exv10w16






Exhibit
10.16

 






 





2011 Bonus Plan




 





March 2011




 








 









 








Sterling Chemicals, Inc.




2011 Bonus Plan


Introduction:




     Our 2011 Bonus Plan (our “Bonus Plan”) will be made up of the following two programs
(collectively, our “Bonus Programs”) that will provide eligible salaried employees with
opportunities to receive cash compensation in addition to their salaries:




	 	•	 	Corporate Performance Bonus Program — pays bonuses based on our
attainment of environmental and safety goals, our achievement of specified levels
of Operating Cash Flow and on individual performance; and
	 
	 	•	 	Individual Performance Bonus Program — pays bonuses based on
individual performance, irrespective of our environmental or safety performance or
the amount of Operating Cash Flow we earn during the year.




All of our salaried personnel (each an “Eligible Employee”), whether exempt or non-exempt
and including our President and Chief Executive Officer, our Senior Vice Presidents and our Vice
Presidents that report directly to one of our Senior Vice Presidents (our “Executives”),
are eligible to receive cash bonuses under our Bonus Plan. To be paid a bonus, an Eligible
Employee must be employed by us at the time bonuses are paid, unless the employee 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. For purposes of our Bonus Plan, “retired” means the
voluntary cessation of employment with us after attaining age 55 with at least five years of
services or the voluntary cessation of employment with us after attaining age 65 (with no service
restriction), and “disabled” has the meaning set forth in our disability plan.



Corporate Performance Bonus Program:



General.




     Under our Corporate Performance Bonus Program, the amount of bonus that each of our Eligible
Employees is eligible to earn for any year is determined by the Eligible Employee’s Bonus Target
and performance during that year relative to our corporate performance goals and his or her
individual performance goals. An Eligible Employee’s “Bonus Target” is a stated percentage
of the Eligible Employee’s annual base salary (set by our Compensation Committee or our Board of
Directors in the case of our Executives and by our Human Resources & Administration Department in
the case of all of our other Eligible Employees). The maximum amount of bonus that can be earned by an Eligible Employee for any year is 130% of his or her Bonus
Target for performance relative to corporate performance goals and 70% of his or her Bonus Target
for performance relative to individual performance goals. Attaining threshold level of Operating
Cash Flow will be required for any bonus to be paid relative to corporate performance goals.



 









 




Corporate Performance Goals




     Our corporate performance goals under our Corporate Performance Bonus Program are based on:




	 	•	 	the number of Employee OSHA recordable injuries experienced during the
year;
	 
	 	•	 	the number of Contractor OSHA recordable injuries experienced during
the year;
	 
	 	•	 	the number of environmental and process safety management incidents
experienced during the year (subject to meeting all process safety management
regulations); and
	 
	 	•	 	the amount of “Operating Cash Flow” earned during the year.




Our Board of Directors has set threshold, target and maximum goals for each of these categories for
performance in 2011 as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Goal	 	Threshold	 	Target	 	Maximum	 	 
	Employee OSHA
Recordable Injuries(1)
	 	 	2	 	 	 	1	 	 	 	0	 	 	 	10	%
	Contractor OSHA
Recordable Injuries(1)
	 	 	2	 	 	 	1	 	 	 	0	 	 	 	10	%
	Environmental and
Process Safety
Incidents(1)(2)
	 	 	3	 	 	 	2	 	 	 	1	 	 	 	10	%
	Operating Cash Flow(3)
	 	 	$(1.0)M	 	 	$	10.0M	 	 	$	25.0M	 	 	 	70	%








 




			
	(1)	 	No credit if incident results in a fine
	 
	(2)	 	• Environmental Incident defined as:
	 


			
	-	 	A release of chemicals that results in a Superfund reportable event;
	 
	-	 	Any other environmental incident that requires immediate
notification to state or federal agencies (e.g., fire/explosion with potential
impact outside the facility); or
	 
	-	 	A violation resulting in a Notice of Enforcement that is not
resolved administratively.
	 


			
	•	 	Process Safety Incident defined as an incident in which a significant
fire, explosion, chemical release or injury occurred due to the direct involvement
of a chemical process. This includes a fire or explosion causing more than $50K in
direct cost to Sterling, a chemical release to the environment which impacts the
community or a serious injury attributed to such an event resulting in at least one
lost work day.
	 
	•	 	 All Process Safety Management regulations must be met to qualify.
	 
	•	 	 All incidents caused by Acts of God are excluded.
	 
	(3)	Operating Cash Flow means operating cash flow (from our cash flow statements)
minus maintenance capital expenditures and proceeds from the sale of non-PP&E assets
(excluding net interest payments, effects of bond repurchases, pension contributions
and any costs incurred by any special committees of our Board).





     At the end of each calendar year, the amount of bonus potentially payable to each
Eligible Employee for performance relative to our corporate performance goals is determined by



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multiplying that Eligible Employee’s Bonus Target times the aggregate percentage earned during that
year for performance relative to our corporate performance goals times 65%. The 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 our Operating Cash Flow goals that is in
between the established levels is prorated on a straight line basis. As an example, if an Eligible
Employee has a base salary of $50,000 and Bonus Target of 10% and we achieved Target level for
Operating Cash Flow and Maximum level for Employee OSHA Recordable Injuries, Contractor OSHA
Reportable Injuries and Environmental and Process Safety Incidents, the Eligible Employee’s
potential bonus for performance relative to our corporate performance goals would be:




	 	•	 	$50,000 times 10% (or $5,000) times aggregate percentage earned during the year
times 0.65, with the aggregate percentage being:





	 	 	 	 	 	 	 

	Employee OSHA Recordable Injuries 
	 	 	20	%	 	(10% @ 2X = 20%)
	Contractor OSHA Recordable Injuries 
	 	 	20	%	 	(10% @ 2X = 20%)
	Environmental and Process Safety Incidents
	 	 	20	%	 	(10% @ 2X = 20%)
	Operating Cash Flow 
	 	 	70	%	 	(70% @ 1X = 70%)
	 
	 	 	 	 	 	 
	Aggregate Percentage 
	 	 	130	%	 	 





As a result, the Eligible Employee in the example would be eligible for a bonus for performance
relative to our corporate performance goals of up to $5,000 times 130% times 0.65, or $4,225. On
the other hand, if the Threshold level of Operating Cash Flow was not achieved, the Eligible
Employee is not eligible for any bonus relative to our corporate performance goals regardless of
the safety and environmental metric results.



Individual Performance Goals.




     At the end of each calendar year, the amount of bonus potentially payable to each Eligible
Employee for performance relative to their individual performance goals is determined by
multiplying that Eligible Employee’s Bonus Target times the aggregate percentage earned during that
year for performance relative to his or her individual performance goals times 35%. As is the case
for our corporate performance goals, the relevant percentage for each individual performance goal
will be multiplied by 0.5 if Threshold level is achieved, 1.0 if Target level is achieved and 2.0
if Maximum level is achieved and those percentages will then be added together (with the multiplier for the relevant percentage pro-rated for performance between any two
levels on a straight-line basis for performance goals based on arithmetic calculations).



     Continuing with the example given above, if the same Eligible Employee had four individual
performance goals, with each weighted at 25%, and Target level was achieved for two individual
performance goals and Maximum level was achieved for two individual performance goals, his or her
potential bonus based on his or her performance relative to his or her individual performance goals
would be:



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	 	 	 	$50,000 times 10% (or $5,000) times aggregate percentage earned during the year times
0.35, with aggregate percentage being calculated as follows:





	 	 	 	 	 	 	 
	Goal #1 
	 	 	25	%	 	(25% @ 1.0 = 25%)
	Goal #2 
	 	 	25	%	 	(25% @ 1.0 = 25%)
	Goal #3 
	 	 	50	%	 	(25% @ 2.0 = 50%)
	Goal #4 
	 	 	50	%	 	(25% @ 2.0 = 50%)
	 
	 	 	 	 	 	 
	Aggregate Percentage 
	 	 	150	%	 	 





As a result, the Eligible Employee in the example would be eligible to receive a bonus for his or
her performance relative to his or her individual performance goals of up to $5,000 times 150%
times 0.35 (or $2,625) and a total potential bonus of up to $6,850 ($4,225 based on performance
relative to our corporate performance goals and $2,625 based on performance relative to his or her
individual performance goals). However, if threshold Operating Cash Flow was not met, the Eligible
Employee is eligible to receive a bonus of only $2625.



General Terms:



Total Bonus Calculation and Payment.




     At the end of each year, our performance under each of our corporate performance goals will be
determined. Our financial results will determine the amount of Operating Cash Flow earned during
that year and, consequently, whether a bonus will be paid under our Corporate Performance Bonus
Program or under our Individual Performance Bonus Program. At the same time, each Eligible
Employee’s performance relative to his or her individual performance goals will be assessed and the
amount of bonus paid to that employee under our Corporate Performance Bonus Program or Individual
Performance Bonus Program, as applicable, will be determined. If the amount of bonus (prior to any
payment reductions) to be paid to any Eligible Employee (other than employee whose rating is DM) is
less than the amount paid to each hourly employee under our Gainsharing Program, then the amount of
that Eligible Employee’s bonus will be increased to match the amount paid under our Gainsharing
Program. All bonuses will be paid to all Eligible Employees on or before March 14 in a single lump sum after all
taxes have been withheld. The payment of a bonus does not affect any employee’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 Adjustments.




     The amount of bonus paid to an Eligible Employee under our Bonus Plan assumes continued
employment with us in active status throughout the year. For purposes of our Bonus Plan, 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 an Eligible Employee is determined under our Bonus Plan, that amount may be
reduced if the Eligible Employee has accumulated absences totaling at least 44 working days (352
hours for shift workers) during the relevant year. The amount of reduction



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will be 16.67% for the first 44 working days (352 hours for shift workers) of non-active status plus an additional 8.33%
reduction for each additional 22 working days (176 hours for shift workers) of non-active status
during the year for which the bonus is being paid. The amounts of bonuses paid to Eligible
Employees may also be reduced by the Executives or our Board of Directors or Compensation Committee
for various business considerations or adjusted, up or down, based on additional individual
performance factors.



     The bonus paid to any Eligible Employee under our Bonus Plan who was hired after July 1 of the
year during which performance is being assessed will be pro rated based on the number of full
months of service during that year. The amount of bonus paid to any Eligible Employee who became
eligible under our Bonus Plan in the first half of a 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 the relevant year will be treated as if they
were performed in the Eligible Employee’s most recent position). The amount of bonus paid to any
Eligible Employee who has a change is status under our Bonus Plan on or after July 1 due to a
promotion or change in job classification will be pro rated based on the number of months of
service in the year in each status. For example, if an Eligible Employee’s salary and bonus
percentage were increased October 1 due to a promotion, 3/4s of such Eligible Employee’s bonus
would be calculated using his or her salary and bonus percentage prior to such promotion and 1/4 of
such Eligible Employee’s bonus would be calculated using his or her salary and bonus percentage
after such promotion.




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