
     applies may accrue or be allocated directly or indirectly under any plan
     maintained by the Employer meeting the requirements of Code Section 401(a):

              (1) during the "Nonallocation Period", for the benefit of;

                                      V-1
<PAGE>
 
                  (i) any taxpayer who makes an election under Code Section
              1042(a) with respect to Company Stock,

                 (ii) any individual who is related to the taxpayer or the
              decedent (within the meaning of Code Section 267(b)), or

              (2) for the benefit of any other person who owns (after
          application of Code Section 318(a)) more than 25 percent of;

                  (i) any class of outstanding stock of the Employer which
              issued such Company Stock, or

                 (ii) the total value of any class of outstanding stock of the
              Employer.

          (b) Except, however, subparagraph (a)(1)(ii) above shall not apply to
     lineal descendants of the taxpayer, provided that, the aggregate amount
     allocated to the benefit of all such lineal descendants during the
     "Nonallocation Period" does not exceed more than five percent of the
     Company Stock (or amounts allocated in lieu thereof) held by the Plan which
     are attributable to a sale to the Plan by any person related to such
     descendants (within the meaning of Code Section 267(c)(4)) in a transaction
     to which Code Section 1042 applied.

          (c) A person shall be treated as failing to meet the stock ownership
     limitation under paragraph (a)(2) above if such person fails such
     limitation:

              (1) at any time during the one year period ending on the date of
          sale of Company Stock to the Plan, or

              (2) on the date as of which Company Stock is allocated to
          Participants in the Plan.

          (d) For purposes of this Section, "Nonallocation Period" means the 10
     year period beginning on the later of:

              (1) the date of the sale of the Company Stock, or

              (2) the date of the Plan allocation attributable to the final
          payment of the Exempt Loan incurred in connection with such sale.

     5.4  LOANS TO THE TRUST

          (a) The Plan may, but only upon the direction of the Administrator,
     borrow money for any lawful purpose, provided, the proceeds of an Exempt
     Loan are used within a reasonable time after receipt only for any or all of
     the following purposes:

                                      V-2
<PAGE>
 
              (1) To acquire Company Stock.

              (2) To repay such loan.

              (3) To repay a prior Exempt Loan.

          (b) All loans to the Trust which are made or guaranteed by a
     disqualified person must satisfy all requirements applicable to Exempt
     Loans including but not limited to the following:

              (1) The loan must be at a reasonable rate of interest;

              (2) Any collateral pledged to the creditor by the Plan shall
          consist only of the Company Stock purchased with the borrower funds;

              (3) Under the terms of the loan, any pledge of Company Stock shall
          provide for the release of shares so pledged on a pro-rata basis
          pursuant to Section 4.3(g);

              (4) Under the terms of the loan, the creditor shall have no
          recourse against the Plan except with respect to such collateral,
          earnings attributable to such collateral, Employer Contributions
          (other than contributions of Company Stock) that are made to meet the
          ESOP's obligations under the Exempt Loan and earnings attributable to
          such collateral and the investment of such contributions;

              (5) The loan must be for a specific term and may not be payable
          at the demand of any person, except in the cause of a default.

              (6) In the event of default upon an Exempt Loan, the value of the
          Trust Fund transferred in satisfaction of the Exempt Loan shall not
          exceed the amount of default. If the lender is a disqualified person,
          an Exempt Loan shall provide for a transfer of Trust Funds upon
          default only upon and to the extent of the failure of the Plan to meet
          the payment schedule of the Exempt Loan; and

              (7) Exempt Loan payments during a Plan Year must not exceed an
          amount equal to: (A) the sum, over all Plan Years, of all Employer
          Contributions made by the Employer to the Plan with respect to such
          Exempt Loan and earnings on such Employer Contributions, less (B) the
          sum of the Exempt Loan payments in all preceding Plan Years. A
          separate accounting shall be maintained for such Employer
          Contributions and earnings until the Exempt Loan is repaid.

          (c) The term "disqualified person" means a person who is a Fiduciary,
     a person providing services to the Plan, an Employer, any of whose
     Employees are covered by the

                                      V-3
<PAGE>
 
     Plan, an employee organization any of whose members are covered by the
     Plan, an owner, direct or indirect, of 50% or more of the total combined
     voting power of all classes of voting stock, or an officer, director, 10%
     or more shareholder, or a Highly Compensated Employee.

                                      V-4
<PAGE>
 
                                  ARTICLE VI
                                  VALUATIONS

     6.1  VALUATION OF THE TRUST FUND

     The Administrator shall direct the Trustee, as of each Valuation Date
to determine the net worth of the assets comprising the Trust Fund as it exists
on the Valuation Date prior to taking into consideration any contribution to be
allocated for that Plan Year.  In determining such net worth, the Trustee shall
value the assets comprising the Trust Fund at their fair market value as of the
Valuation Date and shall deduct all expenses for which the Trustee has not yet
obtained reimbursement from the Employer or the Trust Fund.  The Administrator
shall have the duty of determining the fair market value of Company Stock and,
notwithstanding the foregoing, the fair market value of Company Stock shall be
determined only as of each Anniversary Date unless the Administrator expressly
directs that it be valued as of any other Valuation Date.

     6.2  METHOD OF VALUATION

     Valuations must be made in good faith and based on all relevant factors for
determining the fair market value of securities.  In the case of a transaction
between a Plan and a disqualified person, value must be determined as of the
date of the transaction.  For all other Plan purposes, value must be determined
as of the most recent Valuation Date under the Plan.  An independent appraisal
will not in itself be a good faith determination of value in the case of a
transaction between the Plan and a disqualified person.  However, in other
cases, a determination of fair market value based on at least an annual
appraisal independently arrived at by a person who customarily makes such
appraisals and who is independent of any party to the transaction will be deemed
to be a good faith determination of value.  Company Stock not readily tradeable
on an established securities market shall be valued by an independent appraiser
appointed by the Administrator meeting requirements similar to the requirements
of the Regulations prescribed under Code Section 170(a)(1).

                                     VI-1
<PAGE>
 
                                  ARTICLE VII
                   DETERMINATION AND DISTRIBUTION OF BENEFITS

     7.1  BENEFITS UPON RETIREMENT

     A Participant who terminates his employment due to his Retirement shall be
distributed a benefit in accordance with Section 7.5 equal in value to the
Vested balance in the Participant's Accounts as of his Benefit Commencement
Date, such balance to be determined as of the Valuation Date immediately
preceding the Participant's Benefit Commencement Date. In addition, such
Participant shall be entitled to receive any benefit allocated to such
Participant pursuant to Section 4.3(n) as of the Anniversary Date for the Plan
Year of his Retirement.

     7.2  BENEFITS UPON DEATH

          (a) Upon the death of a Participant before his termination of his
     employment, the Participant's Beneficiary shall be distributed a benefit in
     accordance with Section equal in value to the Vested balance in the
     Participant's Accounts as of the Benefit Commencement Date, such Vested
     balance to be determined as of the Valuation Date immediately preceding
     such Benefit Commencement Date. In addition, such Beneficiary shall be
     entitled to receive any benefit allocated to such Participant pursuant to
     Section 4.3(n) as of the Anniversary Date for the Plan Year of the
     Participant's death.

          (b) The Administrator may require such proper proof of death and such
     evidence of the right of any person to receive payment of the value of the
     account of a deceased Participant as the Administrator may deem desirable.
     The Administrator's determination of death and of the right of any person
     to receive payment shall be conclusive.

          (c) The Beneficiary of the death benefit payable pursuant to this
     Section shall be the Participant's spouse; provided, however, the
     Participant may designate a Beneficiary other than his spouse only if:

              (1) the spouse has waived her right to be the Participant's
          Beneficiary, or

              (2) the Participant has no spouse, or

              (3) the spouse cannot be located.

     In such event, the designation of a Beneficiary shall be made on a form
     provided by the Administrator. A Participant may at any time revoke his
     designation of a Beneficiary or change his Beneficiary by filing written
     notice of such revocation or change with the Administrator. However, the
     Participant's spouse must again consent in writing to any such change or
     revocation unless the original consent acknowledged that the spouse had the
     right to limit consent only to a specific Beneficiary and that the spouse
     voluntarily elected to

                                     VII-1
<PAGE>
 
     relinquish such right. In the event no valid designation of Beneficiary
     exists at the time of the Participant's death, the death benefit shall be
     payable to his estate. In the event of a divorce, such divorce shall
     automatically rescind any designation of such former spouse as the
     Participant's Beneficiary under the Plan except to the extent provided
     otherwise in a qualified domestic relations order.

          (d) Any consent by the Participant's spouse to waive any rights to the
     death benefit must be in writing, must acknowledge the effect of such
     waiver, and be witnessed by a Plan representative or a notary public.
     Further, the spouse's consent must be irrevocable and must acknowledge the
     specific nonspouse Beneficiary.

     7.3  BENEFITS UPON DISABILITY

     In the event a Participant's employment is terminated due to a Total and
Permanent Disability, such Participant shall be distributed a benefit in
accordance with Section 7.5 equal in value to the Vested balance in the
Participant's Accounts as of his Benefit Commencement Date, such balance to be
determined as of the Valuation Date immediately preceding his Benefit
Commencement Date.  In addition, the Participant shall be entitled to receive
any benefit allocated to such Participant pursuant to Section 4.3(n) as of the
Anniversary Date for the Plan Year of his termination.

     7.4  BENEFITS UPON TERMINATION

          (a) Each Participant whose employment is terminated for any reason
     other than Total and Permanent Disability, Retirement, or death shall be
     distributed a benefit in accordance with Section 7.5 equal in value to the
     sum of his Vested interest in the balance of his Participant's Accounts as
     of his Benefit Commencement Date, such balance to be determined as of the
     Valuation Date immediately preceding his Benefit Commencement Date.

          (b) For purposes of this Section, a Participant's Vested interest in
     Participant's Accounts shall be determined by such Participant's Years of
     Service (for Vesting purposes) in accordance with the following schedule:


                                     VII-2
<PAGE>
 
          Years of Service        Vested Interest
          ----------------        ---------------

          Less than 1 year               0%
          1 year                        20%
          2 years                       40%
          3 years                       60%
          4 years                       80%
          5 years or more              100%

          If a portion of a Participant's Account is forfeited, Company Stock
     allocated to the Participant's Company Stock Account must be forfeited only
     after the Participant's Other Investments Account has been depleted. If
     interest in more than one class of Company Stock has been allocated to a
     Participant's Account, the Participant must be treated as forfeiting the
     same proportion of each such class.

          (c) The computation of a Participant's nonforfeitable percentage of
     his interest in the Plan shall not be reduced as the result of any direct
     or indirect amendment to this Article. In the event that the Plan is
     amended to change or modify any vesting schedule, a Participant with a
     least three Years of Service as of the expiration date of the election
     period may elect to have his nonforfeitable percentage computed under the
     Plan without regard to such amendment. If a Participant fails to make such
     election, then such Participant shall be subject to the new vesting
     schedule. The Participant's election period shall commence on the adoption
     date of the amendment and shall end 60 days after the latest of:

              (1) the adoption date of the amendment,

              (2) the effective date of the amendment, or

              (3) the date the Participant receives written notice of the 
          amendment from the Employer or Administrator.

          (d) Paragraph (b) above not withstanding, a Participant shall have a
     100% Vested interest in his Participant's Accounts upon attainment of his
     Normal Retirement Age as an Employee.

          (e) (1) If any Former Participant shall be reemployed by the Employer
          before a 1-Year Break in Service occurs, he shall continue to
          participate in the Plan in the same manner as if such termination had
          not occurred.

              (2) If any Former Participant shall be reemployed by the Employer
          before five consecutive 1-Year Breaks in Service, and such Former
          Participant had received a distribution of his entire Vested interest
          prior to his reemployment, his forfeited account shall be reinstated
          only if he repays the full amount distributed to him before

                                     VII-3
<PAGE>
 
          the earlier of five years after the first date on which the
          Participant is subsequently reemployed by the Employer or the close of
          the first period of five consecutive 1-Year Breaks in Service
          commencing after the distribution. In the event the Former Participant
          does repay the full amount distributed to him, the undistributed
          portion of the Participant's Account must be restored in full,
          unadjusted by any gains or losses occurring subsequent to the
          Anniversary Date or other Valuation Date preceding his termination.

              (3) If any Former Participant is reemployed after a 1-Year Break
          in Service has occurred, Years of Service shall include Years of
          Service prior to his 1-Year Break in Service subject to the following
          rules:

                  (i)  If a Former Participant has a 1-Year Break in Service,
              his pre-break and post-break service shall be used for computing
              Years of Service for eligibility and for vesting purposes only
              after he has been employed for one Year of Service following the
              date of his reemployment with the Employer;

                  (ii) Any Former Participant who under the Plan does not have a
              nonforfeitable right to any interest in the Plan resulting from
              Employer Contributions shall lose credits otherwise allowable
              under (i) above if his consecutive 1-Year Breaks in Service equal
              or exceed the greater of (A) five or (B) the aggregate number of
              his pre-break Years of Service;

                  (iii) After five consecutive 1-Year Breaks in Service, a
              Former Participant's Vested account balance attributable to pre-
              break service shall not be increased as a result of post-break
              service;

                  (iv) If a Former Participant who has not had his Years of
              Service before a 1-Year Break in Service disregarded pursuant to
              (ii) above completes one Year of Service for eligibility purposes
              following his reemployment with the Employer, he shall participate
              in the Plan retroactively from his date of reemployment;

                  (v) If a Former Participant who has not had his Years of
              Service before a 1-Year Break in Service disregarded pursuant to
              (ii) above completes one Year of Service for eligibility purposes
              following his reemployment with the Employer (a 1-Year Break in
              Service previously occurred, but employment had not terminated),
              he shall participate in the Plan retroactively from his
              reemployment commencement date.

                                     VII-4
<PAGE>
 
     7.5  DISTRIBUTION OF BENEFITS

          (a) Payment of a Participant's benefit hereunder shall be made or
     begin as soon as administratively feasible after the Participant's or
     Beneficiary's Benefit Commencement Date.

          (b) If elected by the Participant (or his Beneficiary), the
     Administrator shall direct the Trustee to distribute to the Participant (or
     his Beneficiary) any amount to which he is entitled under the Plan in one
     lump-sum payment. If no election is made, payment shall be made as provided
     in paragraph (c) below.

          (c) Subject to Sections 7.5(b) and (d), this Plan shall distribute to
     a Participant (or his Beneficiary) his Vested account in substantially
     equal (with respect to the Company Stock Account, in terms of number of
     shares of Company Stock) annual installments over a five year period. In
     the case of a Participant with an account balance in the Plan in excess of
     $500,000, the five year period shall be extended one additional year (but
     not more than five additional years) for each $100,000 or fraction thereof
     by which such balance exceeds $500,000. The dollar limits shall be adjusted
     at the same time and in the same manner as provided in Code Section 415(d).
     Distribution of the Participant's Account shall be made or begin, subject
     to the consent requirement to paragraph (d) below if applicable, not later
     than one year after the close of the Plan Year (i) in which the Participant
     separates from service on account of retirement on or after his Normal
     Retirement Age, Total and Permanent Disability or death, or (ii) which is
     the fifth Plan Year following the Plan Year in which the Participant
     otherwise separates from service.

          (d) Any distribution to a Participant who has a Vested benefit which
     exceeds, or at the time of any prior distribution exceeded, $3,500 shall
     require such Participant's consent if such distribution commences prior to
     the later of his Normal Retirement Age or age 62. With regard to this
     required consent:

              (1) The Participant must be informed of his right to defer receipt
          of the distribution. If a Participant fails to consent, it shall be
          deemed an election to defer the commencement of payment of any
          benefit. However, any election to defer the receipt of benefits shall
          not apply with respect to distributions which are required under
          Section 7.5(h).

              (2) Subject to Section 7.15, notice of the rights specified under
          this paragraph shall be provided no less than 30 days and no more than
          90 days before the first day on which all events have occurred which
          entitle the Participant to such benefit.

              (3) Written consent of the Participant to the distribution must
          not be made before the Participant receives the notice and must not be
          made more than 90 days

                                     VII-5
<PAGE>
 
          before the first day on which all events have occurred which entitle
          the Participant to such benefit.

              (4) No consent shall be valid if a significant detriment is
          imposed under the Plan on any Participant who does not consent to the
          distribution.

          If the value of a Participant's Vested benefit does not exceed $3,500
     and has never exceeded $3,500 at the time of any prior distribution, the
     Administrator shall direct the Trustee to cause the entire Vested benefit
     to be paid to such Participant in a lump sum without regard to the
     Participant's election.

          (e) Notwithstanding anything herein to the contrary, cash dividends on
     shares of Company Stock allocated to Participants' Accounts may be paid to
     Participants or their Beneficiaries, as determined in the sole discretion
     of the Administrator, within 90 days after the close of the Plan Year in
     which the dividend is paid.

          (f) Except as limited by Sections 7.5 and 7.6, whenever the Trustee is
     to make a distribution or to commence a series of payments on or before a
     Valuation Date, the distribution or series of payments may be made or begun
     on such date or as soon thereafter as is practicable, but in no event later
     than 180 days after the Anniversary Date. Except, however, the payment of
     benefits shall begin not later than the 60th day after the close of the
     Plan Year in which the latest of the following events occurs:

              (1) the date on which the Participant attains the Normal 
          Retirement Age specified herein,

              (2) the 10th anniversary of the year in which the Participant 
          commenced participation in the Plan, or

              (3) the date the Participant terminates his service with the 
          Employer.

          (g) Any part of a Participant's benefit which is retained in the Plan
     after the Valuation Date on which his participation ends will continue to
     be treated as a Company Stock Account or as an Other Investments Account as
     provided in Article IV. However, neither account will be credited with any
     further Employer Contributions or Forfeitures.

          (h) Notwithstanding any provision in the Plan to the contrary, the
     distribution of a Participant's benefits shall be made in accordance with
     the following requirements and shall otherwise comply with Code Section
     401(a)(9) and the Regulations thereunder (including Regulation Section
     1.401(a)(9)-2), the provisions of which are incorporated herein by
     reference:


                                     VII-6
<PAGE>
 
              (1) A Participant's benefits shall be distributed to him not later
          than April 1st of the calendar year following the later of (i) the
          calendar year in which the Participant attains age 70 1/2 or (ii) the
          calendar year in which the Participant retires, provided, however,
          that this clause (ii) shall not apply in the case of a Participant who
          is a "five percent owner" at any time during the five Plan Year period
          ending in the calendar year in which he attains age 70 1/2 or, in the
          case of a Participant who becomes a "five percent owner" during any
          subsequent Plan Year, clause (ii) shall no longer apply and the
          required beginning date shall be the April 1st of the calendar year
          following the calendar year in which such subsequent Plan Year ends.
          Alternatively, distributions to a Participant must begin no later than
          the applicable April 1st as determined under the preceding sentence
          and must be made over a period certain measured by the life expectancy
          of the Participant (or the life expectancies of the Participant and
          his designated Beneficiary) in accordance with Regulations.
          Notwithstanding the foregoing, clause (ii) above shall not apply to
          any Participant unless the Participant had attained age 70 1/2 before
          January 1, 1988 and was not a "five percent owner" at any time during
          the Plan Year ending with or within the calendar year in which the
          Participant attained age 66 1/2 or any subsequent Plan Year.

              (2) Distributions to a Participant and his Beneficiaries shall
          only be made in accordance with the incidental death benefit
          requirements of Code Section 401(a)(9)(G) and the Regulations
          thereunder.

          (i) For purposes of this Section, the life expectancy of a Participant
     and a Participant's spouse may not be redetermined.

     7.6  HOW PLAN BENEFITS WILL BE DISTRIBUTED

          (a) Distribution of a Participant's benefit from his Company Stock
     Account shall be made in whole shares of Company Stock (with any fractional
     share paid in cash) or in cash, whichever is elected by the Participant or
     his Beneficiary.

          (b) Any balance in a Participant's Other Investments Account will
     be distributed solely in cash.

          (c) The Trustee will make distribution from the Trust only on
     instructions from the Administrator.

          (d) Notwithstanding anything contained herein to the contrary, if the
     Employer's charter or by-laws restrict ownership of substantially all
     shares of Company Stock to Employees and the Trust Fund, as described in
     Code Section 409(h)(2), the Administrator, in his sole discretion, may
     distribute a Participant's Account entirely in cash or distribute entirely
     in Company Stock subject to a requirement that such Company Stock may be
     resold to the Employer pursuant to Section 7.11.

                                     VII-7
<PAGE>
 
          (e) Except as otherwise provided in Section 7.12, Company Stock
     distributed by the Trustee may be restricted as to sale or transfer by the
     by-laws or articles of incorporation of the Employer, provided restrictions
     are applicable to all Company Stock of the same class. If a Participant is
     required to offer the sale of his Company Stock to the Employer before
     offering to sell his Company Stock to a third party, in no event may the
     Employer pay a price less than that offered to the distributee by another
     potential buyer making a bona fide offer and in no event shall the Trustee
     pay a price less than the fair market value of the Company Stock.

          (f) Except as otherwise provided in this Article, a Participant is not
     entitled to any payment, withdrawal or distribution under the Plan during
     his participation. If any such partial distribution is made, the
     Participant's benefit when computed will be reduced by the amount of any
     such advance.

          (g) If Company Stock acquired with the proceeds of an Exempt Loan
     (described in Section 5.4 hereof) is available for distribution and
     consists of more than one class, a Participant or his Beneficiary must
     receive substantially the same proportion of each such class.

          (h) Notwithstanding any provision in the Plan to the contrary,
     distributions upon the death of a Participant shall be made in accordance
     with the following requirements and shall otherwise comply with Code
     Section 401(a)(9) and the Regulations thereunder. If it is determined,
     pursuant to Regulations, that the distribution of a Participant's interest
     has begun and the Participant dies before his entire interest has been
     distributed to him, the remaining portion of such interest shall be
     distributed at least as rapidly as under the method of distribution
     selected pursuant to Section 7.5 as of his date of death. If a Participant
     dies before he has begun to receive any distributions of his interest under
     the Plan or before distributions are deemed to have begun pursuant to
     Regulations, then his death benefit shall be distributed to his
     Beneficiaries by December 31st of the calendar year in which the fifth
     anniversary of his date of death occurs.

          However, in the event that the Participant's spouse (determined as of
     the date of the Participant's death) is his Beneficiary, then in lieu of
     the preceding rules, distributions must be made over a period not extending
     beyond the life expectancy of the spouse and must commence on or before the
     later of (1) December 31st of the calendar year immediately following the
     calendar year in which the Participant died; or (2) December 31st of the
     calendar year in which the Participant would have attained 70 1/2. If the
     surviving spouse dies before distributions to such spouse begin, then the 
     5-year distribution requirement of this section shall apply as if the 
     spouse was the Participant.

          (i) For purposes of this Section, the life expectancy of a Participant
     and a Participant's spouse may not be redetermined.

                                     VII-8
<PAGE>
 
     7.7  DISTRIBUTION FOR MINOR BENEFICIARY

     In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary, or to the custodian for such
Beneficiary under the Uniform Gift to Minors Act or Gift to Minors act, if such
is permitted by the laws of the state in which said Beneficiary resides. Such a
payment to the legal guardian, custodian or parent of a minor Beneficiary shall
fully discharge the Trustee, Employer, and Plan from further liability on
account thereof.

     7.8  LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN

     In the event that all, or any portion, of the distribution payable to
a Participant or his Beneficiary hereunder shall, at the expiration of five
years after it shall become payable, remain unpaid solely by reason of the
inability of the Administrator, after sending a registered letter, return
receipt requested, to the last known address, and after further diligent effort,
to ascertain the whereabouts of such Participant or his Beneficiary, the amount
so distributable shall be treated as a Forfeiture pursuant to the Plan.  In the
event a Participant or Beneficiary is located subsequent to his benefit being
reallocated, such benefit shall be restored.

     7.9  RIGHT OF FIRST REFUSAL

          (a) If any Participant or Former Participant, his Beneficiary or any
     other person to whom shares of Company Stock are distributed from the Plan
     (the "Selling Participant") shall, at any time, desire to sell some or all
     of such shares (the "Offered Shares") to a third party (the "Third Party"),
     the Selling Participant shall give written notice of such desire to the
     Administrator and the Employer, which notice shall contain the number of
     shares offered for sale, the proposed terms of the sale and the names and
     addresses of both the Selling Participant and Third Party. Both the Trust
     Fund and the Employer shall each have the right of first refusal for a
     period of 14 days from the date the Selling Participant gives such written
     notice to the Employer and the Administrator (such 14 day period to run
     concurrently against the Trust Fund and the Employer) to acquire the
     Offered Shares. As between the Trust Fund and the Employer, the Trust Fund
     shall have priority to acquire the shares pursuant to the right of first
     refusal. The selling price and terms shall be the same as offered by the
     Third Party.

          (b) If the Trust Fund and the Employer do not exercise their right of
     first refusal within the required 14 day period provided above, the Selling
     Participant shall have the right, at any time following the expiration of
     such 14 day period, to dispose of the Offered Shares to the third Party'
     provided, however, that (i) no disposition shall be made to the Third Party
     on terms more favorable to the Third Party than those set forth in the
     written notice delivered by the Selling Participant above, and (ii) if such
     disposition shall not be made to a third party on the terms offered to the
     Employer and the Trust Fund, the offered Shares shall again be subject to
     the right of first refusal set forth above.

                                     VII-9
<PAGE>
 
          (c) The closing pursuant to the exercise of the right of first refusal
     under Section 7.9(a) above shall take place at such place agreed upon
     between the Administrator and the Selling Participant, but not later than
     10 days after the Employer or the Trust Fund shall have notified the
     Selling Participant of the exercise of the right of first refusal. At such
     closing, the Selling Participant shall deliver certificates representing
     the Offered Shares duly endorsed in blank for transfer, or with stock
     powers attached duly executed in blank with all required transfer tax
     stamps attached or provided for, and the Employer or the Trust Fund shall
     deliver the purchase price, or an appropriate portion thereof, to the
     Selling Participant.

          (d) Except as provided in this Paragraph (d), no Company Stock
     acquired with the proceeds of an Exempt Loan complying with the
     requirements of Section hereof shall be subject to a right of first
     refusal. Company Stock, which is acquired with the proceeds of an Exempt
     Loan, which is distributed to a Participant or Beneficiary shall be subject
     to the right of first refusal, provided for in Paragraph (a) of this
     Section only so long as the Company Stock is not publicly traded. The term
     "publicly traded" refers to a securities exchange registered under
     section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) or that is
     quoted on a system sponsored by a national securities association
     registered under Section 15A(b) of the Securities Exchange Act (15 U.S.C.
     780). In addition, in the case of Company Stock which was acquired with the
     proceeds of a loan described in Section 5.4, the selling price and other
     terms under the right must not be less favorable to the seller than the
     greater of the value of the security determined under Regulation 54.4975-
     11(d)(5), or the purchase price and other terms offered by a buyer (other
     than the Employer or the Trust Fund), making a good faith offer to purchase
     the security. The right of first refusal must lapse no later than 14 days
     after the security holder gives notice to the holder of the right that an
     offer by a third party to purchase the security has been made. The right of
     first refusal shall comply with the provisions of Paragraphs (a), (b) and
     (c) of this Section, except to the extent those provisions may conflict
     with the provisions of this paragraph.

     7.10 STOCK CERTIFICATE LEGEND

     Certificates for shares distributed pursuant to the Plan shall contain the
following legend:

     "The shares represented by this certificate are transferable only upon
     compliance with the terms of the STERLING CHEMICALS ESOP, a copy of said
     Plan being on file in the office of the Company."

     7.11 PUT OPTION

          (a) If Company Stock which was not acquired with the proceeds of an
     Exempt Loan is distributed to a Participant and such Company Stock is not
     readily tradeable on an established securities market, a Participant has a
     right to require the Employer to repurchase the Company Stock distributed
     to such Participant under a fair valuation formula. Such Stock shall be
     subject to the provisions of Section 7.11(c).

                                    VII-10
<PAGE>
 
          (b) Company Stock which is acquired with the proceeds of an Exempt
     Loan and which is not publicly traded when distributed, or if it is subject
     to a trading limitation when distributed, must be subject to a put option.
     For purposes of this paragraph, a "trading limitation" on a Company Stock
     is a restriction under any Federal or State securities law or any
     regulation thereunder, or an agreement (not prohibited by Section 7.12)
     affecting the Company Stock which would make the Company Stock not as
     freely tradeable as stock not subject to such restriction.

          (c) The put option must be exercisable only by a Participant, by the
     Participant's donees, or by a person (including an estate or its
     distributee) to whom the Company Stock passes by reason of a Participant's
     death. (Under this paragraph, Participant means a Participant or Former
     Participant and the Beneficiaries of the Participant or Former Participant
     under the Plan.) The put option must permit a Participant to put the
     Company Stock to the Employer. Under no circumstances may the put option
     bind the Plan. However, it shall grant the Plan an option to assume the
     rights and obligations of the Employer at the time that the put option is
     exercised. If it is known at the time a loan is made that Federal or state
     law will be violated by the Employer's honoring such put option, the put
     option must permit the Company Stock to be put, in a manner consistent with
     such law, to a third party (e.g., an affiliate of the Employer or a
     shareholder other than the Plan) that has substantial net worth at the time
     the loan is made and whose net worth is reasonably expected to remain
     substantial.

          The put option shall commence as of the day following the date the
     Company Stock is distributed to the Former Participant and end 60 days
     thereafter and if not exercised within such 60-day period, an additional 
     60-day option shall commence on the first day of the fifth month of the 
     Plan Year next following the date the stock was distributed to the Former
     Participant (or such other 60-day period as provided in regulations
     promulgated by the Secretary of the Treasury). However, in the case of
     Company Stock that is publicly traded without restrictions when distributed
     but ceases to be so traded within either of the 60-day periods described
     herein after distribution, the Employer must notify each holder of such
     Company Stock in writing on or before the tenth day after the date the
     Company Stock ceases to be so traded that for the remainder of the
     applicable 60-day period the Company Stock is subject to the put option.
     The number of days between the tenth day and the date on which notice is
     actually given, if later than the tenth day, must be added to the duration
     of the put option. The notice must inform distributees of the terms of the
     put options that they are to hold. The terms must satisfy the requirements
     of this paragraph.

          The put option is exercised by the holder notifying the Employer in
     writing that the put option is being exercised; the notice shall state the
     name and address of the holder and the number of shares to be sold. The
     period during which a put option is exercisable does not include any time
     when a distributee is unable to exercise it because the party bound by the
     put option is prohibited from honoring it by applicable Federal or state
     law. The price at which a put option must be exercisable is the value of
     the Company Stock determined in

                                    VII-11
<PAGE>
 
     accordance with Section 6.12. Payment under the put option involving a
     "Total Distribution" shall be paid in substantially equal monthly,
     quarterly, semiannual or annual installments over a period certain
     beginning not later than 30 days after the exercise of the put option and
     not extending beyond 5 years. The deferral of payment is reasonable if
     adequate security and a reasonable interest rate on the unpaid amounts are
     provided. The amount to be paid under the put option involving installment
     distributions must be paid not later than 30 days after the exercise of the
     put option. Payment under a put option must not be restricted by the
     provisions of a loan or any other arrangement, including the terms of the
     employer's articles of incorporation, unless so required by applicable
     state law.

          For purposes of this Section, "Total Distribution" means a
     distribution to a Participant or Former Participant within one taxable year
     of the entire Vested Participant's Account.

          (d) An arrangement involving the Plan that creates a put option must
     not provide for the issuance of put options other than as provided under
     this Section. The Plan (and the Trust Fund) must not otherwise obligate
     itself to acquire Company Stock from a particular holder thereof at an
     indefinite time determined upon the happening of an event such as the death
     of the holder.

     7.12 NONTERMINABLE PROTECTIONS AND RIGHTS

     No Company Stock, except as provided in Section 7.9(d) and Section 7.11(b),
acquired with the proceeds of a loan described in Section 5.4 hereof may be
subject to a put, call, or other option, or buy-sell or similar arrangement when
held by and when distributed from the Trust Fund, whether or not the Plan is
then an ESOP. The protections and rights granted in this Section are
nonterminable, and such protections and rights shall continue to exist under the
terms of this Plan so long as any Company Stock acquired with the proceeds of a
loan described in Section 5.4 hereof is held by the Trust Fund or by a
Participant or other person for whose benefit such protections and rights have
been created, and neither the repayment of such loan nor the failure of the Plan
to be an ESOP, nor an amendment of the Plan shall cause a termination of said
protections and rights.

     7.13 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS

     All rights and benefits, including elections, provided to a Participant in
this plan shall be subject to the rights afforded to any "alternate payee" under
a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
separated from service and has not reached the "earliest retirement age" under
the Plan.  For purposes of this Section, "alternate payee," "qualified domestic
relations order" and "earliest retirement age" shall have the meaning set forth
under Code Section 414(p).


                                    VII-12
<PAGE>
 
     7.14 PAYMENT OF DISTRIBUTION DIRECTLY TO ELIGIBLE RETIREMENT PLAN

          (a) Notwithstanding any provision of the Plan to the contrary that
     would otherwise limit a Distributee's election under this Section, a
     Distributee may elect, at the time and in the manner prescribed by the
     Administrator, to have any portion of an Eligible Rollover Distribution
     paid directly to an Eligible Retirement Plan specified by the Distributee
     in a Direct Rollover.

          (b) For purposes of this Section the following definitions shall
     apply:

              (1) "Eligible Rollover Distribution": An Eligible Rollover
          Distribution is any distribution of all or any portion of the balance
          to the credit of the Distributee, except that an Eligible Rollover
          Distribution does not include: any distribution that is one of a
          series of substantially equal periodic payments (not less frequently
          than annually) made for the life (or life expectancy) of the
          Distributee or the joint lives (or joint life expectancies) of the
          Distributee and the Distributee's designated Beneficiary, or for a
          specified period of ten years or more; any distribution to the extent
          such distribution is required under Section 401(a)(9) of the Code; and
          the portion of any distribution that is not includible in gross income
          (determined without regard to the exclusion for net unrealized
          appreciation with respect to employer securities).

              (2) "Eligible Retirement Plan": An Eligible Retirement Plan is an
          individual retirement account described in Section 408(a) of the Code,
          an individual retirement annuity described in Section 408(b) of the
          Code, an annuity plan described in Section 403(a) of the Code, or a
          qualified trust described in Section 401(a) of the Code, that accepts
          the Distributee's Eligible Rollover Distribution. However, in the case
          of an Eligible Rollover Distribution to the surviving spouse, an
          Eligible Retirement Plan is an individual retirement account or
          individual retirement annuity.

              (3) "Distributee": A Distributee includes an Employee or former
          Employee. In addition, the Employee's or former Employee's surviving
          spouse and the Employee's or former Employee's spouse or former spouse
          who is the alternate payee under a qualified domestic relations order,
          as defined in Section 414(p) of the Code, are Distributees with regard
          to the interest of the spouse or former spouse.

              (4) "Direct Rollover": A Direct Rollover is a payment by the Plan
          to the Eligible Retirement Plan specified by the Distributee.

                                    VII-13
<PAGE>
 
     7.15 30-DAY WAIVER

     If a distribution is one to which Sections 401(a)(11) and 417 of the Code
do not apply, such distribution may commence less than 30 days after the notice
required under Section 1.411(a)-11(c) of the Regulations is given, provided
that:

              (1) the Plan Administrator clearly informs the Participant that
          the Participant has a right to a period of at least 30 days after
          receiving the notice to consider the decision of whether or not to
          elect a distribution (and, if applicable, a particular distribution
          option), and

              (2) the Participant, after receiving the notice, affirmatively
          elects a distribution.


                                    VII-14
<PAGE>
 
                                 ARTICLE VIII
                                    TRUSTEE

     8.1  BASIC RESPONSIBILITIES OF THE TRUSTEE

     The Trustee shall have the following categories of responsibilities:

          (a) With respect to Company Stock, the Company Stock Account, or an
     Exempt Loan, except as directed solely by the Administrator,

              (1) the Trustee shall not sell, acquire or dispose of Company 
          Stock or 
                   
              (2) enter into any Exempt Loan.

          Upon direction of the Administrator, up to 100% of the Trust Fund 
     may be invested in Company Stock.

          (b) With respect to the Other Investments Account, the Trustee shall
     invest such Participant's Accounts as directed by the Participant in the
     funds then made available under the Trust for such directions.

          (c) At the direction of the Administrator, the Trustee shall pay
     benefits required under the Plan to be paid to Participants, or, in the
     event of their death, to their Beneficiaries.

          (d) The Trustee shall maintain records of receipts and disbursements,
     and furnish to the Employer and/or Administrator for each Plan Year a
     written annual report according to Section 3.2 of this Trust Agreement.

          (e) If there shall be more than one Trustee, they shall act by a
     majority of their number, but may authorize one or more of them to sign
     papers on their behalf.

     8.2  VOTING COMPANY STOCK

     The Trustee shall vote all Company Stock held by it as part of the Plan as
sets at such time and in such manner as the Administrator shall direct.  
Provided, however, that if any agreement entered into by the Trustee, upon the
direction of the Administrator, provides for voting of any shares of Company
Stock pledged as security for any obligation of the Plan, then such shares of
Company Stock shall be voted in accordance with such agreement.  If the
Administrator fails or refuses to give the Trustee timely instructions as to how
to vote any Company Stock held by the Trustee and which the Administrator
otherwise has the right to vote, the Trustee shall not vote such Company Stock,
except as otherwise required by the Act, and shall consider the Administrator's
failure or refusal to give timely instructions as an exercise of the
Administrator's rights and a directive to the Trustee not to vote said Company
Stock.  The Trustee shall not vote Company Stock

                                    VIII-1
<PAGE>
 
when a Participant or Beneficiary, pursuant to this Section, fails to exercise a
right to vote Company Stock.

     Notwithstanding the foregoing, if the Employer has a registration-type
class of securities, each Participant or Beneficiary shall be entitled, in lieu
of the Administrator, to direct the Trustee as to the manner in which the
Company Stock allocated to the Company Stock Account of such Participant or
Beneficiary is to be voted.  If the Employer does not have a registration-type
class of securities, each Participant or Beneficiary in the Plan shall be
entitled, in lieu of the Administrator, to direct the Trustee as to the manner
in which voting rights on shares of Company Stock which are allocated to the
Company Stock Account of such Participant or Beneficiary are to be exercised
with respect to any corporate matter which involves the voting of such shares
with respect to the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business, or such similar
transaction as prescribed in Regulations.  For purposes of this Section the term
"registration-type class of securities" means"  (A) a class of securities
required to be registered under Section 12 of the Securities Exchange Act of
1934; and (B) a class of securities which would be required to be so registered
except for the exemption from registration provided in subsection (g)(2)(H) of
such Section 12.

     The Trustee shall notify each Participant or Beneficiary of each tender or
exchange offer and utilize its best efforts to distribute or cause to be
distributed to such Participant or Beneficiary in a timely manner all
information received by the Trustee as a recordholder of shares of Company Stock
in connection with any such tender or exchange offer. Each Participant or
Beneficiary shall have the right from time to time with respect to the shares of
Company stock allocated to his account, to instruct the Trustee in writing as to
the manner in which to respond to any tender or exchange offer which shall be
pending or which may be made in the future for all shares of Company Stock or
any portion thereof. A Participant's or Beneficiary's instructions shall remain
in force until superseded in writing by the Participant or Beneficiary. The
Trustee shall tender or exchange such shares of Company Stock as and to the
extent so instructed. Unless and until shares of Company Stock are tendered or
exchanged, the individual instructions received by the Trustee from Participant
or Beneficiaries shall be held in strict confidence by the Trustee and shall not
be divulged or released to any person, including, but not limited to officers or
Employees of the Employer, or of any other Participating Employer; provided,
however, that the Trustee shall advise the Employer, at any time upon request,
of the total number of shares not subject to instructions to tender or exchange.
The Trustee shall not make recommendations to Participants or Beneficiaries on
whether to instruct the Trustee to tender or exchange.

     The Trustee shall not vote, sell, convey or transfer any allocated shares
of Company Stock for which no directions are timely received from Participants
or Beneficiaries pursuant to the immediately preceding paragraph, and shares of
Company Stock held by the Trustee which are not allocated to Participants'
Company Stock Accounts shall be voted by the Trustee only in the manner directed
by the Administrator.

                                    VIII-2
<PAGE>
 
                                 ARTICLE IX
                      AMENDMENT, TERMINATIONS, AND MERGERS

     9.1  AMENDMENT

     The Company shall have the right at any time to amend the Plan by action of
its Board of Directors. In addition, the Chief Executive Officer of the Company
shall have the authority to amend the Plan, provided such amendment does not
materially increase the Company's obligations hereunder or are of a ministerial
or technical compliance nature. However, no such amendment shall authorize or
permit any part of the Trust Fund (other than such part as is required to pay
taxes and administration expenses) to be used for or diverted to purposes other
than for the exclusive benefit of the Participants or their Beneficiaries or
estates; no such amendment shall cause any reduction in the amount credited to
the account of any Participant or cause or permit any portion of the Trust Fund
to revert to or become the property of the Employer; and no such amendment which
affects the rights, duties or responsibilities of the Trustee and Administrator
may be made without the Trustee's and Administrator's written consent. The
Trustee shall not be required to execute any such amendment unless the Trust
provisions contained herein are as part of the Plan and the amendment affects
the duties of the Trustee hereunder.

     In addition, no such amendment shall have the effect of terminating the
protections and rights set forth in Section , unless such termination shall then
be permitted under the applicable provisions of the Code and Regulations; such a
termination is currently expressly prohibited by Regulation 54.4975-
11(a)(3)(ii).

     For the purposes of this Section, a Plan amendment which has the effect of
(1) eliminating or reducing an early retirement benefit or a retirement-type
subsidy, (2) eliminating an optional form of benefit (as provided in
Regulations) or (3) restricting, directly or indirectly, the benefit provided to
any Participant prior to the amendment shall be treated as reducing the amount
credited to the account of a Participant except that an amendment described in
clause (2) above (other than an amendment having an effect described in clause
(1) above) shall not be treated as reducing the amount credited to the account
of a Participant to the extent so provided in Regulations. Any Plan amendment
which modifies distribution options in a nondiscriminatory manner shall not be
treated as reducing the amount credited to the account of a Participant.

     9.2  TERMINATION

     The Board of Directors of the Company shall have the right at any time
to terminate the Plan by delivering to the Trustee and Administrator written
notice of such termination.  Upon any termination (full or partial) or complete
discontinuance of contributions, all amounts credited to the affected
Participants' Accounts shall become 100% Vested and shall not thereafter be
subject to forfeiture and all unallocated amounts shall be allocated to the
accounts of all Participants in accordance with the provisions hereof.  Upon
such termination of the Plan, the Employer, by written notice to the Trustee and
Administrator, may direct either:

                                     IX-1
<PAGE>
 
          (a) complete distribution of the assets in the Trust Fund to the
     Participants in a manner consistent with the requirements of Sections 7.5
     and 7.6; or

          (b) continuation of the Trust created by this agreement and the
     distribution of benefits at such time and in such manner as though the Plan
     had not been terminated.

     9.3  MERGER OR CONSOLIDATION

     This Plan may be merged or consolidated with, or its assets and/or
liabilities maybe transferred to any other Plan and Trust only if the benefits
which would be received by a Participant of this Plan, in the event of a
termination of the Plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation.

                                     IX-2
<PAGE>
 
                                   ARTICLE X
                                 MISCELLANEOUS

     10.1 PARTICIPANT'S RIGHTS

     This Plan shall not be deemed to constitute a contract between the Employer
and any participant or to be a consideration or an inducement for the employment
of any Participant or Employee.  Nothing contained in this Plan shall be deemed
to give any Participant or Employee the right to be retained in the service of
the Employer or to interfere with the right of the Employer to discharge any
Participant or Employee at any time regardless of the effect which such
discharge shall have upon him as a Participant of this Plan.

     10.2 ALIENATION

          (a) Subject to the exceptions provided below, no benefit which shall
     be payable out of the Trust Fund to any person (including a Participant or
     his Beneficiary) shall be subject in any manner to anticipation,
     alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and
     any attempt to anticipate, alienate, sell, transfer, assign, pledge,
     encumber, or charge the same shall be void; and no such benefit shall be in
     any manner be liable for, or subject to, the debts, contracts, liabilities,
     engagements, or torts of any such person, nor shall it be subject to
     attachment or legal process for or against such person, and the same shall
     not be recognized by the Trustee, except to such extent as may be required
     by law.

          (b) This provision shall not apply to a "qualified domestic relations
     order" defined in Code Section 414(p), and those other domestic relations
     orders permitted to be so treated by the Administrator under the provisions
     of the Retirement Equity Act of 1984. The Administrator shall establish a
     written procedure to determine the qualified status of domestic relations
     orders and to administer distributions under such qualified orders.
     Further, to the extent provided under a "qualified domestic relations
     order", (i) a Former spouse of a Participant shall be treated as the spouse
     or surviving spouse for all purposes under the Plan and (ii) the Plan may
     include distribution prior to the Participant's attainment of his "earliest
     retirement age."

     10.3 CONSTRUCTION OF PLAN

     This Plan shall be construed and enforced according to the Act and the laws
of the State of Delaware, other than its laws respecting choice of law, to the
extent not preempted by the Act.

     10.4 GENDER AND NUMBER

     Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply,

                                      X-1
<PAGE>
 
and whenever any words are used herein in the singular or plural form, they
shall be construed as though they were also used in the other form in all cases
where they would so apply.

     10.5 LEGAL ACTION

     In the event any claim, suit, or proceeding is brought regarding the Trust
and/or Plan established hereunder to which the Trustee or the Administrator may
be a party, and such claim suit, or proceeding is resolved in favor of the
Trustee or Administrator, they shall be entitled to be reimbursed from the Trust
Fund for any and all costs, attorney's fees, and other expenses pertaining
thereto incurred by them for which they shall have become liable.

     10.6 PROHIBITION AGAINST DIVERSION OF FUNDS

          (a) Except as provided below and otherwise specifically permitted by
     law, it shall be impossible by operation of the Plan or of the Trust, by
     termination of either, by power or revocation or amendment, by the
     happening of any contingency, by collateral arrangement or by any other
     means, for any part of the corpus or income of any trust fund maintained
     pursuant to the Plan or any funds contributed thereto to be used for, or
     diverted to, purposes other than the exclusive benefit of Participants,
     Retired Participants, or their Beneficiaries.

          (b) In the event the Employer shall make an excessive contribution
     under a mistake of fact pursuant to Section 403(c)(2)(A) of the Act, the
     Employer may demand repayment of such excessive contribution at any time
     within one year following the time of payment and the Trustees shall return
     such amount to the Employer within the one year period. Earnings of the
     Plan attributable to the excess contributions may not be returned to the
     Employer but any losses attributable thereto must reduce the amount so
     returned.

     10.7 BONDING

     Every Fiduciary, except a bank or an insurance company, unless exempted by
the Act and regulations thereunder, shall be bonded in an amount not less than
10% of the amount of the funds such Fiduciary handles; provided, however, that
the minimum bond shall be $1,000 and the maximum bond, $500,000.  The amount of
funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current year.  The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in
connivance with others.  The surety shall be a corporate surety company (as such
term is used in Section 412(a)(2) of the Act), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything in the Plan to the
contrary, the cost of such bonds shall be an expense of and may, at the election
of the Administrator, be paid from the Trust Fund or by the Employer.

                                      X-2
<PAGE>
 
     10.8  RECEIPT AND RELEASE FOR PAYMENTS

     Any payment to any Participant, his legal representative, Beneficiary, or
to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.

     10.9  ACTION BY THE EMPLOYER

     Whenever the Employer under the terms of the Plan is permitted or required
to do or perform any act or matter or thing, it shall be done and performed by a
person duly authorized by its legally constituted authority.

     10.10 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY

     The "named Fiduciaries" of this Plan are the Company and the Administrator.
The named Fiduciaries shall have only those specific powers, duties,
responsibilities, and obligations as are specifically given them under the Plan.
In general, the Company shall have the sole responsibility for making the
contributions provided for under Section 4.1; and shall have the sole authority
to appoint and remove the Trustee and the Administrator; to formulate the Plan's
"funding policy and method"; and to amend or terminate, in whole or in part, the
Plan. The Administrator shall have the sole responsibility for the
administration of the Plan, which responsibility is specifically described in
the Plan, including the acquisition, holding and/or disposition of Company Stock
and the entering into any Exempt Loans. The Administrator shall also have the
sole responsibility of management of the assets of the Other Investments Account
held under the Trust, except those assets in such accounts, the management of
which has been assigned to an Investment Manager, who shall be solely
responsible for the management of the assets assigned to it, all as specifically
provided in the Plan.

     10.11 HEADINGS

     The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.

     10.12 APPROVAL BY INTERNAL REVENUE SERVICE

           (a) Notwithstanding anything herein to the contrary, contributions to
     this Plan are conditioned upon the initial qualification of the Plan under
     Code Section 401. If the Plan receives an adverse determination with
     respect to its initial qualification, then the Plan may return such
     contributions to the Employer within one year after such determination,
     provided the application for the determination is made by the time
     prescribed by law for filing the

                                      X-3
<PAGE>
 
     Employer's return for the taxable year in which the Plan was adopted, or
     such later date as the Secretary of the Treasury may prescribe.

           (b) Notwithstanding any provisions to the contrary, except Sections
     3.6 and 4.3(d), any contribution by the Employer to the Trust Fund is
     conditioned upon the deductibility of the contribution by the Employer
     under the Code and, to the extent any such deduction is disallowed, the
     Employer may, within one year following the disallowance of the deduction,
     demand repayment of such disallowed contribution and the Trustee shall
     return such contribution within one year following the disallowance of the
     deduction, demand repayment of such disallowed contribution and the Trustee
     shall return such contribution within one year following the disallowance.
     Earnings of the Plan attributable to the excess contribution may not be
     returned to the Employer, but any losses attributable thereto must reduce
     the amount so returned.

     10.13 UNIFORMITY

     All provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner.

     10.14 SECURITIES AND EXCHANGE COMMISSION APPROVAL

     The Company may request an interpretative letter from the Securities and
Exchange Commission stating that the transfer of Company Stock contemplated
hereunder does not involve transactions requiring a registration of such Company
Stock under the Securities Act of 1933.  In the event that a favorable
interpretative letter is not obtained, the Employer reserves the right to amend
the Plan and Trust retroactively to their Effective Dates in order to obtain a
favorable interpretative letter or to terminate the Plan.

     10.15 INDEMNIFICATION

     Neither the Employer, any of its officers or directors, nor the
Administrator shall be personally liable for any action or inaction with respect
to any duty or responsibility imposed upon such person by the terms of the Plan,
unless such action or inaction is judicially determined to be a breach of that
person's fiduciary responsibility with respect to the Plan under any applicable
law. The Employer may indemnify or purchase insurance to underwrite indemnity
for the Administrator and/or the Employer's board of directors against any
personal liability or expense except for their own gross negligence.

     10.16 CONTROLLING LAW

     All legal questions pertaining to the Plan, all construction and all
Regulations shall be determined in accordance with the laws of the State of
Delaware and the United States.  All contributions shall be deemed to have been
made under such laws.  Notwithstanding anything in this

                                      X-4
<PAGE>
 
Agreement to the contrary, the effective dates provided for herein for the
application of any Code Section to this Plan shall be extended in accordance
with any act of Congress or any effective Regulation, Ruling or other measure of
like import.

                                      X-5
<PAGE>
 
                                  ARTICLE XI
                            PARTICIPATING EMPLOYERS

     11.1 ADOPTION BY OTHER EMPLOYERS

     Notwithstanding anything herein to the contrary, with the consent of the
Company and Trustee, any other Affiliated Employer may adopt this Plan and all
of the provisions hereof, and participate herein and be known as a Participating
Employer, by a properly executed document evidencing said intent and will of
such Participating Employer.

     11.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS

          (a) Each such Participating Employer shall be required to use the same
     Trustee as provided in this Plan.

          (b) The Trustee, unless directed otherwise by the Administrator, shall
     commingle and hold as one Trust Fund all contributions made by
     Participating Employers.

          (c) The transfer of any Participant from or to an Employer
     participating in this Plan, whether he be an Employee of the Employer or a
     Participating Employer, shall not affect such Participant's rights under
     the Plan, and all amounts credited to such Participant's Account as well as
     his accumulated service time with the transferor or predecessor, and his
     length of participation in the Plan, shall continue to his credit.

          (d) All rights and values forfeited by termination of employment shall
     inure only to the benefit of the Employee-Participants of the Participating
     Employer by which the forfeiting Participant was employed, except if the
     Forfeiture is for an Employee whose Employer is a member of an affiliated
     or controlled group, then said Forfeiture shall be allocated, based on
     Compensation to all Participant Accounts of Participating Employers who are
     members of the affiliated or controlled group. Should an Employee of one
     ("First") Employer be transferred to an associated ("Second") Employer (the
     Employer, an affiliate or subsidiary), such transfer shall not cause his
     Account balance (generated while an Employee of "First" Employer) in any
     manner or by any amount to be forfeited. Such Employee's Participant
     Account balance for all purposes of the Plan, including length of service,
     shall be considered as though he had always been employed by the "Second"
     Employer and as such had received contributions, forfeitures, earnings of
     losses, and appre ciation or depreciation in value of assets totaling
     amount so transferred.

          (e) Any expenses of the Trust which are to be paid by the Employer or
     borne by the Trust Fund shall be paid by each Participating Employer in the
     same proportion that the total amount standing to the credit of all
     Participants employed by such Employer bears to the total standing to the
     credit of all Participants.

                                     XI-1
<PAGE>
 
     11.3 DESIGNATION OF AGENT

     Each Participating Employer shall be deemed to be a part of this Plan;
provided, however, that with respect to all of its relations with the Trustee
and Administrator for the purpose of this Plan, each Participating Employer
shall be deemed to have designated irrevocably the Employer as its agent.
Unless the context of the Plan clearly indicates the contrary, the word
"Employer" shall be deemed to include each Participating Employer as related to
its adoption of the Plan.

     11.4 EMPLOYEE TRANSFERS

     It is anticipated that an Employee may be transferred between Participating
Employers, and in the event of any such transfer, the Employee involved shall
carry with him his accumulated service and eligibility.  No such transfer shall
effect a termination of employment hereunder, and the Participating Employer to
which the Employee is transferred shall thereupon become obligated hereunder
with respect to such Employee in the same manner as was the Participating
Employer from whom the Employee was transferred.

     11.5 PARTICIPATING EMPLOYER'S CONTRIBUTION

     Any contribution or Forfeiture subject to allocation during each Plan Year
shall be allocated among all Participants of all Participating Employers in
accordance with the provisions of this Plan. On the basis of the information
furnished by the Administrator, the Trustee shall keep separate books and
records concerning the affairs of each Participating Employer hereunder and as
to the accounts and credits of the Employees of each Participating Employer.
The Trustee may, but need not, register contracts so as to evidence that a
particular Participating Employer is the interested Employer hereunder, but in
the event of an Employee transfer from one Participating Employer to another,
the employing Employer shall immediately notify the Administrator will notify
the Trustee thereof.  Notwithstanding anything herein seemingly to the contrary,
the Plan shall constitute a "single" Plan as to all Participating Employers and
not a separate plan as to any such Participating Employer.

     11.6 AMENDMENT

     Each amendment of this Plan shall be binding on each and every
Participating Employer and on the Trustee, unless its consent is necessary in
accordance with the terms of this Plan.

     11.7 DISCONTINUANCE OF PARTICIPATION

     Any Participating Employer shall be permitted to discontinue or revoke its
participation in the Plan.  At the time of any such discontinuance or
revocation, satisfactory evidence thereof and of any applicable conditions
imposed shall be delivered to the Trustee.  The Trustee shall thereafter
transfer, deliver and assign Trust Fund assets allocable to the Participants of
such Participating Employer or to such new Trustee as shall have been designated
by such Participating Employer, in

                                     XI-2
<PAGE>
 
the event that it has established a separate pension plan for its Employees. If
no successor is designated, the Trustee shall retain such assets for the
Employees of said Participating Employer pursuant to the provisions of Article
VII hereof.  In no such event shall any part of the corpus or income of the
Trust as it relates to such Participating Employer be used for or diverted for
purposes other than for the exclusive benefit of the Employees of such
Participating Employer.

     11.8 ADMINISTRATOR'S AUTHORITY

     The Administrator shall have authority to make any and all necessary rules
or regulations, binding upon all Participating Employers and all Participants,
to effectuate the purpose of this Article.

     11.9  PARTICIPATING EMPLOYER CONTRIBUTION FOR AFFILIATE

     If any Participating Employer is prevented in whole or in part from making
a contribution to the Trust Fund which it would otherwise have made under the
Plan by reason of having no current or accumulated earnings or profits, or
because such earnings or profits are less than the contribution which it would
otherwise have made, then, pursuant to Code Section 404(a)(3)(B), so much of the
contribution which such Participating Employer was so prevented from making may
be made, for the benefit of the participating employees of such Participating
Employer, by the other Participating Employers who are members of the same
affiliated group within the meaning of Code Section 1504 to the extent of their
current or accumulated earnings or profits, except that such contribution by
each such other Participating Employer shall be limited to the proportion of its
total current and accumulated earnings or profits remaining after adjustment for
its contribution to the Plan made without regard to this paragraph which the
total prevented contribution bears to the total current and accumulated earnings
or profits of all the Participating Employers remaining after adjustment for all
contributions made to the Plan without regard to this paragraph.

                                     XI-3
<PAGE>
 
                                 ARTICLE XII
                                TOP-HEAVY STATUS

     12.1  ARTICLE CONTROLS

     Any Plan provisions to the contrary notwithstanding, the provisions of
this Article shall control to the extent required to cause the Plan to comply
with the requirements imposed under Code Section 416.

     12.2  DEFINITIONS

     For purposes of this Article, the following terms and phrases shall have
these respective meanings:

          (a) Account Balance: As of any Valuation Date, the aggregate amount
     credited to an individual's account or accounts under a qualified defined
     contribution plan maintained by the Employer or an Affiliated Employer
     (excluding employee contributions which were deductible within the meaning
     of section 219 of the Code and rollover or transfer contributions made
     after December 31, 1983 by or on behalf of such individual to such plan
     from another qualified plan sponsored by an entity other than the Employer
     or an Affiliated Employer), increased by (1) the aggregate distributions
     made to such individual from such plan during a five-year period ending on
     the Determination Date and (2) the amount of any contributions due as of
     the Determination Date immediately following such Valuation Date.

          (b) Accrued Benefit: As of any Valuation Date, the present value
     (computed on the basis of the Assumptions) of the cumulative accrued
     benefit (excluding the portion thereof which is attributable to employee
     contributions which were deductible pursuant to section 219 of the Code, to
     rollover or transfer contributions made after December 31, 1983 by or on
     behalf of such individual to such plan from another qualified plan
     sponsored by an entity other than the Employer or an Affiliated Employer,
     to proportional subsidies or to ancillary benefits) of an individual under
     a qualified defined benefit plan maintained by the Employer or an
     Affiliated Employer increased by (1) the aggregate distributions made to
     such individual from such plan during a five-year period ending on the
     Determination Date and (2) the estimated benefit accrued by such individual
     between such Valuation Date and the Determination Date immediately
     following such Valuation Date. Solely for the purpose of determining top-
     heavy status, the Accrued Benefit of an individual shall be determined
     under (1) the method, if any, that uniformly applies for accrual purposes
     under all qualified defined benefit plans maintained by the Employer or an
     Affiliated Employer, or (2) if there is no such method, as if such benefit
     accrued not more rapidly than under the slowest accrual rate permitted
     under section 411(b)(1)(C) of the Code.

          (c) Aggregation Group: The group of qualified plans maintained by the
     Employer and each Affiliated Employer consisting of (1) each plan in which
     a Key

                                     XII-1
<PAGE>
 
     Employee participates and each other plan which enables a plan in which a
     Key Employee participates to meet the requirements of sections 401(a)(4) or
     410 of the Code, or (2) each plan in which a Key Employee participates,
     each other plan which enables a plan in which a Key Employee participates
     to meet the requirements of sections 401(a)(4) or 410 of the Code and any
     other plan which the Employer elects to include as a part of such group;
     provided, however, that the Employer may not elect to include a plan in
     such group if its inclusion would cause the group to fail to meet the
     requirements of sections 401(a)(4) or 410 of the Code.

          (d) Assumptions: The interest rate and mortality assumptions specified
     for top-heavy status determination purposes in any defined benefit plan
     included in the Aggregation Group including the Plan.

          (e) Determination Date: For the first Plan Year of any plan, the last
     day of such Plan Year and for each subsequent Plan Year of such plan, the
     last day of the preceding Plan Year.

          (f) Key Employee:  A "key employee" as defined in section 416(i) of 
     the Code and the Treasury Regulations thereunder.

          (g) Plan Year:  With respect to any plan, the annual accounting 
     period used by such plan for annual reporting purposes.

          (h) Remuneration: Compensation within the meaning of section 415(c)(3)
     of the Code, as limited by section 401(a)(17) of the Code for Plan Years
     beginning after December 31, 1988.

          (i) Valuation Date: With respect to any Plan Year of any defined
     contribution plan, the most recent date within the twelve-month period
     ending on a Determination Date as of which the trust fund established under
     such plan was valued and the net income (or loss) thereof allocated to
     participants' accounts. With respect to any Plan Year of any defined
     benefit plan, the most recent date within a twelve-month period ending on a
     Determination Date as of which the plan assets were valued for purposes of
     computing plan costs for purposes of the requirements imposed under section
     412 of the Code.

     12.3  TOP-HEAVY STATUS

           (a) The Plan shall be deemed to be top-heavy for a Plan Year, if, as
     of the Determination Date for such Plan Year, (1) the sum of Account
     Balances of Participants who are Key Employees exceeds 60% of the sum of
     Account Balances of all Participants unless an Aggregation Group including
     the Plan is not top-heavy or (2) an Aggregation Group including the Plan is
     top-heavy. An Aggregation Group shall be deemed to be top-heavy as of a
     Determination Date if the sum (computed in accordance with section
     416(g)(2)(B) of

                                     XII-2
<PAGE>
 
     the Code and the Treasury Regulations promulgated thereunder) of (1) the
     Account Balances of Key Employees under all defined contribution plans
     included in the Aggregation Group and (2) the Accrued Benefits of Key
     Employees under all defined benefit plans included in the Aggregation Group
     exceeds 60% of the sum of the Account Balances and the Accrued Benefits of
     all individuals under such plans. Notwithstanding the foregoing, the
     Account Balances and Accrued Benefits of individuals who are not Key
     Employees in any Plan Year but who were Key Employees in any prior Plan
     Year shall not be considered in determining the top-heavy status of the
     Plan for such Plan Year. Further, notwithstanding the foregoing, the
     Account Balances and Accrued Benefits of individuals who have not performed
     services for the Employer at any time during the five-year period ending on
     the applicable Determination Date shall not be considered.

     12.4  TERMINATION OF TOP-HEAVY STATUS

     If the Plan has been deemed to be top-heavy for one or more Plan Years
and thereafter ceases to be top-heavy, the provisions of this Article shall
cease to apply to the Plan effective as of the Determination Date on which it is
determined to no longer be top-heavy.

     12.5  EFFECT OF ARTICLE

     Notwithstanding anything contained herein to the contrary, the provisions
of this Article shall automatically become inoperative and of no effect to the
extent not required by the Code or the Act.

     IN WITNESS WHEREOF, this Plan has been executed this  August 21, 1996,
effective for all purposes as of the Effective Date.

                                  STX CHEMICALS CORP.
                                  (to be renamed Sterling Chemicals, Inc.)



                                  By:  /s/ Hunter Nelson
                                       -----------------
                                  Name:    Hunter Nelson
                                  Title:   Vice President



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