exv10w2






Exhibit 10.2


Sterling Chemicals, Inc.




2008 Bonus Plan

(Executives)




Eligibility:




          Our President and Chief Executive Officer and each of our Senior Vice Presidents (our
“Executives”) are eligible to receive cash bonuses under our 2008 Bonus Plan (Executives).
To be paid a bonus, an Executive must be employed by us at the time bonuses are paid, unless the
Executive has retired, died or become disabled, in which event a pro rata bonus payment will be
made based on full months of service for the relevant year.




Payment Structure:




          Under our 2008 Bonus Plan (Executives), the amount of bonus payable to each of our Executives
for any year is determined by the Executive’s Bonus Target and performance during that year
relative to corporate goals and individual goals. An Executive’s “Bonus Target” is a
stated percentage of the Executive’s annual base salary set by our Compensation Committee or our
Board of Directors. The maximum amount of bonus that can be earned by an Executive for any year is
100% of his or her Bonus Target for performance relative to corporate goals and 100% of his or her
Bonus Target for performance relative to individual goals.




          The corporate goals under our 2008 Bonus Plan (Executives) are based on:





	 	•	 	the number of employee OSHA recordable injuries experienced during the year;
	 
	 	•	 	the number of environmental incidents experienced during the year;
	 
	 	•	 	the number of process safety management incidents experienced during
the year (subject to meeting all process safety management
regulations); and
	 
	 	•	 	the amount of “Adjusted EBITDA” earned during the year.




Our Board of Directors has set threshold, target and maximum goals for each of these categories for
performance in 2008 as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	             Goal	 	Threshold	 	Target	 	Maximum	 	 	 	 
	Employee OSHA

Recordable Injuries
	 	 	2	 	 	 	1	 	 	 	0	 	 	 	10	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Environmental Incidents(1)
	 	 	3	 	 	 	2	 	 	 	1	 	 	 	10	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Process Safety

Management Incidents(2)
	 	 	3	 	 	 	2	 	 	 	1	 	 	 	10	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Adjusted EBITDA(3)
	 	$	14.5M	 	 	$	17.5M	 	 	$	20.5M	 	 	 	70	%






 









 








 




			
	(1)	 	Environmental Incidents defined as:






	 	•	 	Unauthorized air emissions that must be reported to outside agencies
plus
	 
	 	•	 	Regulatory violations resulting in a Notice of Enforcement (NOE) that
are not resolved Administratively plus
	 
	 	•	 	Releases of chemicals to soil that must be reported to outside agencies plus
	 
	 	•	 	Releases of chemicals to state waterways (excluding those caused by Acts of God) plus
	 
	 	•	 	Any other environmental incidents that require immediate notification
to state or federal agencies (e.g. fire/explosion with potential impact outside the
facility).






	(2)	 	All Process Safety Management regulations must be met to qualify. Process
Safety Management Incidents defined as any incident in which a significant fire,
explosion, chemical release or injury occurs due to the direct involvement of a
chemical process, including any fire or explosion causing more than $50,000 in direct
cost to Sterling, a chemical release to the environment which exceeds a regulated
quantity or a serious injury attributed to such an event resulting in at least one lost
work day. All incidents caused by Acts of God are excluded (e.g., rainfall events).
	 
	(3)	 	Adjusted EBITDA defined as EBITDA excluding impairments, staff reduction
impacts on benefit plans (e.g., plan curtailments, remeasurement impacts), severance
and accruals for payments under the Bonus Plan.





          At the end of each calendar year, the amount of bonus payable to each Executive for
performance relative to corporate goals is determined by multiplying that Executive’s Bonus Target
times the aggregate percentage earned during that year for performance against corporate goals
times 50%. Aggregate percentage is determined using the table above with the relevant percentage
from the table being multiplied by 0.5 if Threshold level is achieved, 1.0 if Target level is
achieved and 2.0 if Maximum level is achieved. Performance relative to any specific corporate goal
that is in between the established levels is prorated on a straight line basis. As an example, if
an Executive has a base salary of $200,000 and Bonus Target of 40% and we achieved Target level for
Adjusted EBITDA and Maximum level for OSHA Recordable Injuries, Environmental Incidents and Process
Safety Management Incidents, the Executive’s bonus for performance relative to corporate goals
would be:





	 	•	 	$200,000 times 40% (or $80,000) times aggregate percentage
earned during the year times 0.5 with the aggregate percentage
being:





	 	 	 	 	 	 	 	 	 
	OSHA Recordable Injuries 
	 	 	20	%	 	 	(10% @ 2X = 20%)	 
	Environmental Incidents 
	 	 	20	%	 	 	(10% @ 2X = 20%)	 
	Process Safety Incidents 
	 	 	20	%	 	 	(10% @ 2X = 20%)	 
	Adjusted EBITDA 
	 	 	70	%	 	 	(70% @ 1X = 70%)	 
	 
	 	 	 	 	 	 	 	 
	Aggregate Percentage 
	 	 	130	%	 	 	 	 





As a result, the bonus for the Executive in the example for performance relative to corporate goals
would be $80,000 times 130% times 0.5, or $52,000.




          The bonus payable to each Executive under our 2008 Bonus Plan (Executives) for performance
relative to individual goals is determined by that Executive’s performance against individual
performance metrics set for 2008 by our Board of Directors or Compensation Committee using the same
calculation principles as are used for performance relative to corporate goals.




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          Irrespective of our performance relative to corporate goals or an Executive’s performance
relative to individual goals, no bonuses are payable to any of our Executives under our 2008 Bonus
Plan (Executives) if we do not attain at least the Threshold level for Adjusted EBITDA for the
relevant year unless our Compensation Committee elects, in its sole discretion, to pay bonuses to
our Executives.




Payment.




          At the end of each year, each Executive’s performance under his or her individual goals will
be determined, our performance under the OSHA Recordable Injuries, Environmental Incidents and
Process Safety Management Incidents goals will be determined and our financial statements will be
audited and presented to our Audit Committee for approval. The results of the audit will determine
the amount of Adjusted EBITDA earned during that year and, consequently, a portion of the amount of
the bonuses to be paid under our 2008 Bonus Plan (Executives) for performance relative to corporate
goals. Once our Audit Committee has approved the audit for the year, bonus amounts for each
Executive for that year will be determined, and the bonus payments will be made in any event on or
before March 14. Bonuses are paid in a single lump sum after all taxes have been withheld. The
payment of a bonus does not, however, affect the Executive’s base pay in any manner and has no
impact on the amount or level of benefits under any of our other benefit plans.




Payment Reductions.




          The amount of bonus paid to an employee under our 2008 Bonus Plan (Executives) assumes
continued employment with us in active status throughout the year. For purposes of our 2008 Bonus
Plan (Executives), active status is made up of regular hours worked, vacation time, jury duty,
service as a witness under court subpoena, funeral leave and military leave. Non-active status
includes all other absences from work for any reason, including illness, injury, personal business,
doctor’s appointment, excused absence, family illness, leave of absences and personal leave, etc.
Once the amount of bonus to be paid to each Executive is determined, an Executive’s bonus may be
reduced if the Executive has accumulated absences totaling at least 44 working days (352 hours for
shift workers) during the year for which the bonus is being paid. The amount of reduction will be
16.67% for the first 44 working days of non-active status plus an additional 8.33% reduction for
each additional 22 working days of non-active status during the year for which the bonus is being
paid.




          The amount of bonus paid to any Executive who was hired after July 1 of the year for which the
bonus is being paid will be pro rated based on the number of full months of service during that
year. The amount of bonus paid to any Executive who became eligible under our 2008 Bonus Plan
(Executive) in the first half of the year due to a promotion or change in job classification or
being hired will not be pro rated due to such promotion, job reclassification or hiring (i.e., all
months of service with us during that year will be treated as if they were performed in the
Executive’s most recent position).





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