<PAGE>   1
                                                                  EXECUTION COPY


                                                                    EXHIBIT 10.2

                                                         *** OMITTED INFORMATION
                                                      DENOTED BY ASTERISKS (***)
                                                       HAS BEEN SEPARATELY FILED
                                                         WITH THE COMMISSION AND
                                                    IS SUBJECT TO A CONFIDENTIAL
                                                            TREATMENT REQUEST***



                   AMENDED AND RESTATED PRODUCTION AGREEMENT

                                    between

                               BP CHEMICALS INC.

                                      and

                            STERLING CHEMICALS, INC.





                                      -1-
<PAGE>   2
                              PRODUCTION AGREEMENT

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
     ARTICLE                                                                                                          PAGE
     -------                                                                                                          ----
<S>                                                                                                                    <C>
1 - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2 - Term  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

3 - Technology  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

4 - Rights and Obligations Respecting Facility Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

5 - Delivery, Shipment and Storage Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12

6 - Specifications  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

7 - Purchase Price and Payment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

8 - Deliveries and Shipments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

9 - Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18

10 - Measurement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21

***.

12 - Co-Products  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23

13 - Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25

14 - Personnel  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29

15 - BP Security Interests; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29

16 - Access to Information and Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30

17 - Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32

18 - Force Majeure  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  36

19 - Indemnification  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  37
</TABLE>





                                      -i-
<PAGE>   3
<TABLE>
<S>                                                                                                                    <C>
20 - Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43

21 - Dispute Resolution and Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  44

22 - Confidentiality and Intellectual Property  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  46

23 - Defaults; Failures; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47

24 - Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49

25 - Miscellaneous  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
</TABLE>

EXHIBITS

Exhibit A - Definitions

Exhibit B - Propylene Specifications

Exhibit C -Ammonia Specifications

Exhibit D - Acrylonitrile Specifications

SCHEDULES

Schedule 3.5(e)(i) - Sterling Actual Costs

Schedule 15.2 - Insurance

Schedule A-1 - Facility

Schedule A-2 - Example of Fixed Costs

Schedule A-3 - Example of Variable Costs

Schedule A-4 - BP Net Unrecouped Investment Amount





                                      -ii-
<PAGE>   4
                   AMENDED AND RESTATED PRODUCTION AGREEMENT

         THIS AMENDED AND RESTATED PRODUCTION AGREEMENT executed as of the 31st
day of March 1998 is by and between BP Chemicals Inc., an Ohio corporation
("BP") and Sterling Chemicals, Inc., a Delaware corporation ("Sterling").

         WHEREAS, Sterling owns and operates the Plant which contains the
Facility for the production of Product and Co-Products; and

         WHEREAS, BP and Sterling are parties to the Production Agreement dated
as of April 15, 1988 (the "Original Agreement") pursuant to which BP provided
funds for the Project and Sterling granted BP the right to purchase a specified
portion of the Product produced by the Facility for a period of ten years with
BP options to extend such right for up to an additional ten years; and

         WHEREAS, in lieu of an extension of the Original Agreement, the
parties hereto wish to amend and restate the Original Agreement to reflect (i)
the completion of the Project, (ii) the Right, and (iii) *** and otherwise to
provide for the terms and conditions under which Sterling shall produce and BP
shall purchase Product hereunder;

         NOW, THEREFORE, for and in consideration of the premises and of the
mutual representations, warranties, covenants and agreements herein contained
and the mutual benefits to be derived therefrom, the parties hereto agree as
follows:

                            Article 1 - Definitions

1.1      Unless otherwise stated in this Agreement, capitalized terms used
         herein shall have the meanings ascribed to them in Exhibit A.
<PAGE>   5
1.2      In this Agreement, unless a clear contrary intention appears:

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

         (b)     reference to any gender includes each other gender and the
                 neuter;

         (c)     all terms defined in the singular shall have the same meanings
                 in the plural and vice versa;

         (d)     reference to any Person includes such Person's heirs,
                 executors, personal representatives, administrators,
                 successors and assigns; provided, however, that nothing
                 contained in this clause (d) is intended to authorize any
                 assignment not otherwise permitted by this Agreement;

         (e)     reference to a Person in a particular capacity or capacities
                 excludes such Person in any other capacity;

         (f)     reference to any contract or agreement means such contract or
                 agreement as amended, supplemented or modified from time to
                 time in accordance with the terms thereof;

         (g)     all references to Articles and Sections shall be deemed to be
                 references to the Articles and Sections of this Agreement;

         (h)     all references to Exhibits and Schedules shall be deemed to be
                 references to the Exhibits and Schedules attached hereto which
                 are made a part hereof and incorporated herein by reference;

         (i)     the word "including" (and with correlative meaning "include")
                 means including, without limiting the generality of any
                 description preceding such term;





                                      -2-
<PAGE>   6
         (j)     with respect to the determination of any period of time, the
                 word "from" means "from and including" and the words "to" and
                 "until" each means "to but excluding";

         (k)     the captions and headings contained in this Agreement shall
                 not be considered or given any effect in construing the
                 provisions hereof if any question of intent should arise;

         (l)     where any provision of this Agreement refers to action to be
                 taken by any Person, or which such Person is prohibited from
                 taking, such provision shall be applicable whether such action
                 is taken directly or indirectly by such Person; and

         (m)     no provision of this Agreement shall be interpreted or
                 construed against any Person solely because that Person or its
                 legal representative drafted such provision.

                                Article 2 - Term

2.1      Unless sooner terminated as provided herein, the term of this
         Agreement shall be for an initial term commencing on the Effective
         Date and ending on December 31, 2009 (the "Initial Term") and from
         year to year thereafter unless either party gives two years' prior
         written notice of its election to terminate this Agreement at the
         expiration of the Initial Term or any Additional Term pursuant to this
         Article 2.  Each year that this Agreement remains in effect after the
         expiration of the Initial Term shall be considered an "Additional
         Term".  Notwithstanding anything to the contrary contained in this
         Agreement, in the event that (i) ANEXCO, LLC, a Delaware limited
         liability company in which Sterling and BP are members, is dissolved
         and liquidated for any reason, or (ii) any of the Joint Venture
         Agreement dated as of March 31, 1998 or the ***, is terminated for any
         reason, then each of Sterling and BP shall have the right, in its sole
         discretion, to terminate this Agreement by





                                      -3-
<PAGE>   7
         providing written notice of its election to terminate this Agreement
         within 30 days after the date ANEXCO LLC is dissolved or liquidated or
         such other agreement is effectively terminated, as the case may be
         (the "Cross Termination Right").

2.2      Either party shall have the right to terminate this Agreement without
         cause for reasons other than as set forth in Section 2.3 effective at
         any time by giving the other party at least 24 Months prior written
         notice of its intent to terminate as of a date at least 24 Months
         after the delivery of such notice.  If BP terminates this Agreement
         pursuant to this Section 2.2 or the Cross Termination Right during the
         Initial Term, ***.  If Sterling terminates this Agreement pursuant to
         this Section 2.2 or the Cross Termination Right during the Initial
         Term, in either case, (i) prior to November 26, 2004, *** of the
         License Agreement or (ii) on or after November 26, 2004 but prior to
         November 26, 2009, *** of the License Agreement, and, in any event, BP
         will receive no further payments hereunder.

2.3      If this Agreement is terminated during the Initial Term due to a
         final, non-appealable order of a court or governmental agency of
         competent jurisdiction, ***, if any, produced from the Facility each
         calendar quarter after the date of termination in excess of one-fourth
         of  *** then in effect which is sold or otherwise provided to a third
         party during such calendar quarter.  Such payments shall be made for
         each calendar quarter during the period from the date of termination
         until the earlier to occur of the following:  (i) BP has received the
         BP Net Unrecouped Investment Amount or (ii) December 31, 2004 (if
         termination occurs before November 26, 1999), or December 31, 2009 (if
         termination occurs thereafter).  Nothing herein shall require Sterling
         to pay BP, in the aggregate, a sum greater than the BP Net Unrecouped
         Investment Amount or require Sterling to produce any amount of
         Product.





                                      -4-
<PAGE>   8
                             Article 3 - Technology

3.1      ***

3.2      ***

3.3      Sterling shall have no obligation to pay BP for use of the New
         Technology in the Facility except as otherwise provided in this
         Agreement, the License Agreement ***.

3.4      ***

3.5      (a)     Representatives of each of BP and Sterling shall meet at least
                 twice during each Contract Year.  At each such meeting, (i) BP
                 will make preliminary disclosures, on a non-confidential
                 basis, with respect to any technology, know-how, operating
                 practices and procedures and similar matters of which it is
                 aware which could improve the operation of the Facility,
                 reduce the costs of manufacturing acrylonitrile at the
                 Facility or which are related to safety, manufacturing,
                 maintenance, technical issues or review of projects and (ii)
                 Sterling will make preliminary disclosures, on a
                 non-confidential basis, with respect to any technology,
                 know-how, operating practices and procedures and similar
                 matters of which it is aware which could improve the operation
                 of the acrylonitrile facilities of BP located in Lima, Ohio
                 and Green Lake, Texas (collectively, the "BP Facilities"),
                 reduce the costs of manufacturing acrylonitrile at the BP
                 Facilities or which are related to safety, manufacturing,
                 maintenance, technical issues or review of projects.

         (b)     If the recipient of any such preliminary disclosure was
                 previously aware of the matter disclosed, either (i) each of
                 BP and Sterling shall make full disclosure to the other of





                                      -5-
<PAGE>   9
                 the relevant matter, in which event each of BP and Sterling
                 will be entitled to implement all or any portion of the matter
                 disclosed by the other without any payment made to the
                 disclosing party, or (ii) if either party so elects prior to
                 any further disclosure by the other party, BP and Sterling
                 shall not make any further disclosure with respect to the
                 relevant matter.

         (c)     If the recipient of any preliminary disclosure was not
                 previously aware of the matter disclosed, the recipient shall
                 be entitled to elect at any time and from time to time, by
                 providing written notice of such election to the disclosing
                 party, to receive full disclosure of the relevant matter, in
                 which event the party making the preliminary disclosure will,
                 as soon as practicable after such election, make full
                 disclosure of the relevant matter to the recipient.

         (d)     In the event that the recipient of a disclosed matter
                 implements such matter after full disclosure by the disclosing
                 party, the recipient shall pay the disclosing party ***.  If
                 the implementation of the disclosed matter is related to a
                 Capital Project previously contemplated by the recipient, the
                 value of the disclosed matter to the recipient will be based
                 upon the difference between the estimated cost of the Capital
                 Project contained in the most recent Appropriation Request (in
                 the case of Sterling) or Financial Memorandum (in the case of
                 BP) prepared prior to the disclosure of such matter and, in
                 the case of a matter resulting in recurring savings, the
                 actual cost of the Capital Project (with appropriate
                 adjustments to such estimated costs due to changes in scope of
                 the Capital Project which are unrelated to the disclosed
                 matter) or, in the case of a matter resulting in a one-time
                 savings, the estimated cost of the Capital





                                      -6-
<PAGE>   10
                 Project if the disclosed matter is implemented.  If the
                 implementation of the disclosed matter is not related to a
                 Capital Project, the value of the disclosed matter to the
                 recipient will be based upon, in the case of a matter
                 resulting in recurring savings, the savings realized through
                 the improvement in operating or maintenance procedures or the
                 reduction in costs from the implementation of the disclosed
                 matter or, in the case of a matter resulting in a one-time
                 savings, the savings estimated to be realized through the
                 improvement in operating or maintenance procedures or the
                 reduction in costs from the implementation of the disclosed
                 matter.  In the absence of any agreement by the parties as to
                 the value of the disclosed matter to the recipient, such value
                 shall be determined in accordance with Article 21.  The
                 recipient shall calculate the documented savings associated
                 with the implementation of any matter resulting in recurring
                 savings, as soon as practicable after the expiration of
                 one-year (and, if applicable, two years) following the
                 implementation of such matter.  Any payment by the recipient
                 or the disclosing party associated with the full disclosure of
                 any matter resulting in recurring savings shall be due and
                 payable upon each such calculation or notice of such
                 calculation, as the case may be.

         (e)     For purposes of determining the value of any matter disclosed
                 pursuant to this Section 3.5, each of BP and Sterling
                 acknowledge and agree that, as of the date of this Agreement,
                 the actual costs for the manufacture of acrylonitrile at the
                 Facility is as set forth in Schedule 3.5(e)(i).





                                      -7-
<PAGE>   11
         (f)     Any matter which is fully disclosed by a party pursuant to
                 this Section 3.5 shall be treated by the recipient as
                 confidential information of the disclosing party and be
                 subject to the provisions of Article 22 hereof.

         (g)     Notwithstanding anything to the contrary contained in this
                 Agreement, (i) this Section 3.5 shall not apply to any matter
                 disclosed or required to be disclosed pursuant to, and shall
                 not affect the rights of Sterling to receive technical support
                 under, the License Agreement, including the disclosure by BP
                 of any matter related to optimization changes in the reactor
                 areas of the Facility during the change-out of any catalyst,
                 and (ii) no payment by Sterling or BP pursuant to this Section
                 3.5 shall be deemed to be a Fixed Cost or Variable Cost for
                 purposes of this Agreement.

       Article 4 - Rights and Obligations Respecting Facility Production

4.1      On the terms and subject to the conditions of this Agreement, Sterling
         hereby grants to BP the Rights, and BP hereby agrees to receive and
         purchase and pay for, and Sterling agrees to sell and deliver to BP,
         Product in the manner provided herein subject at all times to the
         limitations imposed herein.

4.2      BP and Sterling agree that Product delivered to the applicable Point
         of Delivery hereunder shall be made available to BP under as uniform
         conditions and rates as possible.  Accordingly, BP shall take
         deliveries of, and Sterling shall deliver, Product in a manner
         commensurate with good operating practices and in accordance with
         proper maintenance, operating and distribution procedures and at as
         uniform rates of delivery as possible throughout each Quarter during
         the term of this Agreement.





                                      -8-
<PAGE>   12
4.3      BP and Sterling each agree to give the other reasonable notice of such
         party's desire at any time to materially increase or decrease the
         quantity of Product deliverable at any particular time hereunder.  If
         either party fails to meet the requirements of the Delivery, Shipment
         and Storage Instructions, such party shall notify the other party of
         the reasons for such failure and the estimated time such failure may
         continue.

4.4      BP agrees, subject to the terms, provisions and limitations hereof, to
         purchase hereunder each Quarter a quantity of Product equal to or in
         excess of the Minimum Quarterly Contract Quantity, provided that BP at
         its option may purchase and take in any Quarter a quantity of Product
         less than the Minimum Quarterly Contract Quantity, if BP pays to
         Sterling pursuant to the terms of Section 7.1:

         (a)     the Variable Cost Component then in effect multiplied by the
                 pounds of Product actually taken by BP during the Quarter;
                 plus

         (b)     the Fixed Cost Component in effect for each Month during the
                 Quarter.

         In the event BP makes payments to Sterling pursuant to this Section
         4.4, the failure of BP to purchase the Minimum Quarterly Contract
         Quantity in any Quarter shall not be deemed to be a breach of this
         Agreement.

4.5      Subject to the terms of this Agreement, Sterling agrees to sell and
         deliver to BP the Maximum Annual Contract Quantity of Product (or such
         lesser amount as BP shall request) each Contract Year.  Sterling shall
         not be obligated to sell or deliver to BP hereunder (i) during any
         Month, a quantity of Product in excess of the Maximum Monthly Contract
         Quantity, (ii) during any Quarter, a quantity of Product in excess of
         the Maximum Quarterly Contract Quantity, or (iii) during any Contract
         Year, a quantity of Product in excess of the





                                      -9-
<PAGE>   13
         Maximum Annual Contract Quantity.  Subject to the foregoing, Sterling
         agrees to use commercially reasonable efforts, subject to Sterling's
         existing or ongoing obligations to third parties, to meet any request
         by BP for Product (a) in any Month, in amounts in excess of the
         Maximum Monthly Contract Quantity, and (b) in any Quarter, in amounts
         in excess of the Maximum Quarterly Contract Quantity.

4.6      ***

            Article 5 - Delivery, Shipment and Storage Instructions

5.1      On or before the fifteenth Day of each Month during each Contract
         Year, BP shall deliver written notice to Sterling setting forth (a)
         BP's requested dates and volumes of deliveries and shipping and its
         storage requirements of Product for the coming Month (the "Delivery,
         Shipment and Storage Instructions") and (b) BP's estimated delivery,
         shipment and storage instructions of Product for the Month after the
         coming Month (the "Estimated Delivery, Shipment and Storage
         Instructions") which shall include estimated dates and volumes of
         deliveries, shipments and storage requirements of Product for such
         Month.  For example, on January 15, BP would deliver Delivery,
         Shipment and Storage Instructions for the Month of February, and
         Estimated Delivery, Shipment and Storage Instructions for the Month of
         March.  The estimated and requested volumes shall comply with Article
         4 hereof.  Sterling shall be entitled to rely on the Estimated
         Delivery, Shipment and Storage Instructions and the same shall be
         deemed to be the Delivery, Shipment and Storage Instructions unless
         actual Delivery, Shipment and Storage Instructions are received by
         Sterling.  Notwithstanding anything to the contrary in this Agreement,
         delivery of Product shall be made by Sterling only by barge or ocean
         going vessels.





                                      -10-
<PAGE>   14
5.2      Sterling will use reasonable efforts to comply with the Delivery,
         Shipment and Storage Instructions and shall give BP the same rights of
         priority and scheduling with respect thereto that it uses for
         deliveries, shipments and storage of its own Product and those of
         Sterling's other customers.  If Sterling fails to comply with the
         Delivery, Shipment and Storage Instructions as a result of Force
         Majeure or the actions or omissions of BP, Sterling shall have no
         liability for such failure.  Nothing contained in this Agreement is
         intended to authorize or require, or shall be deemed or construed as
         authorizing or requiring, Sterling to violate any Laws.

5.3      In addition to the Estimated Delivery, Shipping and Storage
         Instructions and the Delivery, Shipping and Storage Instructions, BP
         may deliver to Sterling from time to time additional shipping
         instructions for Product. All such instructions with respect to any
         particular shipment shall be given as early as is practicable prior to
         the requested shipment date.  Sterling shall use reasonable efforts to
         deliver Product at the times specified in such instructions. If such
         instructions cause Sterling to incur unusual expenses in order to
         deliver Product for such shipment, and if Sterling has obtained BP's
         approval of such expenses before they are incurred, BP shall reimburse
         Sterling upon receipt of invoice therefor.

5.4      Sterling and BP shall cooperate in utilizing their respective storage
         and transportation facilities to maximize cost savings and
         efficiencies in the transportation and storage of Product for both
         parties. With respect to shipments or exchanges made pursuant to this
         provision, the provisions of Articles 5, 8, 9 and 10 relating to
         delivery, shipment, testing and measurement shall generally apply.





                                      -11-
<PAGE>   15
5.5      To the extent required hereunder, Sterling shall comply with all Laws
         and other requirements of governmental authorities having jurisdiction
         now in force or which may hereafter be in force pertaining to the
         operation of the Facility and the production of acrylonitrile.

                           Article 6 - Specifications

The Specifications shall not be changed unless agreed to in advance in writing
by BP and Sterling. Sterling agrees to use all commercially reasonable efforts
to comply with state of the U.S. chemical industry statistical process control
requirements.

                     Article 7 - Purchase Price and Payment

7.1      The Purchase Price for all Product delivered to BP hereunder shall be
         equal to the sum of the following: ***.  BP shall pay each such
         invoice on or before the 30th Day after date of shipment or the 25th
         Day after receipt of invoice, whichever is later.

7.2      As soon as is practicable after the end of each Quarter, but in any
         event prior to the 15th day of first Month following the end of such
         Quarter, Sterling shall submit to BP a statement showing: ***

7.3      ***

7.4      Sterling will at all times use commercially reasonable efforts to
         minimize its  costs of producing Product.

7.5      BP shall provide Sterling at no charge the Raw Materials needed to
         produce the Product purchased by BP under this Agreement, provided
         that BP may terminate its obligation to provide Raw Materials on one
         year's prior written notice to Sterling and, provided further, that,
         if BP so terminates its obligation to provide Raw Materials, it may
         not again provide Raw Materials needed to produce the Product
         purchased by BP hereunder unless it gives





                                      -12-
<PAGE>   16
         Sterling at least one year's prior written notice and then only if
         such provision does not materially interfere with Sterling's
         contractual relationships existing at the time of such notice. BP's
         ammonia exchange balance shall never exceed plus or minus five million
         pounds.  For purposes of determining BP's propylene supply obligations
         hereunder, it is agreed that initially the Baseline Raw Materials
         Usage for propylene shall apply, adjusted each Quarter to reflect
         actual propylene usage. Sterling will maintain a running account of
         the Raw Materials supplied by BP and used to produce BP purchased
         Product, which amount shall be reflected in the statements delivered
         pursuant to this Article 7 and reconciled every Quarter along with the
         reconciliation under Section 7.2.  It is agreed that ammonia provided
         by BP will be delivered by barge and propylene provided by BP will be
         delivered by pipeline. Sterling will make available to BP on a volume
         pro rata basis any propylene pipeline transportation rights it has
         with third parties for the transportation of Raw Materials to the
         Facility. To the extent that BP's use of Sterling's pipeline
         transportation rights results in charges payable by Sterling to a
         third party for BP's transportation of Raw Materials on any given
         pipeline, BP shall reimburse Sterling for all of such charges upon
         receipt of an invoice therefor.

7.6      If BP has reason to dispute the accuracy of any invoice submitted to
         it by Sterling, BP will pay that part of the invoice which is
         undisputed in accordance with the provisions of this Article 7 and,
         after such dispute has been resolved, BP will pay any balance due to
         Sterling upon receipt by BP of a replacement or additional invoice
         submitted to it by Sterling.





                                      -13-
<PAGE>   17
7.7      Sterling shall maintain records and production data in accordance with
         its usual and customary practices and standards in respect of all
         matters referred to in this Agreement and in such detail as is
         sufficient to make the calculations required hereby.  Sterling shall
         provide access to such records and data pursuant to the provisions of
         Article 16 hereof.

                      Article 8 - Deliveries and Shipments

8.1      The point of delivery of any Product ("Point of Delivery") shall be
         the point of transfer of custody of such Product from Sterling to BP,
         and shall mean the first intake flange on the ship, barge or other
         inland water or marine vessel into which the Product is loaded for
         shipment. Title and risk of loss shall pass to BP at such flange
         (irrespective of whether Sterling owns or has provided the barge or
         ship into which the Product is loaded or delivered). As between
         Sterling and BP, Sterling shall be in control and possession of the
         Product sold and purchased hereunder and responsible for any damage or
         injury caused thereby until risk of loss with respect thereto has
         passed to BP. In addition to its other obligations hereunder, BP shall
         be in control and possession of the Product sold and purchased
         hereunder and responsible for any damage or injury caused thereby
         after risk of loss with respect thereto has passed to BP. The Point of
         Delivery of Raw Materials, if any, delivered by BP pursuant to Section
         7.5 hereof shall be the point of transfer of custody of such Raw
         Materials to Sterling and shall be (i) the last exit flange on the
         ship, barge or other inland water or marine vessel from which the Raw
         Materials are unloaded or (ii) the first inlet flange at the Plant
         used by the pipeline to effect delivery of Raw Materials to Sterling
         by the common carrier, in the case of delivery by pipeline. Title and
         risk of loss shall pass to Sterling at such flange or outlet, as the
         case may be, and BP shall be in control and





                                      -14-
<PAGE>   18
         possession of Raw Materials delivered pursuant to Section 7.5 hereof
         and responsible for any damage or injury caused thereby until risk of
         loss with respect thereto has passed to Sterling.

                              Article 9 - Testing

9.1      Product shall be tested prior to delivery to BP under the testing
         procedures and schedules being utilized by Sterling at the Facility.
         Such procedures and schedules may be changed from time to time by the
         agreement of BP and Sterling. Sterling shall retain representative
         samples for sufficient time to allow delivery to and acceptance by
         BP's customers of such Product but in no event less than six months.
         Sterling shall provide BP access to such samples and all records
         maintained by Sterling with respect thereto pursuant to the provisions
         of Article 16 hereof.

9.2      Confirmatory tests of the quality of (i) Product shipments and (ii)
         Raw Materials provided by BP, if any, shall be performed at the time
         of delivery according to the procedures and schedules being used from
         time to time by Sterling and where requested, in the presence of an
         independent surveyor, at BP's expense, utilizing representative
         samples taken, (a) in the case of Product, from the intake flange of
         the ship, barge or other inland water or marine vessel and from the
         tanks thereof where appropriate, into which the Product is loaded, and
         (b) in the case of Raw Materials provided by BP, from the outlet
         flange of the ship, barge or other inland water or marine vessel and
         from the tanks thereof where appropriate, from which such Product is
         unloaded or other appropriate facility, in the case of pipeline
         delivery.  The testing procedures and schedules described herein shall
         be subject to change from time to time by agreement of BP and
         Sterling.





                                      -15-
<PAGE>   19
9.3      All product of the Facility (other than Co-Products) when tested
         according to the agreed procedures and schedules shall be conclusively
         presumed to constitute Product unless analysis of the sample retained
         pursuant to the provisions of Sections 9.1, 9.2 or 9.4 hereof shows
         the product not to have been Product.

9.4      BP shall have the right, at BP's expense, to have Product tested by
         independent third parties prior to shipment as Product hereunder, so
         long as any such testing does not materially interfere with Facility
         operations, and Sterling shall cooperate in any such test and shall
         have the right to be represented and to participate in any such test
         and to inspect any equipment used in determining the nature or quality
         of Product. After such independent test, unless BP or its independent
         surveyor notifies Sterling prior to shipment of any such product that
         such product is not Product for purposes hereof, all such product
         shall be conclusively presumed to meet the Specifications and
         constitute Product. If such a notice is delivered to Sterling with
         respect to any such product which has not been shipped at the time
         such notice is given, such product shall not constitute Product
         hereunder, and BP shall have no obligation with respect to any such
         product; provided, however, that should Sterling object in writing to
         such notice with five Business Days after delivery of such objection,
         the parties will meet to resolve the question of whether such product
         is Product hereunder. If the parties fail to resolve the matter within
         20 Business Days after the delivery of the original objection by
         Sterling to BP, either party may refer the matter for dispute
         resolution pursuant to Article 21 hereof.





                                      -16-
<PAGE>   20
9.5      BP's sole remedy with respect to all product which is determined not
         to have constituted Product hereunder at the Point of Delivery shall
         be to require Sterling to, at Sterling's option, either (i) reprocess
         such product in the Facility at Sterling's sole cost and expense, (ii)
         exchange Product for such product or (iii) refund to BP the Purchase
         Price therefor, if previously paid.

9.6      BP agrees to be financially responsible for all product which is
         determined to have constituted Product sold to it hereunder at the
         Point of Delivery thereof, and the indemnity in Article 19 shall cover
         Damages arising from such Product.

9.7      Sterling shall have the right to refuse to accept delivery of raw
         materials which do not constitute Raw Materials hereunder, in addition
         to any other remedies it may have.

                            Article 10 - Measurement

10.1     The unit of measurement of Product, Co-Products and Raw Materials (the
         "Unit of Measurement") shall be one pound (avoirdupois).  All
         quantities given herein, unless otherwise expressly stated, are in
         terms of such Unit of Measurement.

10.2     Sterling shall maintain and operate the Measuring Equipment in
         accordance with customary practice in the industry and all applicable
         Laws.  BP may, at its option and expense, install measuring equipment
         for checking the Measuring Equipment so long as such installation does
         not materially interfere with the operation of the Facility.

10.3     BP shall have the right, at BP's expense, to monitor and check the
         measurement of Product from the Facility into the tanks of the ship,
         barge or other inland water or marine vessel into which Product is
         loaded or delivered, in the presence of an independent surveyor, at
         BP's





                                      -17-
<PAGE>   21
         expense. Any reports and certifications resulting from such monitoring
         and checking will be made available by BP to Sterling on request.

10.4     The determination of the quantity of Product deliveries hereunder
         shall be made by taking the opening and closing inventory of Sterling
         properly calibrated static shore tanks before and after each shipment.

10.5     The determination of the quantity of Product and Co-Product for
         pipeline in-Plant transport shall be made by suitable meter(s) and any
         other necessary equipment designated by Sterling. The determination of
         the quantity of Raw Materials, if any, provided by BP hereunder,
         including by means of pipeline, shall be made in the same manner as
         set forth in Section 10.4 and this Section 10.5.

10.6     Each party shall have the right to be present at the time any
         installing, reading, cleaning, changing, repairing, inspecting,
         testing or adjusting is done in connection with the Measuring
         Equipment used in measuring deliveries hereunder. The records from
         such Measuring Equipment shall remain the property of the owner
         thereof, but, upon request, each party will submit to the other party
         its records, charts and weight tickets, together with calculations
         therefrom, subject to return within 15 days after receipt thereof.
         Such records, charts and weight tickets shall be kept on file for a
         period of not less than 90 days.

10.7     If upon any test the Measuring Equipment is found to be inaccurate in
         the aggregate by 2% or more, any payment based upon such measurements
         shall be corrected at the rate of such inaccuracy for any period of
         inaccuracy which is definitely known or agreed upon, or if not known
         or agreed upon, then for a period extending back one- half of the time
         elapsed since the last successful test. Following any test, any
         Measuring Equipment found to be inaccurate





                                      -18-
<PAGE>   22
         to any degree shall be adjusted as soon as practicable to measure
         accurately. If for any reason any Measuring Equipment is out of
         service or out of repair so that the quantity delivered cannot be
         ascertained or computed from the readings thereof, the quantity so
         delivered during the period the Measuring Equipment is out of service
         or out of repair shall be estimated and agreed upon by the parties
         upon the basis of the best available data, using the first of the
         following methods which is feasible:

         (a)     by using the results of any check measuring equipment or other
                 measuring device of BP, if installed and measuring accurately;

         (b)     by using the ship's records of tank measurements where Product
                 has been loaded onto (or Raw Materials unloaded from) a ship;

         (c)     by correcting the error if the percentage of error is
                 ascertainable by test or mathematical calculation; or

         (d)     by estimating the quantity of deliveries during preceding
                 periods under similar conditions when the Measuring Equipment
                 was measuring accurately.

10.8     Notwithstanding the foregoing, Sterling's measurements shall be deemed
         to be accurate for purposes of all deliveries made hereunder unless,
         as to any particular delivery, BP objects thereto in writing delivered
         to Sterling within three weeks after receipt of notice of inaccurate
         measurement from BP's customer, but in no event greater than 90 days
         from the date of shipment.





                                      -19-
<PAGE>   23
***.
                            Article 12 - Co-Products

12.1     The parties shall have the benefit of Co-Products produced at the
         Facility in proportion to the respective pounds of Product actually
         taken or retained, as the case may be, by such parties hereunder. ***
         In no event shall Co-Products be taken from or delivered off the Plant
         site unless they have first been converted to a form deemed safe for
         transport by both BP and Sterling.

                       Article 13 - Capital Expenditures

13.1     Upon compliance by Sterling with the procedures contained in this
         Article 13 and the receipt by BP of an invoice therefor, BP shall ***.

13.2     On or before October 1 of each Contract Year, Sterling shall prepare
         and submit to BP a capital budget for the next succeeding Contract
         Year (the "Capital Budget") including (i) with respect to each
         proposed or continuing Capital Project for which the Capital
         Expenditures related thereto are anticipated to exceed *** in such
         Contract Year (each, a "Major Capital Project"), a description of such
         Major Capital Project in reasonable detail (including, to the extent
         known at such time, a brief description of such Capital Project, the
         estimated costs thereof and any anticipated benefits), and an estimate
         of the Capital Expenditures anticipated to be made in connection with
         such Major Capital Project during such Contract Year, and (ii) with
         respect to any proposed or continuing Capital Projects for which the
         Capital Expenditures related thereto are anticipated to be less than
         or equal to *** on an individual basis in such Contract Year ("Minor
         Capital Projects"), an estimate of the





                                      -20-
<PAGE>   24
         aggregate amount of Capital Expenditures anticipated to be made in
         connection with such Minor Capital Projects during such Contract Year
         (the "Minor Capital Projects Budget").  BP shall, on or before the
         next succeeding January 1, approve the Capital Budget in whole or in
         part; provided that Sterling has provided BP with the description of
         each Major Capital Project included in the Capital Budget, as required
         under this Section 13.2.  Sterling may submit any portion of the
         Capital Budget which is not approved by BP for dispute resolution
         under Article 21 and, if the matter is ultimately submitted to
         arbitration, the arbitrators shall determine whether all or any
         portion of such disputed matter should have been approved by BP based
         upon whether or not the disputed matter would have been implemented by
         a prudent operator in like circumstances in the acrylonitrile
         manufacturing business.  Prior to making any Capital Expenditure in
         connection with a Major Capital Project, Sterling shall, to the extent
         practicable under the circumstances, consult with BP with respect to
         such Major Capital Project and give BP the opportunity to propose
         alternative approaches to such Major Capital Project which it believes
         will reduce costs.  In the event that Sterling and BP disagree on the
         approach to any Major Capital Project, Sterling shall be entitled to
         proceed with such Major Capital Project in such manner as it deems
         advisable, in its sole discretion, and the matter shall be referred
         for dispute resolution under Article 21 and, if the matter is
         ultimately submitted to arbitration, the arbitrators shall determine
         which of Sterling's and BP's respective approaches would have been
         pursued by a prudent operator in like circumstances in the
         acrylonitrile manufacturing business and estimate the cost of BP's
         approach.  The costs and expenses of Sterling's approach shall be
         deemed to be Capital Expenditures hereunder if the arbitrators choose
         Sterling's approach.  The estimated costs and expenses





                                      -21-
<PAGE>   25
         of BP's approach (as determined by the arbitrators) shall be deemed to
         be Capital Expenditures hereunder if the arbitrators choose BP's
         approach; provided, however, that Section 3.5 shall not apply to such
         approach or any savings which would have been realized had BP's
         approach been implemented.

13.3     Prior to commencement of a Major Capital Project included in the
         Capital Budget, Sterling shall furnish BP with the details of the
         proposed Capital Expenditure including (i) the anticipated cost of
         such proposed Major Capital Project, (ii) the anticipated benefits of
         such proposed Major Capital Project, (iii) the anticipated effect of
         such proposed Major Capital Project on one or more of the Variable
         Cost Component, the Fixed Cost Component, production rates of the
         Facility, safety and environmental and the quality of Product, and
         (iv) an estimated time-table for completion of such proposed Major
         Capital Project and the making of the Capital Expenditures associated
         therewith. Sterling shall not be required to furnish any of such
         information to BP as a condition to any disbursement from BP related
         to a Minor Capital Project; provided, however, that the aggregate
         amount of Capital Expenditures made during any Contract Year is less
         than or equal to the Minor Capital Projects Budget for such Contract
         Year.

13.4     Sterling may, at any time and from time to time, propose Major Capital
         Projects which are not included in the Capital Budget for the relevant
         Contract Year and/or Minor Capital Projects which will cause the
         aggregate amount of Capital Expenditures for the relevant Contract
         Year to exceed the Minor Capital Projects Budget; provided, however,
         that BP shall not be obligated to reimburse Sterling for any Capital
         Expenditures made in connection with any such Capital Project unless
         and until BP has approved such Capital Project.  In the event





                                      -22-
<PAGE>   26
         that Sterling is required to make any Capital Expenditure on an
         emergency basis, BP will not thereafter unreasonably withhold or delay
         approval of the related Capital Project or reimbursement of such
         Capital Expenditures.  Sterling will provide BP with notice of any
         Capital Expenditure made on an emergency basis as soon as practicable
         after it has made such Capital Expenditure.

13.5     Any Capital Project for which BP has reimbursed Sterling for a portion
         of the Capital Expenditures in accordance with the terms of this
         Agreement shall, unless otherwise agreed by the parties, be deemed to
         have a useful life of ten years and the Capital Expenditures
         associated therewith shall be amortized on a straight- line basis.  If
         this Agreement is terminated (or rejected in connection with any
         bankruptcy proceeding) prior to the end of the useful life of any such
         Capital Project, Sterling shall, within 90 days after the date of such
         termination or rejection, ***.

13.6     BP shall be entitled to the benefit of any and all depreciation and
         amortization or expense deductions with respect to the portion of any
         Capital Expenditures for which BP has reimbursed Sterling and Sterling
         shall be entitled to the benefit of any and all depreciation and
         amortization or expense deductions with respect to the portion of any
         Capital Expenditures which has not been reimbursed by BP.

                             Article 14 - Personnel

Sterling shall at all times have sole authority with respect to all personnel
matters involving the employees, consultants and third-party contractors at the
Facility, including salaries, benefits, compensation, indirect personnel costs,
manpower needs, training, insurance, labor matters, working





                                      -23-
<PAGE>   27
hours, job responsibilities, bonding and all other employee, personnel-related
and contracting matters.

                 Article 15 - BP Security Interests; Insurance

15.1     Sterling has granted to BP, and hereby reaffirms such grant to BP of,
         a first security interest in and lien on the first production of
         Product and the receivables and proceeds therefrom generated from the
         sale of such Product from the Facility to the extent of BP's Right and
         a first security interest in and lien on the Third Reactor, including
         associated equipment, (subject to customary exceptions as to
         immaterial liens and charges) to secure the performance of Sterling's
         obligations under this Agreement and shall execute any necessary
         financing statement, mortgage and other documents to perfect such
         interests and shall cause any current lien holders on Product and the
         Third Reactor to subordinate their security interests and liens to the
         above security interests and liens of BP.  Subject to the foregoing
         rights of BP and obligations of Sterling, Sterling shall have the
         right to pledge, mortgage and grant security interests in the
         Facility, Product, Co- Products and this Agreement as collateral
         security for loans or other financing.  The documents granting BP a
         security interest and lien shall provide to BP appropriate access
         rights to the collateral should a Sterling Event of Default thereunder
         occur and be continuing.

15.2     During the term of this Agreement, insurance on the Facility and those
         parts of the Plant which serve the Facility shall be maintained by
         Sterling in types and amounts agreed to by BP and Sterling or, in the
         absence of any agreement, as described in Schedule 15.2; but BP and
         Sterling may each carry additional insurance, at its sole discretion
         and cost.  Sterling shall make BP an additional insured under the
         policies evidencing such insurance coverages





                                      -24-
<PAGE>   28
         for liability purposes only.  In the event of a fire, explosion,
         flood, hurricane or windstorm or other casualty resulting in the loss
         of the Facility or a substantial part thereof, and Sterling and BP
         cannot agree whether or not the Facility should be repaired, Sterling
         shall have the right to require the Facility to be repaired and that
         the insurance proceeds first be applied to the payment of all repair
         costs and the parties' obligations under this Agreement shall
         continue, but Sterling shall bear all costs of such repair in excess
         of the proceeds of insurance and shall have the right to fully
         depreciate such repair costs.

                Article 16 - Access to Information and Facility

16.1     For purposes of verifying any information pertinent to this Agreement,
         upon written request by BP from time to time, subject to the receipt
         by Sterling of appropriate confidentiality agreements, Sterling shall
         provide to an independent third party accountant selected by BP, at
         reasonable times during normal business hours, access to Sterling's
         books, records and accounts relating to this Agreement, except as such
         access may be prohibited by law or presently existing third party
         confidentiality agreements. Such independent third party accountant
         shall thereupon have the right to make copies of and abstracts from
         such books, records and accounts, at BP's expense, which copies may be
         removed from the premises of Sterling and retained by such accountant,
         subject to the terms of any confidentiality agreement between Sterling
         and BP regarding use of such information. It is agreed that such
         accountant may report to BP only its conclusions resulting from such
         accountant's review of Sterling data, and nothing else.





                                      -25-
<PAGE>   29
16.2     Sterling agrees to permit representatives of BP, at BP's expense, to
         have access to the Facility at reasonable times and on reasonable
         notice to obtain information relating to the present or proposed
         operations thereof to the extent related to this Agreement so long as
         such access does not violate existing third party confidentiality
         agreements or materially disrupt the operation of the Facility. BP
         agrees to furnish Sterling with copies of all information and audits
         obtained or prepared pursuant to the provisions of this Section.

16.3     For purposes of verifying any information pertinent to the Agreement,
         upon written request by Sterling from time to time, subject to the
         receipt by BP of appropriate confidentiality agreements, BP shall
         provide to an independent third party accountant selected by Sterling,
         at reasonable times during normal business hours, access to BP's
         books, records and accounts relating to this Agreement, except as such
         access may be prohibited by law or presently existing third party
         confidentiality agreements.  Such independent third party accountant
         shall thereupon have the right to make copies of and abstracts from
         such books, records and accounts, at Sterling's expense, which copies
         may be removed from the premises of BP and retained by such
         accountant, subject to the terms of any confidentiality agreement
         between BP and Sterling regarding use of such information.  It is
         agreed that such accountant may report to Sterling only its
         conclusions resulting from such accountant's review of BP data, and
         nothing else.





                                      -26-
<PAGE>   30
                  Article 17 - Representations and Warranties

17.1     Sterling represents and warrants to BP as follows:

         (a)     Organization, Good Standing and Corporate Power.  Sterling is
                 a corporation, duly organized, validly existing and in good
                 standing under the laws of the State of Delaware, is duly
                 qualified to do business as a foreign corporation in the State
                 of Texas, and has all requisite corporate power and authority
                 to carry on its business as presently conducted, to enter into
                 this Agreement and perform its obligations hereunder.

         (b)     Authority Relative to Agreement.  The execution, delivery and
                 performance by Sterling of this Agreement have been duly and
                 effectively authorized by all necessary corporate action.
                 This Agreement has been duly executed and delivered by
                 Sterling and constitutes a legal, valid and binding obligation
                 of Sterling enforceable in accordance with its terms, except
                 as such enforcement may be limited by applicable bankruptcy,
                 insolvency, reorganization or similar Laws affecting
                 creditors' rights generally and general equitable principles.

         (c)     No Conflict with Other Instruments or Proceedings.  Neither
                 the execution and delivery of this Agreement, nor the
                 performance or compliance with the terms and conditions
                 hereof, conflict with, or will result in a breach by Sterling
                 of, or constitute a default under, or result in the creation
                 of any lien, charge or encumbrance (other than those set forth
                 herein) upon, any asset of Sterling pursuant to any of the
                 terms, conditions or provisions of (i) the Certificate of
                 Incorporation or Bylaws of Sterling, (ii) any mortgage, deed
                 of trust, lease, contract, agreement or other instrument to





                                      -27-
<PAGE>   31
                 which Sterling is a party or by which Sterling may be bound or
                 affected or (iii) any writ, order, judgment, decree, statute,
                 ordinance, regulation or any other restriction of any kind or
                 character, to which Sterling is subject, or by which Sterling
                 may be bound or affected.

         (d)     No Litigation or Agency Proceedings.  As of the Effective
                 Date, except as expressly set forth in writing delivered by
                 Sterling to BP, there are no actions, suits, claims,
                 investigations or proceedings, private or governmental,
                 pending or to Sterling's knowledge threatened against Sterling
                 at law or in equity or before or by any federal, state,
                 municipal or other governmental or non-governmental
                 department, commission, board, bureau, agency or
                 instrumentality seeking to enjoin, restrain or otherwise
                 prevent the execution and delivery of this Agreement by
                 Sterling, or any past or present environmental, safety or
                 health issue, matter or problem pertaining to the Plant or the
                 Facility that would diminish the ability of BP to fully enjoy
                 all of its rights and privileges under this Agreement.

         (e)     EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, STERLING HEREBY
                 EXPRESSLY DISCLAIMS AND NEGATES (i) ANY REPRESENTATION OR
                 WARRANTY (EXPRESS, IMPLIED, COMMON LAW, STATUTORY OR
                 OTHERWISE) RELATING TO THE FACILITY, ANY PRODUCT OR
                 CO-PRODUCT, THE THIRD REACTOR, THE OPERATION OF ANY OF THE
                 FOREGOING, OR ANY OTHER TANGIBLE PERSONAL PROPERTY AND
                 FIXTURES INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF
                 MERCHANTABILITY OR FITNESS FOR A PARTICULAR





                                      -28-
<PAGE>   32
                 PURPOSE OR FITNESS OF DESIGN OR ENGINEERING, AND (ii) ANY
                 IMPLIED REPRESENTATION OR WARRANTY RELATING TO ANY PRODUCT OR
                 CO-PRODUCT SOLD HEREUNDER, INCLUDING, BUT NOT LIMITED TO, ANY
                 IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
                 PARTICULAR PURPOSE OR FITNESS OF DESIGN OR ENGINEERING.

17.2     BP represents and warrants to Sterling as follows:

         (a)     Organization.  BP is a corporation duly organized, validly
                 existing and in good standing under the laws of the State of
                 Ohio and is duly qualified to do business as a foreign
                 corporation in the State of Texas, and has all requisite
                 corporate power and authority to carry on its business as
                 currently conducted and to enter into this Agreement and
                 perform its obligations hereunder.

         (b)     Authority Relative to Agreement.  The execution, delivery and
                 performance by BP of this Agreement have been duly and
                 effectively authorized by all necessary corporate action.
                 This Agreement has been duly executed and delivered by BP and
                 constitutes a legal, valid and binding obligation of BP
                 enforceable in accordance with its terms, except as such
                 enforcement may be limited by applicable bankruptcy,
                 insolvency, reorganization or similar Laws affecting
                 creditors' rights generally and general equitable principles.

         (c)     No Conflict with Other Instruments or Proceedings.  Neither
                 the execution and delivery of this Agreement, nor the
                 performance or compliance with the terms and conditions
                 hereof, conflict with, or will result in a breach by BP of, or
                 constitute a





                                      -29-
<PAGE>   33
                 default under, or result in the creation of any lien, charge
                 or encumbrance upon, any of its assets pursuant to any of the
                 terms, conditions or provisions of (i) the Certificate of
                 Incorporation or Bylaws of BP, (ii) any mortgage, deed of
                 trust, lease, contract, agreement or other instrument to which
                 BP is a party or by which BP may be bound or affected or (iii)
                 any writ, order, judgment, decree, statute, ordinance,
                 regulation or any other restriction of any kind or character,
                 to which BP is subject, or by which BP may be bound or
                 affected.

         (d)     No Litigation or Agency Proceedings.  As of the Effective
                 Date, except as expressly set forth in writing delivered by BP
                 to Sterling, there are no actions, suits, claims,
                 investigations or proceedings, private or governmental,
                 pending or to BP's knowledge threatened against BP at law or
                 in equity or before or by any federal, state, municipal or
                 other governmental or  non-governmental department,
                 commission, board, bureau, agency or instrumentality seeking
                 to enjoin, restrain or otherwise prevent the execution and
                 delivery of this Agreement by BP.

         (e)     EXCEPT AS OTHERWISE PROVIDED HEREIN, IN THE LICENSE AGREEMENT
                 OR IN THE CATALYST SALES CONTRACT, BP HEREBY EXPRESSLY
                 DISCLAIMS AND NEGATES (i) ANY REPRESENTATION OR WARRANTY
                 (EXPRESS, IMPLIED, COMMON LAW, STATUTORY OR OTHERWISE)
                 RELATING TO THE CATALYST, ANY RAW MATERIALS SUPPLIED BY BP, OR
                 THE NEW TECHNOLOGY INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY
                 OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
                 FITNESS OF DESIGN OR ENGINEERING,





                                      -30-
<PAGE>   34
                 AND (ii) ANY IMPLIED REPRESENTATIONS OR WARRANTY RELATING TO
                 THE FOREGOING INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
                 WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
                 PURPOSE OR FITNESS    OF DESIGN OR ENGINEERING.

                           Article 18 - Force Majeure

18.1     In the event of either party being rendered unable, wholly or in part,
         by Force Majeure to carry out its obligations under this Agreement
         (other than any obligation to make payment of any amount when due and
         payable hereunder), it is agreed that on such party giving notice and
         reasonably full particulars of such Force Majeure in writing to the
         other party within a reasonable time after the occurrence of the cause
         relied on, then the obligations of the party giving such notice, so
         far as they are affected by such Force Majeure, shall be suspended
         during the continuance of any inability so caused, but for no longer
         period, and such cause shall so far as possible be remedied with all
         reasonable dispatch.

18.2     It is understood and agreed that the settlement of strikes or lockouts
         shall be entirely within the discretion of the party having the
         difficulty, and that the above requirement that any Force Majeure
         shall be remedied with all reasonable dispatch shall not require the
         settlement of strikes or lockouts by acceding to the demands of the
         opposing party when such course is inadvisable in the discretion of
         the party having the difficulty.

18.3     Notwithstanding the definitions of Force Majeure herein and the
         provisions of Section 18.1 hereof, the failure by either party to
         perform any of its obligations under this Agreement shall be deemed
         not to have been caused by circumstances reasonably outside its
         control if such failure results from breakage or accident to
         machinery, equipment, lines of pipe or other





                                      -31-
<PAGE>   35
         property or the partial or entire failure thereof or the necessity to
         make repairs or alterations thereto which result from normal wear and
         tear which could be reasonably anticipated by a reasonably prudent
         operator or in circumstances where a reasonably prudent operator would
         have standby equipment or spare parts.

18.4     In the event that for any reason maintenance, utilities, any pipelines
         or other services and resources at or servicing the Plant become
         limited, Sterling agrees that it will in good faith allocate such
         maintenance utilities, pipelines, services and resources between the
         Facility and the other activities at the Plant on a fair and equitable
         basis having regard to the needs of BP hereunder and third parties
         under contracts for the sale by Sterling of other chemicals produced
         in the Plant.

                          Article 19 - Indemnification

19.1     Except as otherwise provided herein, Sterling, from and after the
         Effective Date, shall defend, indemnify and hold harmless BP, its
         affiliates, their respective present and former directors, officers
         and stockholders and their respective heirs, executors, personal
         representatives, administrators, successors and assigns ("BP
         Indemnified Persons") from and against any and all Damages suffered or
         incurred by BP on account of or arising from or related to the breach
         of, or the failure to perform or satisfy any of, the representations,
         warranties, covenants or agreements made by Sterling in or under this
         Agreement, or any liability to any party whether incurred under
         statute or in tort arising directly or indirectly from the operations
         carried on by or on behalf of Sterling at or in connection with the
         Facility, the Plant, or any Product (prior to the time risk of loss
         has passed to BP) or any Co-Product or arising out of Spills or
         Releases (whether occurring before or after the termination





                                      -32-
<PAGE>   36
         of this Agreement), except and to the extent that (i) such Damages
         arise out of or relate to any theory of product liability, including
         those covering the manufacture, sale, introduction into commerce or
         use of Product for which risk of loss has passed to BP, (ii) such
         Damages arise out of Spills or Releases that are attributable to the
         acts, omissions, or default of BP, (iii) such Damages are payable to
         an employee of BP or (iv) such Damages arise out of or result from a
         material breach by BP of its obligations under this Agreement or the
         gross negligence, fraud or willful misconduct of any BP Indemnified
         Person.

19.2     Except as otherwise provided herein, BP, from and after the Effective
         Date, shall defend, indemnify and hold harmless Sterling, its
         affiliates, their respective present and former directors, officers
         and stockholders and their respective heirs, executors, personal
         representatives, administrators, successors and assigns ("Sterling
         Indemnified Persons") from and against any and all Damages suffered or
         incurred by Sterling on account of or arising from or related to the
         breach of, or the failure to perform or satisfy any of, the
         representations, warranties, covenants, or agreements made by BP in or
         under this Agreement, or any liability to any party whether incurred
         under statute or in tort arising directly or indirectly from the
         actions of BP carried out at or in connection with the Facility, the
         Plant, any Product or any Co-Product or arising out of Spills and
         Releases (which Spills and Releases have occurred during the Initial
         Term or any Additional Term) to the extent that the Damages arising
         out of such Spills and Releases are attributable to the acts,
         omissions or default of BP, including Damages arising from or relating
         to any theory of product liability, including those covering the
         manufacture, sale, introduction into commerce or use of Product on and
         after the time risk of loss has passed to BP, excepting any Damages





                                      -33-
<PAGE>   37
         (i) payable to employees of Sterling or (ii) arising out of or
         resulting from a material breach by Sterling of its obligations under
         this Agreement or the gross negligence, fraud or willful misconduct of
         any Sterling Indemnified Person.

19.3     BP and Sterling each agree that promptly after any of its officers
         becomes aware of the discovery of facts giving rise to a claim by it
         for indemnification hereunder (each, a "Claim"), such party will
         provide notice thereof in writing to the other party. The failure of
         either party to so notify the other party of a Claim shall relieve the
         other party from any liability in respect of such Claim to the extent
         such other party is prejudiced by the failure to receive timely
         notice. For purposes of this Section 19.3, receipt by a party of
         notice of any demand, assertion, claim, action to proceedings
         (judicial, administrative or otherwise) by or from any Person (other
         than the other party to this Agreement) ("Third Party Action") which
         may give rise to a Claim on behalf of such party shall constitute the
         discovery of facts giving rise to a Claim by it and shall require
         prompt notice of the receipt of such matter as provided in the first
         sentence of this Section 19.3.  Any notice pursuant to this Section
         19.3 shall set forth all information respecting such Claim and the
         Third Party Action, if any, as such party shall then have and shall
         contain a statement to the effect that the party giving the notice is
         making a Claim pursuant to and formal demand for indemnification under
         this Article 19.

19.4     For purposes of this Article 19, the term "Indemnifying Party" as to a
         particular Claim or Third Party Action shall mean the party having or
         which is held to have an obligation to indemnify the other party with
         respect to such Claim or Third Party Action pursuant to this Article
         19 and the term "Indemnified Party" as to a particular Claim or Third
         Party Action





                                      -34-
<PAGE>   38
         shall mean the party having or which is held to have the right to be
         indemnified with respect to such Claim or Third Party Action by the
         other party pursuant to this Article 19.

19.5     Except as otherwise expressly provided herein, Indemnifying Party
         shall be entitled at its cost and expense to contest and defend by all
         appropriate legal proceedings any Third Party Action with respect to
         which it is called upon to indemnify Indemnified Party under the
         provisions of this Agreement; provided, however, that with respect to
         any Claim arising from the assertion of any Third Party Action, notice
         of the intention so to contest shall be delivered by Indemnifying
         Party to Indemnified Party within 20 days from the date of mailing to
         Indemnifying Party of notice by Indemnified Party of the assertion of
         the Third Party Action.  Any such contest with respect to a Third
         Party Action may be conducted in the name and on behalf of
         Indemnifying Party or the Indemnified Party as may be appropriate.
         Except as otherwise expressly provided herein, such contest shall be
         conducted by attorneys employed by Indemnifying Party, but Indemnified
         Party shall have the right to participate in such proceedings and to
         be represented by attorneys of its own choosing at its cost and
         expense.  If Indemnified Party joins in any such contest, Indemnified
         Party shall have full authority to determine all action to be taken
         with respect thereto. If after notice as provided for herein,
         Indemnifying Party does not elect to contest any Third Party Action as
         provided in this Section 19.5, Indemnifying Party shall be bound by
         the result obtained with respect thereto by Indemnified Party and the
         Indemnified Party may (but shall have no obligation to) contest any
         such Third Party Action or settle or admit liability with respect
         thereto, all for the account of Indemnifying Party. At any time after
         the commencement of defense of any such Third Party Action,
         Indemnifying Party may request Indemnified Party





                                      -35-
<PAGE>   39
         to agree in writing to the abandonment of such contest or the payment
         or compromise by Indemnifying Party of the asserted Third Party Action
         whereupon such action shall be taken unless Indemnified Party so
         determines that the contest should be continued, and so notifies
         Indemnifying Party in writing within 15 days of such request from
         Indemnifying Party. In the event that Indemnified Party determines
         that the contest should be continued, Indemnifying Party shall be
         liable with respect to such Third Party Action only to the extent of
         the lesser of (i) the amount which the third party taking the Third
         Party Action had agreed to accept in payment or compromise as of the
         time Indemnifying Party made its request therefor to Indemnified
         Party, or (ii) such amount for which Indemnifying Party may be liable
         with respect to such Claim by reason of the provisions hereof.

19.6     If requested by Indemnifying Party, Indemnified Party agrees to
         provide reasonable cooperation to Indemnifying Party and its counsel
         in contesting any Third Party Action which Indemnifying Party elects
         to contest or, if appropriate, in making any counter-claim against the
         third party taking the Third Party Action, or any cross-complaint
         against any other Person not a party hereto, but Indemnifying Party
         will reimburse Indemnified Party for any expenses incurred by it in so
         cooperating.

19.7     Indemnified Party agrees to afford Indemnifying Party and its counsel
         the opportunity to be present at, and to participate in, conferences
         with all Persons taking Third Party Action against Indemnified Party
         or conference with representatives of or counsel for such Persons.

19.8     Indemnifying Party shall promptly pay Indemnified Party any amount due
         under this Article 19 and reimburse each Indemnified Party for all
         reasonable expenses (including reasonable counsel fees) for which
         Indemnified Party is entitled to be indemnified hereunder as they are





                                      -36-
<PAGE>   40
         incurred by such Indemnified Party.  Upon judgment, determination by a
         governmental authority having jurisdiction, settlement or compromise
         of any Third Party Action, Indemnifying Party shall promptly pay on
         behalf of Indemnified Party, and/or to Indemnified Party in
         reimbursement of any amount theretofore required to be paid by it
         pursuant to any judgment, determination by a governmental authority
         having jurisdiction, settlement or compromise, the amount so
         determined by such judgment, determination by such governmental
         authority, settlement or compromise, and all other Damages of
         Indemnified Party with respect thereto, unless in the case of a
         judgment or determination by such governmental authority an appeal is
         made from such judgment or determination; provided, however, that if
         Indemnifying Party desires to appeal from an adverse judgment or
         determination by such governmental authority, then Indemnifying Party
         shall post and pay the cost of the security or bond to stay execution
         of such judgment or determination pending appeal.  Upon the payment in
         full by Indemnifying Party of the amounts described in this Section
         19.8, Indemnifying Party shall succeed to the rights of Indemnified
         Party, to the extent such rights are not waived in settlement, against
         the third party in such Third Party Action.

19.9     In no event shall either party be liable to the other for damages
         other than Damages.





                                      -37-
<PAGE>   41
                            Article 20 - Assignment

20.1     Except where all or substantially all of the assets of Sterling are
         sold or otherwise transferred to or Sterling is merged with or
         acquired by another Person, Sterling shall not assign its rights or
         obligations under this Agreement without BP's prior written consent,
         which consent shall not be unreasonably withheld, delayed or
         conditioned.

20.2     BP may assign its rights or delegate its duties and obligations
         hereunder to any Person without the consent of Sterling provided that:

         (a)     Such assignee is of sound financial condition and, in BP's
                 good faith judgment, able timely to perform BP's obligations
                 under this Agreement; and

         (b)     Within ten days after a request by Sterling, BP executes a
                 written guarantee of such assignee's timely performance of
                 BP's obligations hereunder, containing provisions usually and
                 customarily contained in guarantees of financial performance
                 in the United States.

20.3     Notwithstanding any assignment of any of its rights or any delegation
         of any of its duties by BP under this Agreement, whether permitted
         hereby or otherwise, BP shall continue to be responsible for its
         obligations hereunder, and does hereby unconditionally and absolutely
         guarantee the timely payment of all sums due, and the timely
         performance of all obligations, by any such assignee hereunder (the
         "Obligations").  On default by any such assignee, Sterling may, at its
         option, proceed directly and at once against BP to enforce BP's
         obligations hereunder, and exercise all remedies available hereunder,
         without notice to such assignee or the necessity for proceeding or
         taking any action against such assignee.





                                      -38-
<PAGE>   42
20.4     Any attempted assignment or delegation by either party hereto not
         otherwise permitted hereby which is made without the prior written
         consent of the other party shall be ineffective and void for all
         purposes.

20.5     Notwithstanding the foregoing, Sterling may assign its rights
         hereunder as collateral to financial institutions, but any such
         assignment shall be subject to BP's security interests and liens
         referred to in Article 15.

                Article 21 - Dispute Resolution and Arbitration

21.1     In the event of a dispute, difference or question arising out of or
         relating to this Agreement or the License Agreement which the parties
         are unable to resolve within 30 days, the parties agree to promptly
         refer such dispute to a committee comprised of two members appointed
         by Sterling (General Manger Acrylonitrile and Technical Service
         Manager Acrylonitrile) and two members appointed by BP (Manager of
         Planning and Development and Director of Acrylonitrile Engineering and
         Technology) ("Dispute Resolution Committee").  If the Dispute
         Resolution Committee does not unanimously approve a resolution within
         30 days, the parties shall promptly advise their respective chief
         executive officers ("CEOs") of their inability to reach agreement
         through informal discussion within the required time limits, and shall
         within ten days of the passing of such time limits, submit the dispute
         to their respective CEOs for resolution.  In the event that the CEOs
         fail to amicably resolve the dispute within 30 days of such referral,
         the dispute shall be settled by binding arbitration as set forth
         below.

21.2     All disputes, differences or questions arising out of or relating to
         this Agreement or the License Agreement (including those as to the
         validity, interpretation, breach, violation or termination hereof)
         which are not resolved pursuant to Section 21.1 above shall be finally





                                      -39-
<PAGE>   43
         determined and settled pursuant to arbitration in Houston, Texas, by
         three arbitrators, one to be appointed by Sterling, one to be
         appointed by BP, and a neutral arbitrator to be appointed by such two
         party-appointed arbitrators. The neutral arbitrator shall be an
         attorney and shall act as chair-person. Any such arbitration may be
         initiated by a party by written notice ("Arbitration Notice") to the
         other party specifying the subject of the requested arbitration and
         appointing such party's arbitrator for such arbitration.  The panel of
         arbitrators shall be empowered to impose sanctions, permit or order
         depositions and discovery and to take such other actions as they deem
         necessary to the same extent a judge could pursuant to the Federal
         Rules of Civil Procedure and applicable law.  With respect to any
         matter subject to arbitration hereunder, each party agrees that all
         discovery activities shall be expressly limited to matters directly
         relevant to such matter and the panel of arbitrators shall be required
         to fully enforce this requirement.

21.3     Should (i) a party receiving an Arbitration Notice fail to appoint an
         arbitrator as hereinabove contemplated by written notice to the party
         giving the Arbitration Notice within 20 days after the receipt of the
         Arbitration Notice, or (ii) the two arbitrators appointed by or on
         behalf of the parties as contemplated in Section 21.2 hereof fail to
         appoint a neutral arbitrator as hereinabove contemplated within 20
         days after the date of the appointment of the last arbitrator
         appointed by or on behalf of the parties, then a Judge of the United
         States District Court for the Southern District of Texas, Houston
         Division, upon application of Sterling or of BP, shall appoint an
         arbitrator to fill any such position with the same force and effect as
         though such arbitrator had been appointed as hereinabove contemplated.





                                      -40-
<PAGE>   44
21.4     The arbitration proceeding shall be conducted in the English language
         in Houston, Texas, in accordance with the Rules of the American
         Arbitration Association.  Each of the parties may, by summary
         proceedings (e.g., a plea in abatement or motion to stay further
         proceedings) bring any action in any court of competent jurisdiction
         to (i) compel arbitration of any dispute, difference or question
         arising out of or related to this Agreement or the License Agreement,
         (ii) obtain interim measures of protection pending arbitration of any
         dispute, difference or question and/or (iii) enforce any decision of
         the arbitrators, including the final award.  A determination, award or
         other action shall be considered the valid action of the arbitrators
         if supported by the affirmative vote of two or three of the three
         arbitrators.  The costs of arbitration (exclusive of the expense of a
         party in obtaining and presenting evidence and attending the
         arbitration, and of the fees and expenses of legal counsel to such
         party, all of which shall be borne by such party) shall be shared
         equally by the Sterling and BP.  The arbitration award shall be final
         and conclusive and shall receive recognition, and judgment upon such
         award may be entered and enforced in any court of competent
         jurisdiction.

             Article 22 - Confidentiality and Intellectual Property

22.1     During the term of this Agreement and thereafter, except for the New
         Technology and other technology subject to the License Agreement, all
         information relating to the business, products, assets and finances of
         Sterling shall be treated as proprietary to Sterling and as
         confidential by BP and shall not be disclosed by BP or its officers,
         employees, agents, affiliates or representatives to any third party,
         or used for the benefit of, BP or any other Person except as otherwise
         specifically provided herein. At the termination of the Initial





                                      -41-
<PAGE>   45
         Term or any Additional Term, the obligations as to confidentiality
         herein shall continue for a period of five years from the date of such
         termination.

22.2     During the term of this Agreement and thereafter, except for the New
         Technology and other technology subject to the License Agreement, all
         information relating to the business, products, assets and finances of
         BP shall be treated as proprietary to BP and as confidential by
         Sterling and shall not be disclosed by Sterling or its officers,
         employees, agents, affiliates or representatives to any third party,
         or used for the benefit of, Sterling or any other Person except as
         otherwise specifically provided herein. At the termination of the
         Initial Term or any Additional Term, the obligations as to
         confidentiality herein shall continue for a period of five years from
         the date of such termination.

                   Article 23 - Defaults; Failures; Remedies

23.1     If a Sterling Event of Default shall occur and be continuing, BP may,
         at its option, by written notice to Sterling, declare Sterling to be
         in default hereunder ("Declaration of Sterling Default"); provided,
         however, that a Declaration of Sterling Default shall not relieve or
         otherwise discharge Sterling from the performance of its obligations
         under this Agreement, except to the extent that the exercise by BP of
         its remedies pursuant to the provisions of Section 23.3 hereof
         otherwise prevents or restricts Sterling from fully performing its
         obligations under this Agreement.

23.2     If a BP Event of Default shall occur and be continuing, Sterling may,
         at its option, by written notice to BP, declare BP to be in default
         hereunder ("Declaration of BP Default"); provided, however, that a
         Declaration of BP Default shall not relieve or otherwise discharge BP
         from the performance of its obligations under this Agreement.





                                      -42-
<PAGE>   46
23.3     Subject to Article 24 hereof, upon a Declaration of Sterling Default,
         BP may, in addition to the remedies available to it at law or in
         equity, by written notice to Sterling, require Sterling to permit, and
         Sterling shall permit, at BP's risk but at Sterling's cost (subject to
         BP's duty to reasonably mitigate such cost), such employees of BP as
         BP may require to have access to the Facility and those parts of the
         Plant that serve the Facility for the purpose of seeking a solution to
         the cause of the Sterling Event of Default or failure, and Sterling
         shall cause its employees to cooperate with BP's said employees while
         present in the Facility; provided, however, that BP shall indemnify
         and hold Sterling harmless pursuant to the provisions of Article 19
         hereof from Damages which Sterling may suffer or incur by reason of
         permitting such employees of BP to have such access and, provided
         further, that BP shall not materially disrupt Sterling's operations at
         the Facility or those parts of the Plant that serve the Facility.
         BP's access to the Facility and those parts of the Plant that serve
         the Facility shall continue until the Facility has operated so as to
         enable Sterling to comply with its obligations hereunder for one
         Month.  BP shall thereupon withdraw its employees from the Facility.
         After withdrawing such employees, BP shall not have any rights
         pursuant to the provisions of this Section 23.3 of access to the
         Facility for a period of 30 days beginning on the date of such
         withdrawal. Once BP has withdrawn its employees, (i) if Sterling fails
         to operate the Facility during such 30 day period following such
         withdrawal by BP in such a manner as to enable Sterling to comply with
         its obligations under this Agreement, BP shall have the right to
         require Sterling to permit BP's employees to have access to the
         Facility and those parts of the Plant which serve the Facility
         immediately upon the expiration of such 30 day period, or (ii) if
         Sterling operates the Facility throughout such 30 day period following
         such





                                      -43-
<PAGE>   47
         withdrawal by BP in such a manner as to enable Sterling to comply with
         its obligations under this Agreement, BP shall have no right to
         require Sterling to permit BP's employees to have such access until a
         subsequent Declaration of Sterling Default, if any.

23.4     Subject to Article 24 hereof, upon a BP Event of Default, Sterling
         may, by written notice to BP, cease all further sales and deliveries
         of Product and/or Co-Product to BP under this Agreement until such
         time as BP complies with its obligations hereunder and may likewise
         exercise any and all other remedies available to it at law or in
         equity.

                             Article 24 - Survival

The representations, warranties, covenants and agreements contained herein,
together with all indemnity and payment obligations of any party hereto owing
to the other party (or its directors, officers or stockholders) on the date of
termination hereof or arising thereafter based on events or occurrences prior
to the termination of this Agreement shall survive such termination and for the
period of the applicable statute of limitations (or, if there is no such
statute, for the longest period permitted by law) with respect to such
obligations.

                           Article 25 - Miscellaneous

25.1     Notices.  Any notice provided for by this Agreement and any other
         notice, demand or communication which any party may wish to send to
         the other party shall be in writing and either delivered by (i)
         regular, overnight or registered or certified mail (return receipt
         requested), with first class postage prepaid, (ii) hand delivery,
         (iii) facsimile or electronic mail transmission or (iv) overnight
         courier service, to the parties at the following addresses or numbers:





                                      -44-
<PAGE>   48
         (a)     Sterling:        Sterling Chemicals, Inc.
                                  1200 Smith Street
                                  Houston, Texas 77002
                                  Attention:      General Manager -
                                                  Acrylonitrile
                                  Fax No.:        (713) 654-9551
                                  E-Mail:         PRostek@Sterlingchemicals.com

         (b)     BP:              BP Chemicals Inc.
                                  4440 Warrensville Center Road
                                  Warrensville Heights, Ohio 44128-2837
                                  Attention:      Vice President
                                                  Marketing
                                  Fax No.:        (216) 586-3838
                                  E-Mail:         smithdb@bp.com

         Any address, number, or name specified above may be changed by a
         notice given by the addressee to the other parties in accordance with
         this Section. Any notice, demand or other communication shall be
         deemed given and effective (1) in the case of a notice sent by regular
         mail, on the date actually received by the addressee, (2) in the case
         of a notice sent by registered or certified mail, on the date
         receipted for (or refused) on the return receipt, (3) in the case of a
         notice delivered by hand, when personally delivered, (4) in the case
         of a notice sent by facsimile or electronic mail, upon transmission
         subject to telephone confirmation of receipt, and (5) in the case of a
         notice sent by overnight mail or courier service, the date delivered
         at the designated address, in each case given or addressed as
         aforesaid.  The inability to deliver because of changed address of
         which no notice was given, or the rejection or other refusal to accept
         any notice, demand or communication, shall be deemed to be the receipt
         of the notice, demand or communication as of the date of such
         inability to deliver or the rejection or refusal to accept.





                                      -45-
<PAGE>   49
25.2     Controlling Law.  All questions concerning the validity, operation and
         interpretation of this Agreement and the performance of the
         obligations imposed upon the parties hereunder shall be governed by
         the laws of the State of Texas.

25.3     Modifications and Waivers.  No cancellation, modification, amendment,
         deletion, addition or other change in this Agreement or any provision
         hereof, or waiver of any right or remedy herein provided, shall be
         effective for any purpose unless specifically set forth in writing
         signed by the party or parties to be bound thereby.  No failure or
         delay on the part of either of the parties hereto in exercising any
         right, power or privilege hereunder, and no course of dealing between
         the parties hereto, shall operate as a waiver of any right, power or
         privilege hereunder.  No single or partial exercise of any right,
         power or privilege hereunder shall preclude any other or further
         exercise thereof or the exercise of any other right, power or
         privilege hereunder.  No notice to or demand on either of the parties
         hereto in any case shall entitle such party to any other or further
         notice or demand in similar or other circumstances or constitute a
         waiver of the rights of either of the parties hereto to any other or
         further action in any circumstances without notice or demand.

25.4     Entire Agreement.  This Agreement supersedes all other agreements,
         oral or written, heretofore made with respect to the subject matter
         hereof and the transactions contemplated hereby, and contains the
         entire agreement of the parties.

25.5     Severability.  Any provisions hereof prohibited by or unlawful or
         unenforceable under any applicable law of any jurisdiction shall be
         ineffective as to such jurisdiction, without affecting any other
         provision of this Agreement, or shall be deemed to be severed or
         modified to conform with such law, and the remaining provisions of
         this Agreement shall





                                      -46-
<PAGE>   50
         remain in force, provided that the purpose of this Agreement can be
         effected. To the full extent, however, that the provisions of such
         applicable law may be waived, they are hereby waived, to the end that
         this Agreement is deemed to be a valid and binding agreement
         enforceable in accordance with its terms.

25.6     Counterparts.  This Agreement may be executed in multiple
         counterparts, each of which shall be deemed to be an original, and all
         of such counterparts together shall constitute but one and the same
         instrument.

25.7     Binding on Successors.  This Agreement shall be binding upon, and
         shall inure to the benefit of, the parties hereto and their respective
         successors and permitted assigns.

25.8     Public Statements.  The parties hereto agree to consult with one
         another prior to issuing any public announcement or statement with
         respect to the transactions contemplated herein.

25.9     No Partnership or Agency.  This Agreement shall not be construed to
         create a partnership, joint venture, association or other entity or
         business organization or to create a principal agent relationship
         between Sterling and BP. Except for the sale or transfer of Product
         and Co-Product to BP as contemplated hereby and the granting of the
         security interests and liens pursuant to Article 15, nothing in this
         Agreement shall be deemed to convey to BP any legal or beneficial
         ownership of the Facility.

25.10    Wire Funds, Etc.  All sums and amounts payable or to be payable
         pursuant to this Agreement shall be payable in immediately available
         funds and in coin or currency of the United States of America that, at
         the time of payment, is legal tender for the payment of public and
         private debts in the United States of America and shall be made by
         wire transfer of immediately available





                                      -47-
<PAGE>   51
         funds to such bank and/or account in the continental United States for
         the account of the payee as from time to time the payee shall have
         directed to the payor in writing, or, if no such direction shall have
         been given, by check to the payee in the manner and at the address set
         forth above. Whenever in this Agreement either party is required to
         pay or reimburse the other party upon receipt of invoice or otherwise
         when no due date for payment is specifically provided, payment shall
         be due ten Business Days after receipt of invoice or other statement,
         and shall be made in the manner set forth above.

         Executed as of the Effective Date.


                                             BP Chemicals Inc.





                                             By: /s/ Gary C. Greve            
                                                ------------------------------
                                                 Gary C. Greve, President



                                             Sterling Chemicals, Inc.



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





                                      -48-
<PAGE>   52
                                   EXHIBIT A

                                  Definitions

         Additional Costs and Expenses means all additional direct and indirect
costs and expenses incurred by Sterling as a result of the failure by BP to
take the Minimum Annual Contract Quantity in any Contract Year or during the
one- year period following a termination date, including increased costs of
production of Product, increased incremental costs incurred in the operation of
the Facility and increased raw materials usages, utilities and other costs and
expenses.

         Additional Term is defined in Section 2.1 hereof.

         Agreement means this Amended and Restated Production Agreement.

         Arbitration Notice is defined in Section 21.2 hereof.

         Baseline Raw Materials Usage means ***.

         BP is defined in the introductory paragraph hereof.

         BP Event of Default means (i) the failure by BP to perform any of its
financial obligations hereunder or under the License Agreement which failure
shall continue for a period of ten days after notice from Sterling, (ii) the
failure of BP to perform any other covenants or agreements hereunder or under
the License Agreement to a material extent which failure continues for a period
of 30 days after receipt of written notice thereof by BP from Sterling or (iii)
the inaccuracy in any material respect of any representation or warranty made
by BP in this Agreement or in the License Agreement; provided, however, that
(a) with respect to an event described in (i) or (ii) above, if BP has
performed any such obligation, covenant or agreement or made any such payment
prior to the expiration of such ten or 30 day period, as applicable such
failure or default shall not constitute a BP Event of Default; and (b) a BP
Event of Default shall not be deemed to have occurred if BP is





                                      -1-
<PAGE>   53
challenging in good faith in accordance with Article 21 hereof a Declaration of
BP Event of Default, unless such Declaration of BP Event of Default is found by
a court or arbitration to be effective.

         BP Facilities is defined in Section 3.5(a) hereof.

         BP Indemnified Persons is defined in Section 19.1 hereof.

         BP Net Unrecouped Investment Amount shall mean the ***.

         BP's Share is defined in Section 12.1 hereof.

         Business Day means a day in the City of Houston, Harris County, Texas,
that is neither a Saturday, Sunday or legal holiday nor a day on which banking
institutions in Houston, Texas, Cleveland, Ohio or New York, New York are
obligated or permitted by law to close.

         Capital Budget is defined in Section 13.2 hereof.

         Capital Expenditures means expenditures (whether treated as capital or
expense for financial reporting or tax purposes) incurred to (i) acquire or
replace any asset for use on the Facility, (ii) add to (or improve) any asset
in the Facility or (iii) comply with environmental, safety or other Laws
applicable to the Facility or its operation.  Such expenditures shall be
classified in accordance with Sterling's usual and customary practices as it
applies them to its own expenditures.

         Capital Project means a project which requires Capital Expenditures.

         ***.

         ***.

         CEOs is defined in Section 21.1 hereof.

         Claim is defined in Section 19.3 hereof.

         Contract Year means a period of 12 consecutive Months beginning on the
first Day of January next following the Effective Date, and beginning on the
first Day of January of each





                                      -2-
<PAGE>   54
subsequent year during the Initial Term and, if applicable, any Additional
Term.  The period of time from the Effective Date until the first day of the
January next following the Effective Date, and the period of time from the
first day of January last occurring during the Initial Term or, if applicable,
any Additional Term, until the end of the Initial Term, or, if applicable, any
Additional Term, shall each be considered to be a Contract Year, provided that
in each such period the Minimum Annual Contract Quantity and the Maximum Annual
Contract Quantity shall be prorated.

         Co-Products means hydrogen cyanide (HCN), acetonitrile (ACN) and
derivatives thereof and any other materials reasonably agreed to by the
parties.

         Cross Termination Right is defined in Section 2.1 hereof.

         Damages means any and all damages, cash payments, expenses,
obligations, claims, liabilities, fines, penalties, clean-up or remedial costs,
shut-down costs, repairs or reconstruction costs, costs of investigation,
attorneys' fees, court costs, and operating, extraordinary, business
interruption and other losses, including any such matters arising from Spills
or Releases but otherwise excluding consequential, incidental, special,
punitive or indirect damages.

         Day means the 24-hour period commencing at 7:00 a.m. Houston, Texas
time on one calendar day and ending at 7:00 a.m. Houston, Texas time on the
following calendar day. The date of a Day shall be that of its beginning.

         Declaration of BP Default is defined in Section 23.2 hereof.

         Declaration of Sterling Default is defined in Section 23.1 hereof.

         Delivery, Shipment and Storage Instructions is defined in Section 5.1
hereof.

         Dispute Resolution Committee is defined in Section 21.1 hereof.

         Effective Date is the date of execution hereof by BP and Sterling.





                                      -3-
<PAGE>   55
         Estimated Delivery, Shipment and Storage Instructions is defined in
Section 5.1 hereof.

         Facility means any and all equipment of Sterling which is located at
the Plant and which is dedicated to the production of acrylonitrile, including
the equipment listed on Schedule A-1; provided, however, that the term Facility
shall not include any off-site utilities (e.g., nitrogen, fuel gas, plant air,
instrument air and electricity) or any equipment dedicated to loading dock
operations.

         Fixed Cost Component means, ***.

         Fixed Costs means any and all actual fixed costs incurred, sustained
or paid by Sterling in connection with the production, sale or delivery of
Products included within the categories listed on Schedule A-2; provided,
however, that ***.   For purposes of the definition of Fixed Costs, actual
fixed costs shall be calculated in substantially the same manner as that for
the fourth quarter of fiscal year 1997 attached hereto as Schedule A-2.

         Force Majeure means any acts of God, wars, blockades, insurrections,
riots, epidemics, landslides, lightning, earthquakes, fires, storms, floods,
high water, washouts, arrests, restraints of government and people, civil
disturbances, explosions, breakage or accidents to machines, equipment or lines
of pipe or property, freezing of wells, machines, lines of pipe or property,
partial or entire failure of any machinery, equipment or lines of pipe or other
property, the occurrence of any Spills or Releases and any regulatory, civil or
criminal action with respect thereto, strikes, work stoppages, labor
difficulties, other industrial disturbances, acts of public enemy,
transportation difficulties, sabotage, material shortages, difficulties in
obtaining materials through regular channels of supply, governmental controls
(including price and allocation controls), regulations or actions, embargoes
or, without limitation, any other causes or contingencies (whether or not of
the same nature as those hereinbefore specified) beyond the reasonable control
of the party claiming Force





                                      -4-
<PAGE>   56
Majeure, provided the party prevented from performing gives prompt notice to
the other party and takes all reasonable actions within its power to remove the
basis for nonperformance and after doing so resumes performance as soon as
possible.

         Indemnified Party is defined in Section 19.4 hereof.

         Indemnifying Party is defined in Section 19.4 hereof.

         Initial Term is defined in Section 2.1 hereof.

         Laws means all laws, statutes, rules, regulations, ordinances, orders,
writs, injunctions or decrees and other pronouncements having the effect of law
of any governmental authority.

         License Agreement means the License Agreement between BP and Sterling
dated as of April 15, 1988.

         Major Capital Project is defined in Section 13.2 hereof.

         Maximum Annual Contract Quantity means, ***.

         Maximum Monthly Contract Quantity means, ***.

         Maximum Quarterly Contract Quantity means, ***.

         Measuring Equipment means shore tanks or other appropriate equipment
for measuring deliveries to be loaded into or from barges or ships, scales for
measuring deliveries to be loaded into or from trucks or rail cars and meters
and other appropriate equipment for measuring deliveries into or from
pipelines.

         Minimum Annual Contract Quantity means, *** .

         Minimum Quarterly Contract Quantity means, ***.

         Minor Capital Projects is defined in Section 13.2 hereof.

         Minor Capital Projects Budget is defined in section 13.2 hereof.





                                      -5-
<PAGE>   57
         Month means the period beginning at 7:00 a.m. on the first day of a
calendar month and ending at 7:00 a.m. on the first day of the next succeeding
calendar month.

         Net Margin means ***.

         New Technology is defined in Section 1 of the License Agreement and
includes BP's improvements.

         Obligations is defined in Section 20.3 hereof.

         Original Agreement is defined in the recitals hereof.

         Other Raw Materials means *** .

         Person means any individual, firm, corporation, trust, association,
company, limited liability company, joint stock company, partnership, joint
venture, governmental authority or other entity or enterprise.

         Plant means the entire Texas City, Texas petrochemical plant owned by
Sterling.

         Point of Delivery is defined in Article 8 hereof.

         Prime Rate means the prime rate of interest announced from time to
time by The Chase Manhattan Bank, N.A. or any successor thereto.

         Product means acrylonitrile meeting the Specifications.

         Project means the pipe-up, instrumentation and completion of the Third
Reactor and alterations to the recovery and purification section to accommodate
the Third Reactor and the New Technology.

         Purchase Price means the purchase price payable by BP for Product as
provided in Article 7 hereof.





                                      -6-
<PAGE>   58
         Quarter means (i) during any Contract Year which is a calendar year,
the period beginning at 7:00 a.m. on the first day of the Months of January,
April, July and October and ending at 7:00 a.m. on the first day of the next
succeeding April, July, October and January, respectively and (ii) during any
Contract Year which is not a calendar year, the three (3) month period (or such
lesser period prior to reaching the commencement of a calendar year as shall be
applicable) commencing at 7:00 a.m. on the first day of such period and ending
at 7:00 a.m. on the morning of the first day of the next succeeding January,
April, July or October, as the case may be.

         Rated Capacity means ***.  The Rated Capacity, once so established,
shall remain in effect until further agreement of the parties or until proven
to be materially inaccurate.

         Raw Materials means propylene meeting the specifications set forth on
Exhibit B and ammonia meeting the specifications set forth on Exhibit C.

         Right means BP's exclusive right, during the term of this Agreement,
to purchase Product produced at the Facility in the amount of up to *** as
provided in Article 4 hereof.

         Shutdown Reserve means an account for the Facility and a corresponding
schedule for major shutdowns and update these on a regular basis.  The period
over which the Shutdown Reserve is accrued is agreed to be consistent with the
expected major shutdown schedule.  BP and Sterling will review and agree on the
Shutdown Reserve and corresponding major shutdown schedule by October 1 of each
year.

         Once agreed, the amount for "Shutdown Reserve" in the Fixed Costs
shall be revised so that the sum of the monthly charges in current dollars
during the interval between major shutdowns will equal the total.  If, during
the period prior to the major shutdown, additions or deletions of major
(non-routine) items to or from the reserve account may be mutually agreed upon.
After completion





                                      -7-
<PAGE>   59
of a major shutdown, total costs will be reconciled against the Shutdown
Reserve account.  Any difference will then be used to recalculate the next
Shutdown Reserve Account.

         Specifications means the acrylonitrile specifications, attached hereto
as Exhibit D, as the same may be changed from time to time by written agreement
between BP and Sterling.

         Spills or Releases means any emission, discharge, release or
threatened release of pollutants, contaminants, or hazardous substances or
toxic materials or wastes into or upon ambient air, surface water, ground water
or land, or subsurface strata, or, otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, or hazardous substances or toxic
materials or wastes, as any of the same relate to or affect or arise in
connection with the operation of the Facility, or the production, delivery,
storage, shipment, sale, resale or use, disposal or transportation of Product,
Co-Products, or feedstocks, raw materials, wastes or other materials used in or
resulting from the production of Product or Co-Products.

         Start-Up Date means November 26, 1989.

         Sterling is defined in the introductory paragraph.

         Sterling Event of Default means (i) the failure by Sterling to perform
any of its financial obligations hereunder or under the License Agreement which
failure shall continue for a period of ten days after notice from BP, (ii) the
failure of Sterling to perform any other covenants or agreements hereunder or
under the License Agreement to a material extent which failure continues for a
period of 30 days after receipt of written notice thereof by Sterling from BP
or (iii) the inaccuracy in any material respect of any representation or
warranty made by Sterling in this Agreement or the License Agreement; provided,
however, that (a) with respect to an event described





                                      -8-
<PAGE>   60
in (i) or (ii) above, if Sterling has performed any such obligation, covenant
or agreement or made any such payment prior to the expiration of such ten or 30
day period, as applicable, such failure or default shall not constitute a
Sterling Event of Default; and (b) a Sterling Event of Default shall not be
deemed to have occurred if Sterling is challenging in good faith in accordance
with Article 21 hereof a Declaration of Sterling Event of Default, unless such
Declaration of Sterling Event of Default is found by a court or arbitration to
be effective.

         Sterling Indemnified Persons is defined in Section 19.2 hereof.

         Sterling's Share is defined in Section 12.1 hereof.

         *** is defined in Section 3.4 hereof.

         Termination Notice is defined in Section 2.2 hereof.

         Third Party Action is defined in Section 19.3 hereof.

         Third Reactor means the reactor in place in the Facility that, prior
to April 15, 1988, was not connected by piping within the Facility and was
incomplete and which the parties acknowledge and agree has a useful life of ten
years from November 26, 1989.

         Unit of Measurement is defined in Section 10.1 hereof.

         Variable Cost Component means, ***.

         Variable Costs means any and all actual variable costs incurred,
sustained or paid by Sterling in connection with the production, sale or
delivery of Products or Co-Products hereunder included within the categories
listed on Schedule A-3; provided, however, that in no event shall the costs of
Raw Materials which are provided by BP pursuant to Section 7.5 hereof be deemed
to be Variable Costs hereunder.





                                      -9-
<PAGE>   61
                                   EXHIBIT B

                            PROPYLENE SPECIFICATIONS

<TABLE>
<CAPTION>
 PROPERTY                          SPECIFICATION                SHELL                     TEXAS CITY
 --------                          -------------                -----                     ----- ----
                                        MIN           MAX
                                        ---           ---
 <S>                                <C>           <C>           <C>                       <C>
 Propylene, Wt. %                   92                          92.0 MIN                  602.045
 Propane, Wt. %                     --            8             8.0 MAX                   602.045
 C4+, ppm Wt.                       --            1000                                    602.046
 C2H4, ppm Wt. (Ethylene)           --            200           100 MAX                   602.045
 Butylenes, ppm. Wt.                --            125           125 MAX                   602.046
 Methylacetylene, ppm. Wt.          --            100                                     602.045
 Propadiene, ppm Wt.                --            100                                     602.045
 Acetylene, ppm Wt.                 --            100                                     602.045
 Sulfur, ppm Wt.                    --            10            3 MAX                     602.027
 Water, ppm Wt.                     --            60            60 MAX                    No Method
 H2, O2, N2, CO, CO2                --            100           100 MAX                   602.036
 Total, ppm, Wt.
 Methanol, ppm Wt.                  --            100                                     No Method
 DMF, ppm Wt.                       --            0.3                                     No Method
 Amines, as MEA, ppm Wt.            --            5                                       No Method
 Ethane & Lighter H.C., Wt. %                                   0.4 MAX
 Butane & Heavier H.C., ppm Wt.                                 1000 MAX
 Butadiene, ppm Wt.                                             20 MAX
</TABLE>





<PAGE>   62
                                   EXHIBIT C

                             AMMONIA SPECIFICATIONS

<TABLE>
<CAPTION>
                                                                                  TEXAS CITY
                    PROPERTY                           SPECIFICATION              METHOD NO.
                    --------                           -------------              ------ ---
                                                       MIN          MAX
                                                       ---          ---
                    <S>                                <C>          <C>           <C>
                    Ammonia, Wt. %                     99.5         --            602.247
                    Water, Wt. %                       0.2          0.5           602.246
                    Oil, ppm Wt.                       --           10            TOC
</TABLE>





<PAGE>   63
                                   EXHIBIT D

                          ACRYLONITRILE SPECIFICATIONS

<TABLE>
<CAPTION>
                                                                                  TEXAS CITY
                    PROPERTY                           SPECIFICATION              METHOD NO.
                    --------                           -------------              ----------
                    <S>                                <C>                        <C>





                                     ***
</TABLE>




<PAGE>   64

                               SCHEDULE 3.5(e)(i)
                             STERLING ACTUAL COSTS

                                      ***





<PAGE>   65
                                 SCHEDULE 15.2
                                   INSURANCE

                                      ***





<PAGE>   66
                                  SCHEDULE A-1
                                    Facility

                                      ***





<PAGE>   67
                                  SCHEDULE A-2
                             EXAMPLE OF FIXED COSTS

                                      ***





<PAGE>   68
                                  SCHEDULE A-3
                           EXAMPLE OF VARIABLE COSTS


                                      ***





<PAGE>   69
                                  SCHEDULE A-4
                      BP NET UNRECOUPED INVESTMENT AMOUNT

                                      ***