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                        STERLING CHEMICALS HOLDINGS, INC.
                            STERLING CHEMICALS, INC.

                AMENDED AND RESTATED KEY EMPLOYEE PROTECTION PLAN


                             PRELIMINARY STATEMENTS

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

       B.     The Holdings Board and the Chemicals Board (as such terms are
              defined below) have previously duly adopted that certain Key
              Employee Protection Plan dated effective as of January 1, 2000
              (the "Existing Plan").

       C.     The Holdings Board and the Chemicals Board desire to amend the
              Existing Plan in certain respects effective as of July 26, 2000
              (the "Effective Date").

              NOW, THEREFORE, the Existing Plan is hereby amended and restated
to read in its entirety as follows:

                                    ARTICLE I

                         Definitions and Interpretations

              Section 1.01. Definitions. Capitalized terms used in this Plan
shall have the following respective meanings, except as otherwise provided or as
the context shall otherwise require:

              "Annual Compensation" shall mean, when used as of any date with
       reference to any Participant, the sum of (i) the highest annual base
       salary of such Participant in effect at any time during the three-year
       period ending immediately prior to the date on which the applicable
       Change of Control occurs plus (ii) the Targeted Bonus, if any, of such
       Participant in effect immediately prior to the date on which the
       applicable Change of Control occurs.

              "Applicable Multiplier" shall mean, when used with reference to
       any Participant, the multiplier specified in the Instrument of
       Designation executed and delivered by Holdings and such Participant in
       accordance with Section 2.01(b); provided, however, that in no event
       shall the Applicable Multiplier of any Participant be less than 0.50
       (except as provided in Section 2.03) or greater than 2.99.

              "Benefit Plan" shall mean any employee benefit plan (including any
       employee benefit plan within the meaning of Section 3(3) of the Employee
       Retirement Income Security Act of 1974), program, arrangement or practice
       maintained, sponsored or provided by Holdings

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

              "CEO" shall mean the Chief Executive Officer of Holdings.

              "Chairman" shall mean the Chairman of the Board of Holdings.

              "Change of Control" shall mean the occurrence of any of the
       following events: (i) Holdings shall not be the surviving entity in any
       merger, consolidation or other reorganization (or survives only as a
       subsidiary of an entity other than a previously wholly-owned Subsidiary),
       (ii) Holdings sells, leases or exchanges all or a substantial part of its
       assets (other than in the ordinary course of business) to any other
       person or entity (other than a wholly-owned Subsidiary), (iii) Holdings
       is to be dissolved and liquidated, (iv) Chemicals sells, leases or
       exchanges all or a substantial part of its assets (other than in the
       ordinary course of business) to any other person or entity (other than
       Holdings or another wholly-owned Subsidiary), (v) Chemicals ceases to be
       a wholly-owned Subsidiary for any reason other than a merger,
       consolidation or other reorganization in which Holdings or a wholly-owned
       Subsidiary is the surviving entity, (vi) Chemicals sells, leases or
       exchanges all or substantially all of its assets to any other person or
       entity (other than Holdings or another wholly-owned Subsidiary), (vii)
       any person or entity, including a "group" as contemplated by section
       13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires or
       gains ownership or control (including the power to vote) of more than 50%
       of the outstanding shares of Holdings' voting stock (based upon voting
       power) or (viii) as a result of or in connection with any tender or
       exchange offer, merger or other business combination, sale of assets or
       contested election of directors (by proxy or otherwise), the persons who
       were directors of Holdings immediately prior to such offer, merger or
       other business combination, sale of assets or election shall cease to
       constitute a majority of the Holdings Board (or a majority of the board
       of directors of any successor to Holdings) or a majority of the elected
       officers of Holdings immediately prior to such offer, merger or other
       business combination, sale of assets or election shall cease to serve as
       elected officers of Holdings (or any successor to Holdings).

              "Chemicals" means Sterling Chemicals, Inc. and any successor to
       all or substantially all of the business, operations or assets thereof
       pursuant to a Change of Control.

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

              "Code" shall mean the Internal Revenue Code of 1986, as amended.
       Reference in this Plan to any section of the Code shall be deemed to
       include any amendments or successor provisions to such section and any
       regulations under such section.

              "Company" shall mean Holdings and the Subsidiaries, including
       Chemicals.


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              "Compensation Committee" shall mean the Compensation Committee of
       the Holdings Board.

              "Disability" shall mean, when used with reference to any
       Participant, a physical or mental condition of such Participant that, in
       the opinion of a licensed physician reasonably acceptable to Holdings and
       such Participant or his or her legal representative, (a) prevents such
       Participant from being able to perform the services required of him or
       her as an employee of the Company, (b) has continued for at least 180
       days during any period of twelve consecutive months and (c) is reasonably
       expected to continue.

              "Effective Date" has the meaning specified in the Preliminary
       Statements.

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

              "Good Reason" shall mean, when used with reference to any
       Participant, any of the following actions or failures to act, but in each
       case only if it occurs at the time of or after a Change of Control and
       while such Participant is employed by Holdings or any Subsidiary and then
       only if it is not consented to by such Participant in writing:

              (a)   if (but only if) such Participant is Grade S23 or higher, a
                    material change in such Participant's reporting
                    responsibilities, titles or elected or appointed offices as
                    in effect immediately prior to the date on which the Change
                    of Control occurs, including any change caused by the
                    removal of such Participant from, or the failure to re-elect
                    such Participant to, any material corporate office of the
                    Company held by such Participant immediately prior to the
                    date on which the Change of Control occurs but excluding any
                    such change that occurs in connection with such
                    Participant's death, disability or retirement;

              (b)   if (but only if) such Participant is Grade S23 or higher,
                    the assignment to such Participant of duties and/or
                    responsibilities that are materially inconsistent with such
                    Participant's status, positions, duties, responsibilities
                    and functions with the Company immediately prior to the date
                    on which the Change of Control occurs;

              (c)   a material reduction by the Company in such Participant's
                    total compensation in effect immediately prior to the date
                    on which the Change of Control occurs or as such
                    compensation may thereafter be increased from time to time;

              (d)   the failure of the Company to continue such Participant's
                    eligibility for participation in Benefit Plans providing
                    benefits that, in the aggregate, are at least as favorable
                    to such Participant as those provided under the Benefit
                    Plans in which he or she was a participant immediately prior
                    to the date on which the Change of Control occurs;


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              (e)   the failure of the Company to maintain Benefit Plans
                    entitling such Participant to benefits that, in the
                    aggregate, are at least as favorable to such Participant as
                    those available to such Participant immediately prior to the
                    date on which the Change of Control occurs;

              (f)   any change of more than 75 miles (or, in the case of any
                    Participant for whom the Compensation Committee has approved
                    a shorter distance, such shorter distance) in the location
                    of the principal place of employment of such Participant
                    immediately prior to the date on which the Change of Control
                    occurs;

              (g)   any purported termination of such Participant's employment
                    for Misconduct or Disability not in accordance with the
                    provisions of Section 3.02; or

              (h)   any purported termination of such Participant's
                    participation in this Plan not in accordance with the
                    provisions of Section 2.01(c).

       For purposes of this definition, none of the actions described in clauses
       (a) through (c) above shall constitute a Good Reason with respect to any
       Participant if it was an isolated and inadvertent action not taken in bad
       faith by the Company and if it is remedied by the Company promptly after
       receipt of notice thereof given by such Participant. For purposes of this
       definition, any action or failure to act described in clauses (a) through
       (h) above shall cease to be a Good Reason with respect to any Participant
       on the date which is 60 days after such Participant acquires actual
       knowledge of such action or failure to act unless, prior to such date,
       such Participant gives a Termination Notice pursuant to Section 3.01. In
       the event of any dispute between the Company, on the one hand, and any
       Participant, on the other hand, with respect to the amount of total
       compensation of such Participant for purposes of clause (c) above or the
       aggregate value or level of any of such Participant's benefits for
       purposes of clause (d) or (e) above, the Company and such Participant
       shall use their best efforts to resolve such dispute themselves. If they
       are unable to resolve the dispute within 15 business days, Deloitte &
       Touche L.L.P., or such other nationally recognized accounting firm or
       employee benefits firm acceptable to the Company and such Participant,
       shall be engaged by the Company to make its own determination with
       respect to the dispute and the determination by such firm shall be final
       and binding on the Company (including the Compensation Committee) and
       such Participant. If any firm is engaged with respect to any dispute as
       aforesaid, (i) such firm shall be instructed to make its determination as
       soon as practicable and to use such materiality standard as such firm may
       determine to be reasonable under the circumstances and (ii) the
       disputants shall provide such firm with all books, records and other
       information relevant to such dispute as such firm may reasonably request.
       No firm engaged as aforesaid shall be liable or responsible to the
       Company (including the Compensation Committee) or any Participant for any
       determination made by such firm in good faith.

              "Grade" shall mean (i) when used with reference to any Participant
       for purposes of Section 2.02, his or her salary classification by the
       Company immediately prior to the date


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       on which a Change of Control occurs and (ii) when used with reference to
       any Participant for purposes of Section 2.03, his or her salary
       classification by the Company on the relevant Termination Date.

              "Holdings" means Sterling Chemicals Holdings, Inc. and any
       successor to all or substantially all of the business, operations or
       assets thereof pursuant to a Change of Control.

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

              "Misconduct" shall mean, when used with reference to any
       Participant:

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

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

              (c)   the failure of such Participant to observe and comply with
                    any other lawful published policy of the Company, but, in
                    the case of any such failure that is capable of being
                    remedied, only if such failure shall have continued
                    unremedied for more than 30 days after written notice
                    thereof is given to such Participant by Holdings and/or
                    Chemicals;

              (d)   the willful failure of such Participant to observe and
                    comply with all lawful and ethical directions and
                    instructions of the Holdings Board, the Chairman and/or the
                    CEO;

              (e)   the failure of such Participant to perform, in any material
                    respect, his or her duties with the Company, but only if
                    such failure was not caused by disability or incapacity and
                    shall have continued unremedied for more than 30 days after
                    written notice thereof is given to such Participant by
                    Holdings and/or Chemicals;

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

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

       For purposes of clauses (d) and (g) above, no act or failure to act on
       the part of any Participant shall be considered "willful" if such act or
       failure to act was done or omitted to


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       be done by such Participant in good faith and with the reasonable belief
       that such Participant's action or omission was in the best interest of
       the Company. If any Participant is a party to a written employment
       agreement with the Company, then clause (d) above shall not apply to any
       directions or instructions that are contrary to or inconsistent with any
       of the positions, functions, duties or reporting responsibilities of such
       Participant as set forth in such written employment agreement or that
       violate any of such Participant's rights, privileges or immunities under
       such employment agreement. In case of any dispute regarding whether or
       not any conduct by a Participant meets any of the standards set forth in
       clauses (a) through (g) above, the burden of proof shall rest with the
       Company.

              "Participants" shall mean, except as otherwise provided in Section
       2.01(c), those employees of Holdings or any Subsidiary who are from time
       to time designated by the Compensation Committee as Participants in
       accordance with Section 2.01(b).

              "Pension Plan" shall mean the Sterling Chemicals, Inc. Amended and
       Restated Salaried Employees' Pension Plan (effective as of May 1, 1996)
       or any successor plan.

              "Plan" shall mean this Amended and Restated Key Employee
       Protection Plan, as amended, supplemented or modified from time to time
       in accordance with its terms.

              "Qualified Plan" shall mean a "qualified plan" within the meaning
       of section 401(a) of the Code.

              "Severance Amount" has the meaning specified in Section
       2.02(a)(i).

              "Subsidiary" shall mean any corporation, limited partnership,
       general partnership, limited liability company or other form of entity a
       majority of any class of voting stock or other voting rights of which is
       owned, directly or indirectly, by Holdings.

              "Targeted Bonus" shall mean, when used with reference to any
       Participant at any time, the amount determined by multiplying the annual
       base salary of such Participant in effect immediately prior to the
       applicable Change of Control times such Participant's Target Bonus
       Percentage, if any, in effect immediately prior to the date on which such
       Change of Control occurs under the Company's bonus plan for salaried
       employees.

              "Termination Date" shall mean the termination date specified in a
       Termination Notice delivered in accordance with Article III.

              "Termination Notice" shall mean, as appropriate, (a) a notice from
       a Participant to Holdings purporting to terminate such Participant's
       employment for Good Reason in accordance with Section 3.01 or (b) a
       notice from Holdings and/or Chemicals to any Participant purporting to
       terminate such Participant's employment for Misconduct or Disability in
       accordance with Section 3.02.


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              Section 1.02. Interpretation. In this Plan, unless a clear
contrary intention appears, (a) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Plan as a whole and not to any
particular Article, Section or other subdivision, (b) reference to any Article
or Section, means such Article or Section hereof and (c) the words "including"
(and with correlative meaning "include") means including, without limiting the
generality of any description preceding such term. The Article and Section
headings herein are for convenience only and shall not affect the construction
hereof.

                                   ARTICLE II

                            Eligibility and Benefits

              Section 2.01. Eligible Employees. (a) This Plan is only for the
benefit of Participants, and no other employees or personnel shall be eligible
to participate in this Plan or to receive any rights or benefits hereunder.

              (b) The Compensation Committee (acting upon the recommendation of
the Chairman and the CEO) shall be authorized from time to time to designate one
or more members of a select group of management or highly compensated employees
of the Company as Participants. Each such designation shall be evidenced by an
Instrument of Designation signed by Holdings and the Participant substantially
in the form of Exhibit A hereto. Each such Instrument of Designation, and the
designation evidenced thereby, shall be binding on the Company.

              (c) In the event the Compensation Committee determines in good
faith that any Participant is no longer a key employee of the Company and thus
should not continue to participate in this Plan, the Compensation Committee
shall be permitted, subject to the limitations set forth below, to terminate
such Participant's participation in this Plan on such date as shall be specified
by written notice delivered to such Participant not less than 60 days prior to
the date so specified, which notice shall state that it is a termination notice
given pursuant to this Section 2.01(c). Upon the effective date of such
termination, such Participant shall cease to be a Participant and, accordingly,
such Participant shall no longer be entitled to receive any rights or benefits
hereunder; provided, however, that such termination shall not affect the rights
or benefits of such Participant or the obligations of the Company accrued under
this Plan as of the effective date of such termination or the rights or benefits
of such Participant or the obligations of the Company accruing under this Plan
after the effective date of such termination on account of any Change of Control
that occurred on or before such effective date. Notwithstanding the foregoing,
the Compensation Committee shall not be permitted to terminate any Participant's
participation in this Plan unless the sole reason therefor is that, in the good
faith opinion of the Compensation Committee, such Participant has ceased to be a
key employee of the Company and thus should not continue to participate in this
Plan. Without limitation of the foregoing, the Compensation Committee may not
terminate any Participant's participation in this Plan if such termination is
directly or indirectly related to, connected with, in anticipation of, in
furtherance of, pursuant to the terms of or during the pendency of any Change of
Control or is for the purpose of directly or indirectly encouraging or
facilitating a Change of Control. In case of any dispute regarding


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whether or not any purported termination of any Participant's participation in
this Plan is permitted by, or satisfies any of the requirements of, this
paragraph (c), the burden of proof shall rest with the Company.

              Section 2.02. Description of Benefits Triggered by Termination
following a Change of Control. (a) Each Participant shall be entitled to receive
the benefits described below if a Change of Control occurs after the Effective
Date and if, within two years after the date on which such Change in Control
occurs, either such Participant terminates his or her employment for Good Reason
in accordance with Section 3.01 or the Company terminates such Participant's
employment for any reason other than a termination for Misconduct or Disability
in accordance with Section 3.02:

              (i) the Company shall pay to such Participant, within 30 days
       after the Termination Date, a lump sum cash payment equal to the sum of
       (A) the amount (the "Severance Amount") determined (subject to Section
       2.04(b)) by multiplying the Annual Compensation of such Participant times
       the Applicable Multiplier, plus (B) all unused vacation time accrued by
       such Participant as of the Termination Date under the Company's vacation
       policy, plus (C) all accrued but unpaid compensation earned by such
       Participant as of the Termination Date, plus (D) all unpaid vested
       benefits earned or accrued by such Participant as of the Termination Date
       under any Benefit Plan (other than a Qualified Plan) in effect
       immediately prior to the date on which the Change of Control occurs; and

             (ii) for a period of 24 months (including 18 months of COBRA
       coverage) following the Termination Date, such Participant shall continue
       to be covered by all life, health care, medical and dental insurance
       plans and programs (excluding disability) of the Company by which he or
       she was covered on the Termination Date notwithstanding any subsequent
       termination or amendment of any such plan or programs and notwithstanding
       any eligibility provisions thereof to the contrary, provided that (A)
       such Participant makes a timely COBRA election following the Termination
       Date and (B) such Participant pays the regular employee premium required
       by such plans and programs or by COBRA, as the case may be.

              (b) No Participant shall be entitled to receive any of the
benefits described in this Section 2.02 on account of any Change of Control
unless such Change of Control occurred while such Participant was employed by
the Company.

              Section 2.03. Description of Benefits Triggered by Termination
Without a Change of Control. (a) The Compensation Committee shall be authorized,
in its discretion, to confer the benefits described in paragraph (b) below upon
one or more Participants who are Grade S23 or higher. As used in paragraph (b)
below, "Senior Executive Participants" means those Participants, if any, who are
Grade 23 or higher and upon whom the Compensation Committee shall have conferred
the benefits provided by paragraph (b) below; provided, however, that each
Senior Executive Participant who ceases to be a Participant in accordance with
Section 2.01(c) shall thereupon also cease to be a Senior Executive Participant.


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              (b) If, under circumstances where Section 2.02 is inapplicable,
any Senior Executive Participant terminates his or her employment for Good
Reason in accordance with Section 3.01 or the Company terminates such Senior
Executive Participant's employment for any reason other than a termination for
Misconduct or Disability in accordance with Section 3.02, then such Senior
Executive Participant shall be entitled to receive, and the Company shall be
obligated to pay and provide, all the benefits described in Section 2.02 the
same as if a Change of Control had occurred on the date which is 60 days prior
to the relevant Termination Date; provided, however, that, for purposes of
calculating the Severance Amount payable to such Senior Executive Participant
under this Section 2.03, the Applicable Multiplier of such Senior Executive
Participant shall be reduced by 50%. In the case of each termination of
employment covered by this Section 2.03, a Change of Control shall be deemed to
have occurred on the date which is 60 days prior to the relevant Termination
Date and, accordingly, all other provisions of this Plan shall be construed as
if a Change of Control had actually occurred on such date.

              Section 2.04. Additional Provisions Relating to Benefits under
Sections 2.02 and 2.03. (a) Anything in this Plan to the contrary
notwithstanding, (i) the Company shall not be obligated to pay a Severance
Amount to any Participant below Grade S23 or continue the non-COBRA benefits
described in Section 2.02(a)(ii) for such Participant if the Termination Date is
after such Participant's normal Retirement Date (as defined in the Pension Plan)
and (ii) the Company's obligation to continue the benefits described in Section
2.02(a)(ii) for any Participant shall cease if and when such Participant becomes
employed, on a full-time basis, by a third party which provides such Participant
with substantially similar benefits.

              (b) Anything in this Plan to the contrary notwithstanding, the
amount of the Severance Amount payable to any Participant under this Plan shall
be reduced by the aggregate amount of all separation, severance or termination
payments due to such Participant under (i) any Benefit Plan (other than this
Plan), (ii) any agreement between such Participant and the Company or (ii) any
applicable law, statute, rule, regulation, order or decree (or other
pronouncement having the effect of law) of any nation or governmental authority.

              Section 2.05. Certain Additional Payments by the Company. Anything
in this Plan to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution to or for the benefit of any
Participant under this Plan (the "Triggering Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax, together with any such interest or
penalties, being collectively referred to below as the "Excise Tax"), then such
Participant shall be entitled to receive from the Company an additional payment
(the "Gross-Up Payment") in an amount such that after payment by such
Participant of all taxes (including any interest or penalties imposed with
respect to such taxes) including any Excise Tax imposed on the Gross-Up Payment,
such Participant retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Triggering Payment. Notwithstanding the foregoing, in no
event shall any Participant be entitled to receive a Gross-Up Payment greater
than 25% of such Participant's Annual Compensation. All determinations required
to be made under this Section 2.05 with respect to a particular Participant
shall be made by the independent accounting firm then retained by Holdings in
the ordinary course of business (which firm shall provide detailed supporting


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calculations to the Company and such Participant) and such determinations shall
be final and binding on the Company (including the Compensation Committee) and
all Participants.

              Section 2.06. Cost of Plan; Plan Unfunded; Participant's Rights
Unsecured. The entire cost of this Plan shall be borne by the Company, and no
contributions shall be required of the Participants. The Company shall not be
required to establish any special or separate fund or make any other segregation
of funds or assets to assure the payment of any benefit hereunder. The right of
any Participant to receive the benefits provided for herein shall be an
unsecured claim against the general assets of the Company.

                                   ARTICLE III

                               Termination Notices

              Section 3.01. Termination Notices from Participants. For purposes
of this Plan, in order for any Participant to terminate his or her employment
for Good Reason, such Participant must give a written notice of termination to
Holdings and/or Chemicals, which notice shall be in writing and signed by such
Participant, shall be dated the date it is given to Holdings and/or Chemicals,
shall specify the termination date and shall state that the termination is for a
Good Reason and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for such Good Reason. Any Termination Notice given by
a Participant that is not in compliance, in all material respects, with the
foregoing requirements shall be invalid and ineffective for purposes of this
Plan. If Holdings or Chemicals receives from any Participant a Termination
Notice that it believes is invalid and ineffective as aforesaid, it shall
promptly notify such Participant of such belief and the reasons therefor.

              Section 3.02. Termination Notices from Company. For purposes of
this Plan, in order for the Company to terminate any Participant's employment
for Misconduct, Holdings and/or Chemicals must give a written notice of
termination to such Participant, which notice shall be dated the date it is
given to such Participant, shall specify the termination date and shall state
that the termination is for Misconduct and shall set forth in reasonable detail
the particulars thereof. For purposes of this Plan, in order for the Company to
terminate any Participant's employment for Disability, Holdings and/or Chemicals
must give a written notice of termination to such Participant, which notice
shall be dated the date it is given to such Participant, shall specify the
termination date and shall state that the termination is for Disability and
shall set forth in reasonable detail the particulars thereof. Any Termination
Notice given by Holdings and/or Chemicals that is not in compliance, in all
material respects, with the foregoing requirements shall be invalid and
ineffective for purposes of this Plan. Any Termination Notice purported to be
given by Holdings and/or Chemicals to any Participant after the death or
retirement of such Participant shall be invalid and ineffective.


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                                   ARTICLE IV

                               Dispute Resolution

              Section 4.01. Negotiation. Subject to Section 4.03, in case a
dispute or controversy shall arise between any Participant (or any person
claiming by, through or under any Participant) and the Company (including the
Compensation Committee) relating to or arising out of this Plan, either
disputant may give written notice to the other disputant ("Dispute Notice") that
it wishes to resolve such dispute or controversy by negotiations, in which event
the disputants shall attempt in good faith to negotiate a resolution of such
dispute or controversy. If the dispute or controversy is not so resolved within
30 days after the effective date of the Dispute Notice, subject to Section 4.03,
either disputant may initiate arbitration of the matter as provided in Section
4.02. All negotiations pursuant to this Section 4.01 shall be held at the
Company's principal offices in Houston, Texas (or such other place as the
disputants shall mutually agree) and shall be treated as compromise and
settlement negotiations for the purposes of the federal and state rules of
evidence and procedure.

              Section 4.02. Arbitration. Subject to Section 4.03, any dispute or
controversy arising out of or relating to this Plan which has not been resolved
by negotiations in accordance with Section 4.01 within 60 days of the effective
date of the Dispute Notice shall be finally settled by arbitration conducted
expeditiously in accordance with the labor arbitration rules of the American
Arbitration Association. The arbitrator shall be not empowered to award damages
in excess of compensatory damages and each disputant shall be deemed to have
irrevocably waived any damages in excess of compensatory damages. The
arbitrator's decision shall be final and legally binding on the disputants and
their successors and assigns. The fees and expenses of the arbitrator shall be
borne solely by the prevailing disputant or, in the event there is no clear
prevailing disputant, as the arbitrator deems appropriate. All arbitration
conferences and hearings shall be held in Houston, Texas.

              Section 4.03. Exclusivity, etc. The dispute resolution procedures
set forth in Sections 4.01 and 4.02 shall not apply to any matter which, by the
express provisions of this Plan, is to be finally determined by the Compensation
Committee or by an accounting firm or employee benefits firm. No legal action
may be brought with respect to this Plan except for the purpose of specifically
enforcing the provisions of this Article IV or for the purpose of enforcing any
arbitration award made pursuant to Section 4.02.

                                    ARTICLE V

                            Miscellaneous Provisions

              Section 5.01. Cumulative Benefits. Except as provided in Section
2.04(b), the rights and benefits provided to any Participant under this Plan are
cumulative of, and are in addition to, all of the other rights and benefits
provided to such Participant under any Benefit Plan or any agreement between
such Participant and the Company.


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<PAGE>   12
              Section 5.02. No Mitigation. No Participant shall be required to
mitigate the amount of any payment provided for in this Plan by seeking or
accepting other employment following a termination of his or her employment with
the Company or otherwise, nor shall the amount of any payment provided for in
this Plan be reduced by any compensation or benefit earned by a Participant as
the result of employment by another employer or by retirement benefits. The
Company's obligations to make payments to any Participant required under this
Plan shall not be affected by any set off, counterclaim, recoupment, defense or
other claim, right or action that the Company may have against such Participant.

              Section 5.03. Amendment and Termination. (a) The Holdings Board
and the Chemicals Board shall be entitled to terminate this Plan at any time and
for any reason; provided, however, that in no event shall such termination
become effective with respect to any Participant prior to 90 days after notice
of such termination is given to such Participant.

              (b) The Holdings Board and the Chemicals Board shall be entitled
to amend this Plan at any time and for any reason; provided, however, that no
amendment that would effectively reduce, alter, suspend or otherwise impair or
prejudice the rights and benefits (whether accrued or unaccrued) of any
Participant in any material respect (a "Material Amendment") shall become
effective with respect to any Participant prior to 90 days after notice of such
amendment is given to such Participant. For purposes of this paragraph (b), the
termination of a Participant's participation in this Plan in accordance with
Section 2.01(c) shall not be deemed to be an amendment of this Plan.

              (c) Notwithstanding the foregoing, no termination of this Plan and
no Material Amendment shall be effective with respect to, or binding upon, any
person who at the time is a Participant if such termination or such Material
Amendment is directly or indirectly related to, connected with, in anticipation
of, in furtherance of, pursuant to the terms of or during the pendency of any
Change of Control or is for the purpose of directly or indirectly encouraging or
facilitating a Change of Control.

              (d) No termination or amendment of this Plan shall affect the
rights or benefits of any Participant or the obligations of the Company accrued
under this Plan as of the effective date of such termination or amendment or any
of the rights or benefits of such Participant or the obligations of the Company
accruing under this Plan after the effective date of such termination or
amendment on account of any Change of Control that occurred prior to such
effective date. If any Participant shall become entitled to benefits under this
Plan during the term of this Plan, then, notwithstanding the termination or
amendment of this Plan, the benefits payable hereunder to such Participant shall
be paid in full.

              (e) In case of any dispute regarding whether or not any purported
termination or amendment of this Plan is permitted by, or satisfies any of the
requirements of, this Section 5.03, the burden of proof shall rest with the
Company.

              Section 5.04. Enforceability. The provisions of this Plan (i) are
for the benefit of, and may be enforced directly by, each Participant the same
as if the provisions of this Plan were


                                      -12-
<PAGE>   13
set forth in their entirety in a written instrument executed and delivered by
the Company and such Participant and (ii) constitute a continuing offer to all
present and future Participants. Holdings and Chemicals, by their adoption of
this Plan, (a) acknowledge and agree that each present and future Participant
has relied upon and will continue to rely upon the provisions of this Plan in
becoming, and serving as, an employee of the Company, (b) waive reliance upon,
and all notices of acceptance of, this Plan by the Participants and (c)
acknowledge and agree that no present or future Participant shall be prejudiced
in his or her right to enforce directly the provisions of this Plan in
accordance with the terms by any act or failure to act on the part of the
Company.

              Section 5.05. Administration. (a) The Compensation Committee shall
have full and final authority to make determinations with respect to the
administration of this Plan, to construe and interpret its provisions and to
take all other actions deemed necessary or advisable for the proper
administration of this Plan, but such authority shall be subject to the
provisions of this Plan. Subject to Section 2.02(c), the Compensation Committee
shall have no authority to change or modify the level of benefits provided for
Participants under this Plan. No discretionary action by the Compensation
Committee shall amend or supersede the express provisions of this Plan. In
making determinations and taking other actions with respect to this Plan, the
members of the Compensation Committee will be deemed to be fiduciaries with the
same duties imposed upon plan fiduciaries by the Employee Retirement Income
Security Act of 1974.

              (b) The members of the Compensation Committee shall receive no
additional compensation for their services relating to this Plan. Any expenses
properly incurred by the Compensation Committee incident to this Plan, including
the cost of any bond required by applicable law, shall be paid by the Company.

              (c) The Company shall indemnify and hold harmless each member of
the Compensation Committee against and all expenses and liabilities arising out
of his or her administrative functions or fiduciary responsibilities, including
any expenses and liabilities that are caused by or result from an act or
omission constituting the negligence of such member in the performance of such
functions or responsibilities, but excluding expenses and liabilities that are
caused by or result from such member's own gross negligence or willful
misconduct. Expenses against which such member shall be indemnified hereunder
shall include, without limitation, the amounts of any settlement or judgment,
costs, counsel fees, and related charges reasonably incurred in connection with
a claim asserted or a proceeding brought or settlement thereof.

              Section 5.06. Release of Claims. As a condition to receipt of the
benefits under this Plan, a Participant will be required to sign an agreement,
to be prepared by Holdings, in which he or she releases the Company and its
successors, assigns, divisions, subsidiaries, representatives, agents, officers,
directors, stockholders, and employees from any claims, demands and/or causes of
action relating to or arising out of the termination of his or her employment
with the Company, including, but not limited to any statutory claims under the
Age Discrimination in Employment Act of 1967, the Americans with Disabilities
Act of 1990, the Civil Rights Acts of 1964 and 1991, and/or the Texas Commission
on Human Rights Act.


                                      -13-
<PAGE>   14
              Section 5.07. Assignability. The Company shall have the right to
assign this Plan and to delegate its duties and obligations hereunder, but not
otherwise; provided, however, that no such assignment shall relieve or discharge
the Company of or from any of its obligations under this Plan. Unless otherwise
approved by the Compensation Committee, no Participant shall transfer or assign
any of his or her rights under this Plan except by will or the laws of descent
and distribution.

              Section 5.08. Consolidations, Mergers, Etc. Each of Holdings and
Chemicals will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of its business,
operations or assets to expressly assume and agree to perform this Plan in
writing, in the same manner and to the same extent that Holdings or Chemicals,
as the case may be, would be required to perform hereunder if no such succession
had taken place.

              Section 5.09. Successors and Assigns. This Plan shall be binding
upon and inure to the benefit of the Company and its successors and assigns.
This Plan and all rights of each Participant shall inure to the benefit of and
be enforceable by such Participant and his or her personal or legal
representatives, executors, administrators, heirs and permitted assigns. If any
Participant should die while any amounts are due and payable to such Participant
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Plan to such Participant's devisees, legatees
or other designees or, if there be no such devisees, legatees or other
designees, to such Participant's estate.

              Section 5.10. Notices. All notices and other communications
provided for in this Plan shall be in writing and shall be sent, delivered or
mailed, addressed as follows: (i) if to Holdings, Chemicals or any other
Subsidiary, at Holdings' principal office address or such other address as
Holdings may have designated by written notice to all Participants for purposes
hereof, directed to the attention of the Treasurer, and (ii) if to any
Participant, at his or her residence address on the records of Holdings or to
such other address as he or she may have designated to Holdings in writing for
purposes hereof. Each such notice or other communication shall be deemed to have
been duly given or mailed by United States registered mail, return receipt
requested, postage prepaid, except that any change of notice address shall be
effective only upon receipt.

              Section 5.11. Tax Withholdings. The Company shall have the right
to deduct from any payment hereunder all taxes (federal, state or other) which
it is required to be withhold therefrom.

              Section 5.12. No Employment Rights Conferred. Nothing contained in
this Plan shall (i) confer upon any Participant any right with respect to
continuation of employment with the Company or (ii) subject to the rights and
benefits of any Participant hereunder, interfere in any way with the right of
the Company to terminate such Participant's employment at any time.

              Section 5.13. Governing Law. This Plan shall be governed in
accordance with the laws of the State of Texas and applicable federal law.


                                      -14-
<PAGE>   15
              IN WITNESS WHEREOF, and as conclusive evidence of the adoption of
this Plan by the Holdings Board and the Chemicals Board, Holdings and Chemicals
have each caused this Plan to be duly executed in its name and behalf by its
proper officer thereunto duly authorized as of the Effective Date.


                                       STERLING CHEMICALS HOLDINGS, INC.


                                       By:
                                          --------------------------------------
                                          Frank P. Diassi, Chairman of the Board


                                       STERLING CHEMICALS, INC.


                                       By:
                                          --------------------------------------
                                          Frank P. Diassi, Chairman of the Board


                                      -15-
<PAGE>   16
                                                                       EXHIBIT A


                        STERLING CHEMICALS HOLDINGS, INC.

                            Instrument of Designation


              THIS INSTRUMENT OF DESIGNATION (this "Instrument") is intended to
evidence the designation by the Compensation Committee of the Board of Directors
of Sterling Chemicals Holdings, Inc., a Delaware corporation (the
"Corporation"), of the undersigned employee as a "Participant," within the
meaning of that certain Key Employee Protection Plan of the Corporation and
Sterling Chemicals Holdings, Inc., a Delaware corporation, with an Applicable
Multiplier (as defined therein) of _____________.

              IN WITNESS WHEREOF, the Corporation has caused its duly authorized
officer to execute this Instrument effective as of the date set forth below.


Dated:                                         STERLING CHEMICALS HOLDINGS, INC.
      ---------------------


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


EMPLOYEE:


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

Printed Name:
             --------------------


                                       A-i