Document:

exv10w1

 

Exhibit 10.1

Sterling Chemicals, Inc.

Amended and Restated

2002 Stock Plan

Effective as of January 1, 2005

 

 

STERLING CHEMICALS, INC.

AMENDED AND RESTATED

2002 STOCK PLAN

Preliminary Statements

	 	A.	 	Sterling Chemicals, Inc., a Delaware corporation (the “Company”), has previously
adopted that certain 2002 Stock Plan (the “Existing Plan”).
	 
	 	B.	 	Pursuant to Sections 2 and 20 of the Existing Plan, the Compensation Committee
(the “Compensation Committee”) of the Board of Directors of the Company has the right to
amend the Existing Plan from time to time, subject to specified limitations.
	 
	 	C.	 	The Compensation Committee desires to amend the Existing Plan in certain respects
to comply with Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as
amended (the “Code”), and to restate the Existing Plan, as so amended, in its
entirety.
	 
	 	D.	 	This Amended and Restated 2002 Stock Plan is intended as good faith compliance
with Section 409A and is to be construed in accordance with Section 409A and any
guidance issued thereunder.

          Now, Therefore, the Existing Plan is hereby amended and restated, effective as of
January 1, 2005, to read in its entirety as follows:

               1. Purpose. The Sterling Chemicals, Inc. Amended and Restated 2002 Stock Plan (the
“Plan”) is intended to provide incentives which will attract, retain and motivate highly
competent persons as officers and key employees of, and consultants to, the Company and its
subsidiaries and affiliates, by providing them opportunities to acquire shares of the Company’s
common stock, par value $.01 per share (the “Common Stock”) or to receive monetary payments
based on the value of such shares pursuant to the Benefits (as defined in Section 4 below)
described herein. Capitalized terms are defined when first used, as described in the Index of
Defined Terms at the end of this document.

               2. Administration.

               (a) Committee. The Plan will be administered by a committee (the “Committee”)
appointed by the Board of Directors of the Company from among its members (which may be the
Compensation Committee) and shall be comprised, unless otherwise determined by the Company’s Board
of Directors, of not less than two (2) members. During any period when the Company is subject to
Rule 16b-3(b)(3) (or any

 

 

successor rule) promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), each member of the Committee shall be a “Non-Employee Director”
within the meaning of such Rule, and during any period when the Company is subject to Treasury
Regulation Section 1.162-27(e)(3) under Section 162(m) of the Code, each member of the Committee
shall be an “outside directors” within the meaning of such Section.

     (b) Authority. The Committee is authorized, subject to the provisions of the Plan, to
establish such rules and regulations as it deems necessary for the proper administration of the
Plan and to make such determinations and interpretations and to take such action in connection with
the Plan and any Benefits granted hereunder as it deems necessary or advisable. All determinations
and interpretations made by the Committee shall be binding and conclusive on all participants and
their legal representatives.

     (c) Indemnification. No member of the Committee and no employee of the Company shall
be liable for any act or failure to act hereunder, except in circumstances involving his or her bad
faith, gross negligence or willful misconduct, or for any act or failure to act hereunder by any
other member or employee or by any agent to whom duties in connection with the administration of
this Plan have been delegated. The Company shall indemnify members of the Committee and any agent
of the Committee who is an employee of the Company, a subsidiary or an affiliate against any and
all liabilities or expenses to which they may be subjected by reason of any act or failure to act
with respect to their duties on behalf of the Plan, except in circumstances involving such person’s
bad faith, gross negligence or willful misconduct.

     (d) Delegation and Advisers. The Committee may delegate to one or more of its
members, or to one or more agents, such administrative duties as it may deem advisable, and the
Committee, or any person to whom it has delegated duties as aforesaid, may employ one or more
persons to render advice with respect to any responsibility the Committee or such person may have
under the Plan. The Committee may employ such legal or other counsel, consultants and agents as it
may deem desirable for the administration of the Plan and may rely upon any opinion or computation
received from any such counsel, consultant or agent. Expenses incurred by the Committee in the
engagement of such counsel, consultant or agent shall be paid by the Company, or the subsidiary or
affiliate whose employees have benefited from the Plan, as determined by the Committee.

     3. Participants. Participants will consist of such officers and key employees of, and such
consultants to, the Company and its subsidiaries and affiliates as the Committee in its sole
discretion determines to be significantly responsible for the success and future growth and
profitability of the Company and whom the Committee may designate from time to time to receive
Benefits under the Plan. Designation of a participant in any year shall not require the Committee
to designate such person to receive a Benefit in any other year or, once designated, to receive the
same type or amount of Benefit as granted to the participant in any other year. The Committee
shall

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consider such factors as it deems pertinent in selecting participants and in determining the type
and amount of their respective Benefits.

               4. Type of Benefits. Benefits under the Plan may be granted in any one or a combination of
(a) Stock Options, (b) Stock Appreciation Rights, (c) Stock Awards and (d) Stock Units (each as
described below, and collectively, the “Benefits”). Stock Awards and Stock Units may, as
determined by the Committee in its discretion, constitute Performance-Based Awards, as described in
Section 10 hereof. Benefits shall be evidenced by agreements (which need not be identical) in such
forms as the Committee may from time to time approve; provided, however, that in the event of any
conflict between the provisions of the Plan and any such agreements, the provisions of the Plan
shall prevail.

               5. Common Stock Available Under the Plan.

               (a) Basic Limitations. The aggregate number of shares of Common Stock that may be
subject to Benefits, including Stock Options, granted under this Plan shall be 379,747 shares of
Common Stock, which may be authorized and unissued or treasury shares, subject to any adjustments
made in accordance with Section 12 hereof. The maximum number of shares of Common Stock with
respect to which Benefits may be granted or measured to any individual participant under the Plan
during the term of the Plan shall not exceed 379,747 (subject to adjustments made in accordance
with Section 12 hereof).

               (b) Additional Shares. Any shares of Common Stock subject to a Stock Option or Stock
Appreciation Right which for any reason is cancelled or terminated without having been exercised,
or any shares subject to Stock Awards or Stock Units which are forfeited, or any shares delivered
to the Company as part or full payment for the exercise of a Stock Option, Stock Appreciation Right
or Stock Award or any related tax withholding or other sums due (including by the withholding of
shares of Common Stock for which a Stock Option, Stock Appreciation Right or Stock Award is
exercisable) shall again be available for Benefits under the Plan. The preceding sentence shall
apply only for purposes of determining the aggregate number of shares of Common Stock subject to
Benefits but shall not apply for purposes of determining the maximum number of shares of Common
Stock with respect to which Benefits (including the maximum number of shares of Common Stock
subject to Stock Options and Stock Appreciation Rights) that may be granted to any individual
participant under the Plan.

               (c) Acquisitions. In connection with the acquisition of any business by the Company
or any of its subsidiaries or affiliates, any outstanding grants, awards or sales of options or
other similar rights pertaining to such business may be assumed or replaced by Benefits under the
Plan upon such terms and conditions as the Committee determines. The date of any such grant or
award shall relate back to the date of the initial grant or award being assumed or replaced, and
service with the acquired business shall constitute service with the Company or its subsidiaries or
affiliates for purposes of such grant or award. Any shares of Common Stock underlying any grant or
award or sale

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pursuant to any such acquisition shall be disregarded for purposes of applying the limitations
under and shall not reduce the number of shares of Common Stock available under Section 5(a) above.

               6. Stock Options.

               (a) Generally. Stock Options will consist of awards from the Company that will enable
the holder to purchase a number of shares of Common Stock, at set terms. Stock Options may be
“incentive stock options” (“Incentive Stock Options”), within the meaning of Section 422 of
the Code, or Stock Options which do not constitute Incentive Stock Options (“Nonqualified Stock
Options”). The Committee will have the authority to grant to any participant one or more
Incentive Stock Options, Nonqualified Stock Options, or both types of Stock Options (in each case
with or without Stock Appreciation Rights). Each Stock Option shall be subject to such terms and
conditions consistent with the Plan as the Committee may impose from time to time, subject to the
following limitations:

               (b) Exercise Price. Each Stock Option granted hereunder shall have such per-share
exercise price as the Committee may determine at the date of grant; provided, however, that the
per-share exercise price of a Stock Option granted hereunder shall not be less than one hundred
percent (100%) of the Fair Market Value (as defined in Section 15) of a share of Common Stock on
the date of grant.

               (c) Payment of Exercise Price. The option exercise price may be paid in cash or by
the withholding of shares of Common Stock for which a Stock Option is exercisable. Additionally,
the Committee may prescribe any other method of paying the exercise price that it determines to be
consistent with applicable law and the purpose of the Plan.

               (d) Exercise Period. Stock Options granted under the Plan shall be exercisable at
such time or times and subject to such terms and conditions as shall be determined by the
Committee; provided, however, that no Stock Option shall be exercisable later than ten (10) years
after the date it is granted except in the event of a participant’s death, in which case, the
exercise period of such participant’s Stock Options may be extended beyond such period but no later
than one (1) year after the participant’s death. All Stock Options shall terminate at such earlier
times and upon such conditions or circumstances as the Committee shall in its discretion set forth
in such option agreement at the date of grant.

               (e) Restoration of Stock Options. The Committee may, at the time of grant of an
option, provide for the grant of a subsequent Restoration Stock Option if the exercise price is
paid for by delivering previously owned shares of Common Stock of the Company. Restoration Stock
Options (i) may be granted in respect of no more than the number of shares of Common Stock tendered
in exercising the predecessor Stock Option, (ii) shall have an exercise price equal to the Fair
Market Value on the date the Restoration Stock Option is granted, and (iii) may have an exercise
period that does not extend

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beyond the remaining term of the predecessor Stock Option. In determining which methods a
participant may utilize to pay the exercise price, the Committee may consider such factors as it
determines are appropriate.

               (f) Limitations on Incentive Stock Options. Incentive Stock Options may be granted
only to participants who are employees of the Company or of a “Parent Corporation” or
“Subsidiary Corporation” (as defined in Sections 424(e) and (f) of the Code, respectively)
at the date of grant. The aggregate Fair Market Value (determined as of the time the Stock Option
is granted) of the Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by a participant during any calendar year (under all option plans of the Company and
of any Parent Corporation or Subsidiary Corporation ) shall not exceed one hundred thousand dollars
($100,000). For purposes of the preceding sentence, Incentive Stock Options will be taken into
account in the order in which they are granted. No Incentive Stock Option may be exercised later
than ten (10) years after the date it is granted.

               (g) Additional Limitations on Incentive Stock Options for Ten Percent Shareholders.
Incentive Stock Options may not be granted to any participant who, at the time of grant, owns stock
possessing (after the application of the attribution rules of Section 424(d) of the Code) more than
ten percent (10%) of the total combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary Corporation, unless the exercise price of the option is fixed at
not less than one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the
date of grant and the exercise of such option is prohibited by its terms after the expiration of
five (5) years from the date of grant of such option.

               7. Stock Appreciation Rights.

               (a) Generally. A Stock Appreciation Right means a right to receive a payment in cash,
Common Stock or a combination thereof, an amount equal to the excess of (i) the Fair Market Value,
or other specified valuation, of a specified number of shares of Common Stock on the date the right
is exercised over (ii) the Fair Market Value of such shares of Common Stock on the date the right
is granted, as determined by the Committee. Each Stock Appreciation Right shall be subject to such
terms and conditions as the Committee shall impose from time to time.

               (b) Exercise Period. Stock Appreciation Rights granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions as shall be determined
by the Committee; provided, however, that no Stock Appreciation Rights shall be exercisable (i)
earlier than the date of death or disability of the participant, the date of the participant’s
termination of employment or service with the Company and its subsidiaries or affiliates or a fixed
date set forth in such right at the date of grant nor (ii) later than ten (10) years after the date
it is granted. All Stock Appreciation Rights shall terminate at such earlier times and upon such
conditions or circumstances as the Committee shall in its discretion set forth in such right at the
date of grant.

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               8. Stock Awards.

               (a) Generally. The Committee may, in its discretion, grant Stock Awards (which may
include mandatory payment of any bonus in stock) consisting of Common Stock issued or transferred
to participants with or without other payments therefor. A Stock Award shall be construed as an
offer by the Company to the participant to purchase the number of shares of Common Stock subject to
the Stock Award at the purchase price, if any, established therefor; provided, however, that the
purchase price established for the shares of Common Stock subject to a Stock Award granted
hereunder shall not be less than one hundred percent (100%) of the Fair Market Value of such shares
of Common Stock on the date of grant. Any right to acquire the shares under the Stock Award that
is not exercised by the participant within thirty (30) days after the grant is communicated shall
automatically expire.

               (b) Payment of the Purchase Price. If the Stock Award requires payment therefor, the
purchase price of any shares of Common Stock subject to a Stock Award may be paid in any manner
authorized by the Committee, which may include any manner authorized under the Plan for the payment
of the exercise price of a Stock Option. Stock Awards may also be made in consideration of
services rendered to the Company or its subsidiaries or affiliates.

               (c) Additional Terms. Stock Awards may be subject to such terms and conditions as the
Committee determines appropriate, including, without limitation, restrictions on the sale or other
disposition of such shares, the right of the Company to reacquire such shares for no consideration
upon termination of the participant’s employment within specified periods, and may constitute
Performance-Based Awards, as described in Section 10 hereof. The Committee may require the
participant to deliver a duly signed stock power, endorsed in blank, relating to the Common Stock
covered by such an Award. The Committee may also require that the stock certificates evidencing
such shares be held in custody or bear restrictive legends until the restrictions thereon shall
have lapsed.

               (d) Rights as a Shareholder. The Stock Award shall specify whether the participant
shall have, with respect to the shares of Common Stock subject to a Stock Award, all of the rights
of a holder of shares of Common Stock of the Company, including the right to receive dividends and
to vote the shares.

               9. Stock Units.

               (a) Generally. The Committee may, in its discretion, grant Stock Units (as defined in
subsection (d) below) to participants hereunder. The Committee shall determine the criteria for
the vesting of Stock Units. Stock Units may constitute Performance-Based Awards, as described in
Section 10 hereof. A Stock Unit granted by the Committee shall provide payment in shares of Common
Stock at such time as the award agreement shall specify. Shares of Common Stock issued pursuant to
this Section 9 may be issued with or without other payments therefor as may be required by

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applicable law or such other consideration as may be determined by the Committee. The Committee
shall determine whether a participant granted a Stock Unit shall be entitled to a Dividend
Equivalent Right (as defined in subsection (d) below).

               (b) Settlement of Stock Units. Upon vesting of a Stock Unit, shares of Common Stock
representing the Stock Units shall be distributed to the participant unless the Committee provides
for the payment of the Stock Units in cash equal to the value of the shares of Common Stock which
would otherwise be distributed to the participant or partly in cash and partly in shares of Common
Stock.

               (c) Definitions. A “Stock Unit” means a notional account representing one (1)
share of Common Stock. A “Dividend Equivalent Right” means the right to receive the amount
of any dividend paid on the share of Common Stock underlying a Stock Unit, which shall be payable
in cash or in the form of additional Stock Units.

               10. Performance-Based Awards.

               (a) Generally. Any Benefits granted under the Plan may be granted in a manner such
that the Benefits qualify for the performance-based compensation exemption of Section 162(m) of the
Code (“Performance-Based Awards”). As determined by the Committee in its sole discretion,
either the granting or vesting of such Performance-Based Awards shall be based on achievement of
hurdle rates and/or growth rates in one or more business criteria that apply to the individual
participant, one or more business units or the Company as a whole.

               (b) Business Criteria. The business criteria shall be as follows, individually or in
combination: (i) net earnings; (ii) earnings per share; (iii) net sales growth; (iv) market share;
(v) net operating profit; (vi) expense targets; (vii) working capital targets relating to inventory
and/or accounts receivable; (viii) operating margin; (ix) return on equity; (x) return on assets;
(xi) planning accuracy (as measured by comparing planned results to actual results); (xii) market
price per share; and (xiii) total return to stockholders. In addition, Performance-Based Awards
may include comparisons to the performance of other companies, such performance to be measured by
one or more of the foregoing business criteria.

               (c) Establishment of Performance Goals. With respect to Performance-Based Awards, the
Committee shall establish in writing (i) the performance goals applicable to a given period, and
such performance goals shall state, in terms of an objective formula or standard, the method for
computing the amount of compensation payable to the participant if such performance goals are
obtained and (ii) the individual employees or class of employees to which such performance goals
apply no later than ninety (90) days after the commencement of such period (but in no event after
twenty-five percent (25%) of such period has elapsed).

               (d) Certification of Performance. No Performance-Based Awards shall be payable to or
vest with respect to, as the case may be, any participant for a given

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period until the Committee certifies in writing that the objective performance goals (and any other
material terms) applicable to such period have been satisfied.

               (e) Modification of Performance-Based Awards. With respect to any Benefits intended
to qualify as Performance-Based Awards, after establishment of a performance goal, the Committee
shall not revise such performance goal or increase the amount of compensation payable thereunder
(as determined in accordance with Section 162(m) of the Code) upon the attainment of such
performance goal. Notwithstanding the preceding sentence, the Committee may reduce or eliminate
the number of shares of Common Stock or cash granted or the number of shares of Common Stock vested
upon the attainment of such performance goal.

               11. Foreign Laws. The Committee may grant Benefits to individual participants who are subject
to the tax laws of nations other than the United States, which Benefits may have terms and
conditions as determined by the Committee as necessary to comply with applicable foreign laws. The
Committee may take any action which it deems advisable to obtain approval of such Benefits by the
appropriate foreign governmental entity; provided, however, that no such Benefits may be granted
pursuant to this Section 11 and no action may be taken which would result in a violation of the
Exchange Act, the Code or any other applicable law.

               12. Adjustment Provisions; Change in Control.

               (a) Adjustment Generally. If there shall be any change in the Common Stock of the
Company, through merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, reverse stock split, split up, spin-off, combination of shares, exchange of shares, dividend
in kind or other like change in capital structure or distribution (other than normal cash
dividends) to stockholders of the Company, an adjustment shall be made to each outstanding Stock
Option and Stock Appreciation Right such that each such Stock Option and Stock Appreciation Right
shall thereafter be exercisable for such securities, cash and/or other property as would have been
received in respect of the Common Stock subject to such Stock Option or Stock Appreciation Right
had such Stock Option or Stock Appreciation Right been exercised in full immediately prior to such
change or distribution, and such an adjustment shall be made successively each time any such change
shall occur.

               (b) Modification of Benefits. In the event of any change or distribution described in
subsection (a) above, in order to prevent dilution or enlargement of participants’ rights under the
Plan, the Committee will adjust, in an equitable manner, the number and kind of shares that may be
issued under the Plan, the number and kind of shares subject to outstanding Benefits, the exercise
price applicable to outstanding Benefits, and the Fair Market Value of the Common Stock and other
value determinations applicable to outstanding Benefits; provided, however, that any such
arithmetic adjustment to a Performance-Based Award shall not cause the amount of compensation
payable thereunder to be increased from what otherwise would have been due upon attainment of the
unadjusted award. Appropriate adjustments may also be

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made by the Committee in the terms of any Benefits under the Plan to reflect such changes or
distributions and to modify any other terms of outstanding Benefits on an equitable basis,
including modifications of performance targets and changes in the length of performance periods;
provided, however, that any such arithmetic adjustment to a Performance-Based Award shall not cause
the amount of compensation payable thereunder to be increased from what otherwise would have been
due upon attainment of the unadjusted award. In addition, other than with respect to Stock
Options, Stock Appreciation Rights, and other awards intended to constitute Performance-Based
Awards, the Committee is authorized to make adjustments to the terms and conditions of, and the
criteria included in, Benefits in recognition of unusual or nonrecurring events affecting the
Company or the financial statements of the Company, or in response to changes in applicable laws,
regulations, or accounting principles. Notwithstanding the foregoing, (i) each such adjustment
with respect to an Incentive Stock Option shall comply with the rules of Section 424(a) of the
Code, and (ii) in no event shall any adjustment be made which would render any Incentive Stock
Option granted hereunder other than an incentive stock option for purposes of Section 422 of the
Code.

               (c) Effect of a Change in Control. Notwithstanding any other provision of this Plan,
if there is a Change in Control (as defined in subsection (d) below) of the Company, all then
outstanding Stock Options, Stock Appreciation Rights and Stock Units shall immediately vest and
become exercisable and any restrictions on Stock Awards or Stock Units shall immediately lapse.
Thereafter, all Benefits shall be subject to the terms of any agreement effecting the Change in
Control, which agreement, may provide, without limitation, that each Stock Option and Stock
Appreciation Right outstanding hereunder shall terminate within a specified number of days after
notice to the holder, and that such holder shall receive, with respect to each share of Common
Stock subject to such Stock Option or Stock Appreciation Right, an amount equal to the excess of
the Fair Market Value of such shares of Common Stock immediately prior to the occurrence of such
Change in Control over the exercise price per share underlying such Stock Option or Stock
Appreciation Right with such amount payable in cash, in one or more kinds of property (including
the property, if any, payable in the transaction) or in a combination thereof, as the Committee, in
its discretion, shall determine. A provision like the one contained in the preceding sentence
shall be inapplicable to a Stock Option or Stock Appreciation Right granted within six (6) months
before the occurrence of a Change in Control if the holder of such Stock Option or Stock
Appreciation Right is subject to the reporting requirements of Section 16(a) of the Exchange Act
and no exception from liability under Section 16(b) of the Exchange Act is otherwise available to
such holder.

               (d) Definitions. For purposes of this Section 12, a “Change in Control” of
the Company shall be deemed to have occurred upon any of the following events:

     (i) Any person (as such term us used in Section 13(d) of the Exchange Act, other than
one or more trusts established by the Company for the benefit of employees of the Company
or its subsidiaries) and other than Resurgence Asset

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Management, L.L.C. or any affiliates thereof, shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of fifty percent (50%) or more of the
Company’s outstanding Common Stock or fifty percent (50%) or more of the combined voting
power of the Company’s then outstanding securities entitled to vote generally in the
election of directors (the Company Stock, together with any such securities, the
“Voting Securities”); or

     (ii) The Company’s Board of Directors shall approve a sale, lease, exchange or
transfer of all or substantially all of the property and assets of the Company, and such
transaction shall have been consummated; or

     (iii) The Company’s Board of Directors shall approve any merger or consolidation of
the Company which will result in the holders of the Voting Securities of the Company
immediately prior to such merger or consolidation owning less than a majority of the Voting
Securities of the surviving entity immediately following such transaction, and such
transaction shall have been consummated.

Notwithstanding the foregoing, (A) any spin-off of a division or subsidiary of the Company to its
stockholders and any event listed in (i) or (ii) above that the Company’s Board of Directors
determines not to be a Change in Control of the Company, shall not constitute a Change in Control
of the Company, and (B) with respect to any Benefit that is subject to Section 409A of the Code, a
“Change of Control” shall occur only to the extent that the definition of “Change of
Control” set forth above may be interpreted to be consistent with Section 409A of the Code and
the applicable Internal Revenue Service and Treasury Department regulations thereunder.

               13. Nontransferability. Each Benefit granted under the Plan to a participant shall not be
transferable otherwise than by will or the laws of descent and distribution, and shall be
exercisable, during the participant’s lifetime, only by the participant. In the event of the death
of a participant, each Stock Option or Stock Appreciation Right theretofore granted to him or her
shall be exercisable during such period after his or her death as the Committee shall in its
discretion set forth in such option or right at the date of grant and then only by the executor or
administrator of the estate of the deceased participant or the person or persons to whom the
deceased participant’s rights under the Stock Option or Stock Appreciation Right shall pass by will
or the laws of descent and distribution. Notwithstanding the foregoing, at the discretion of the
Committee, an award of a Benefit other than an Incentive Stock Option may permit the
transferability of a Benefit by a participant solely to the participant’s spouse, siblings,
parents, children and grandchildren or trusts for the benefit of such persons or partnerships,
corporations, limited liability companies or other entities owned solely by such persons, including
trusts for such persons, subject to any restriction included in the award of the Benefit.

               14. Other Provisions. The award of any Benefit under the Plan may also be subject to such
other provisions (whether or not applicable to the Benefit awarded

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to any other participant) as the Committee determines appropriate, including, without limitation,
for the installment purchase of Common Stock under Stock Options, for the installment exercise of
Stock Appreciation Rights, to assist the participant in financing the acquisition of Common Stock,
for the forfeiture of, or restrictions on resale or other disposition of, Common Stock acquired
under any form of Benefit, for the acceleration of exercisability or vesting of Benefits in the
event of a change in control of the Company, for the payment of the value of Benefits to
participants in the event of a change in control of the Company, or to comply with federal and
state securities laws, or understandings or conditions as to the participant’s employment in
addition to those specifically provided for under the Plan.

               15. Fair Market Value. For purposes of this Plan and any Benefits awarded hereunder,
“Fair Market Value” shall be the closing price of the Company’s Common Stock on the date of
calculation (or on the last preceding trading date if Common Stock was not traded on such date) if
the Company’s Common Stock is readily tradable on a national securities exchange or other market
system, and if the Company’s Common Stock is not readily tradable, Fair Market Value shall mean the
amount determined in good faith by the Committee as the fair market value of the Common Stock of
the Company. In making any determination of Fair Market Value, the Committee shall endeavor to
comply with Section 409A of the Code and the applicable Internal Revenue Service and Treasury
Department regulations thereunder and in so doing shall be entitled to rely on the advice of the
Company’s counsel and other advisors.

               16. Withholding. All payments or distributions of Benefits made pursuant to the Plan shall be
net of any amounts required to be withheld pursuant to applicable federal, state and local tax
withholding requirements. If the Company proposes or is required to distribute Common Stock
pursuant to the Plan, it may require the recipient to remit to it or to the corporation that
employs such recipient an amount sufficient to satisfy such tax withholding requirements prior to
the delivery of any certificates for such Common Stock. In lieu thereof, the Company or the
employing corporation shall have the right to withhold the amount of such taxes from any other sums
due or to become due from such corporation to the recipient as the Committee shall prescribe. The
Committee may, in its discretion and subject to such rules as it may adopt (including any as may be
required to satisfy applicable tax and/or non-tax regulatory requirements), permit an optionee or
award or right holder to pay all or a portion of the federal, state and local withholding taxes
arising in connection with any Benefit consisting of shares of Common Stock by electing to have the
Company withhold shares of Common Stock having a Fair Market Value equal to the amount of tax to be
withheld, such tax calculated at rates required by statute or regulation.

               17. Tenure. A participant’s right, if any, to continue to serve the Company or any of its
subsidiaries or affiliates as an officer, employee, or otherwise, shall not be enlarged or
otherwise affected by his or her designation as a participant under the Plan.

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               18. Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to
any investments which the Company may make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the Company and any
participant, beneficiary, legal representative or any other person. To the extent that any person
acquires a right to receive payments from the Company under the Plan, such right shall be no
greater than the right of an unsecured general creditor of the Company. All payments to be made
hereunder shall be paid from the general funds of the Company and no special or separate fund shall
be established and no segregation of assets shall be made to assure payment of such amounts except
as expressly set forth in the Plan. The Plan is not intended to be subject to the Employee
Retirement Income Security Act of 1974, as amended.

               19. No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan or any Benefit. The Committee shall determine whether cash, or Benefits, or
other property shall be issued or paid in lieu of fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.

               20. Duration, Amendment and Termination. No Benefit shall be granted after December 19, 2012.
The Committee may amend the Plan from time to time or suspend or terminate the Plan at any time.
No amendment of the Plan may be made without approval of the stockholders of the Company if the
amendment will: (i) disqualify any Incentive Stock Options granted under the Plan; (ii) increase
the aggregate number of shares of Common Stock that may be delivered through Stock Options under
the Plan; (iii) increase either of the maximum amounts which can be paid to an individual
participant under the Plan as set forth in Section 5 hereof; (iv) change the types of business
criteria on which Performance-Based Awards are to be based under the Plan; or (v) modify the
requirements as to eligibility for participation in the Plan.

               21. Governing Law. This Plan, Benefits granted hereunder and actions taken in connection
herewith shall be governed and construed in accordance with the laws of the State of Delaware
(regardless of the law that might otherwise govern under applicable Delaware principles of conflict
of laws).

               22. Section 409A of the Code. It is intended that any grant of a Benefit to which Section
409A of the Code is applicable shall satisfy all of the requirements of such Section 409A and the
applicable regulations issued thereunder to the extent necessary.

               23. Effective Date. The Plan shall be effective as of January 1, 2005, the date on which the
Plan was adopted by the Committee.

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Index of Defined Terms

	 	 	 
	Term	 	Section Where Defined or First Used
	Benefits
	 	4
	Change in Control
	 	12(d)
	Code
	 	2(a)
	Committee
	 	2(a)
	Common Stock
	 	1
	Company
	 	1
	Dividend Equivalent Right
	 	10(d)
	Effective Date
	 	22
	Exchange Act
	 	2(a)
	Fair Market Value
	 	15
	Incentive Stock Option
	 	6(a)
	Non-Employee Director
	 	2(a)
	Nonqualified Stock Option
	 	6(a)
	Parent Corporation
	 	6(f)
	Performance-Based Awards
	 	10(a)
	Plan
	 	1
	Restoration Stock Options
	 	6(e)
	Stock Appreciation Rights
	 	7
	Stock Award
	 	8
	Stock Options
	 	6
	Stock Unit
	 	9(c)
	Subsidiary Corporation
	 	6(f)
	Voting Securities
	 	12(d)

-13-exv10w2

 

Exhibit 10.2

Sterling Chemicals, Inc.

Fifth Amended and Restated Key Employee Protection Plan

Preliminary Statements

	 	A.	 	The Board (as defined below) of Sterling Chemicals, Inc., a Delaware corporation,
has previously adopted that certain Fourth Amended and Restated Key Employee Protection
Plan (the “Existing Plan”).
	 
	 	B.	 	The Board desires to amend the Existing Plan in certain respects and to restate the
Existing Plan as so amended in its entirety.

          Now, Therefore, the Existing Plan is hereby amended and restated, effective as of the
Effective Date (as defined below), to read in its entirety as follows:

Article I

Definitions and Interpretations

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

     “Annual Compensation” means, as of the Date of Computation with respect to any
Participant, the sum of (a) the highest annual base salary of such Participant in effect at
any time during the three-year period ending immediately prior to the Date of Computation plus
(b) the Targeted Bonus, if any, of such Participant in effect immediately prior to the Date of
Computation.

     “Applicable Multiplier” means (a) with respect to any Existing Participant, the
number set forth opposite such Existing Participant’s name on Exhibit B attached hereto under
the heading “Applicable Multiplier” and (b) with respect to any other Participant, the
multiplier specified in the Instrument of Designation executed and delivered by the Company
and such Participant in accordance with Section 2.01(b); provided, however, that in no event
shall the Applicable Multiplier of any Participant be less than 0.50 (except as provided in
Section 2.03) or greater than 3.00.

     “Benefit Plan” means any employee benefit plan (including any employee benefit
plan within the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974), program, arrangement or practice maintained, sponsored or provided by the Company or
any Subsidiary, including those relating to bonuses, incentive compensation, retirement
benefits, stock options, stock ownership or stock awards, healthcare or medical

 

 

benefits, disability benefits, death benefits, disability, life, accident or travel insurance,
sick leave, vacation pay or termination pay.

     “Board” means the Board of Directors of the Company.

     “Change of Control” means the occurrence of any of the following events:

     (a) the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) (a “Person”), other than Resurgence Asset Management,
L.L.C. and/or any of its or its affiliates’ managed funds or accounts
(“Resurgence”), of Company securities if, immediately thereafter, such Person is
the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 50% or more of the combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in the election of directors (the
“Outstanding Company Voting Securities”); provided, however, that the following
acquisitions shall not constitute a Change of Control: (A) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company or any
of its affiliates; or (B) any acquisition by any corporation pursuant to a transaction
that complies with subclauses (c)(i), (c)(ii) and (c)(iii) of this definition;

     (b) the time at which individuals who, within any 12 month period, constitute the
Board (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board;

     (c) consummation of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving the Company or any of its
subsidiaries, a disposition of assets by the Company or the acquisition of assets or
stock of another entity by the Company or any of its subsidiaries (each, a “Business
Combination”), in each case unless, following such Business Combination, (i) all or
substantially all of the individuals and entities that were the beneficial owners of the
Outstanding Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-outstanding voting
securities entitled to vote generally in the election of directors of the corporation
resulting from such Business Combination (including a corporation that, as a result of
such transaction, owns the Company or has purchased the Company’s assets in a
disposition of assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Voting Securities,

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(ii) no Person (excluding Resurgence or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 50% or more of the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent that such
ownership existed prior to the Business Combination, and (iii) at least a majority of
the members of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of the
initial agreement or of the action of the Board providing for such Business Combination;
or

     (d) approval by the stockholders or other relevant stakeholders of the Company of a
complete liquidation or dissolution of the Company.

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

     “Company” means Sterling Chemicals, Inc. and any Successor.

     “Compensation Committee” means the Compensation Committee of the Board.

     “Date of Computation” means the earlier of (a) the date on which an event occurs
that results in a Participant terminating his or her employment for Good Reason and (b) the
actual date of such Participant’s termination by the Company for any reason other than
Misconduct or Disability.

     “Disability” means, with respect to any Participant, a physical or mental
condition of such Participant that, in the opinion of a licensed physician reasonably
acceptable to the Company and such Participant or his or her legal representative, (a)
prevents such Participant from being able to perform the services required of him or her as an
employee of the Company , (b) has continued for at least 180 days during any period
of 12 consecutive months and (c) is reasonably expected to continue.

     “Effective Date” means March 12, 2004.

     “Excise Tax” has the meaning specified in Section 2.05.

     “Existing Participants” means the Participants in this Plan as of the Effective
Date, each of whom is listed on Exhibit B attached hereto.

     “Existing Plan” has the meaning specified in the Preliminary Statements.

     “Good Reason” means, with respect to any Participant, any of the following
actions or failures to act:

-3-

 

	 	(i)	 	if (but only if) such Participant has an Applicable Multiplier of 2.00
or higher, a material change in such Participant’s reporting responsibilities,
titles or elected or appointed offices as in effect immediately prior to the
effective date of such change, including any change caused by the removal of such
Participant from, or the failure to re-elect such Participant to, any material
corporate office of the Company held by such Participant immediately prior to such
effective date but excluding any such change that occurs in connection with such
Participant’s death, disability or retirement;
	 
	 	(ii)	 	if (but only if) such Participant has an Applicable Multiplier of 2.00
or higher, the assignment to such Participant of duties and/or
responsibilities that are materially inconsistent with such Participant’s status,
positions, duties, responsibilities and functions with the Company immediately
prior to the effective date of such assignment;
	 
	 	(iii)	 	a material reduction by the Company in such Participant’s total
compensation in effect immediately prior to the effective date of such reduction;
	 
	 	(iv)	 	the failure of the Company to maintain employee benefit plans, programs,
arrangements and practices entitling such Participant to benefits that, in the
aggregate, are at least as favorable to such Participant as those available to such
Participant under the Benefit Plans in which he or she was a participant immediately
prior to the effective date of such failure: provided, however, that the amendment,
modification or discontinuance of any or all such employee benefit plans, programs,
arrangements or practices by the Company shall not constitute “Good Reason”
hereunder if such amendment, modification or discontinuance applies generally to the
Company’s salaried work force and does not single out such Participant for disparate
treatment;
	 
	 	(v)	 	any change of more than 75 miles (or, in the case of any Participant
for whom the Compensation Committee has approved a shorter distance, such shorter
distance) in the location of the principal place of employment of such Participant
immediately prior to the effective date of such change;
	 
	 	(vi)	 	any purported termination of such Participant’s employment for Misconduct
or Disability not in accordance with the provisions of Section 3.02; or
	 
	 	(vii)	 	any purported termination of such Participant’s participation in this Plan
not in accordance with the provisions of Section 2.01(c).

For purposes of this definition, none of the actions described in clauses (i) through (iii)
above shall constitute a Good Reason with respect to any Participant if it was an isolated and
inadvertent action not taken in bad faith by the Company and if it is remedied by the Company
promptly after receipt of notice thereof given by such Participant. For purposes of this
definition, any action or failure to act described in clauses (i) through (viii) above shall
cease to be a Good Reason with respect to any Participant on the date which is 90

-4-

 

days after such Participant acquires actual knowledge of such action or failure to act unless,
prior to such date, such Participant gives a Termination Notice pursuant to Section 3.01. In
the event of any dispute between the Company, on the one hand, and any Participant, on the
other hand, with respect to the amount of total compensation of such Participant for purposes
of clause (iii) above or the aggregate value or level of any of such Participant’s benefits
for purposes of clause (iv) above, the Company and such Participant shall use their best
efforts to resolve such dispute themselves. If they are unable to resolve the dispute within
15 business days, Deloitte & Touche L.L.P., or such other nationally recognized accounting
firm or employee benefits firm acceptable to the Company and such Participant, shall be
engaged by the Company to make its own determination with respect to the dispute and the
determination by such firm shall be final and binding on the Company (including the
Compensation Committee) and such Participant. If any firm is engaged with respect to any
dispute as aforesaid, (A) such firm shall be instructed to make its determination as soon as
practicable and to use such materiality standard as such firm may determine to be reasonable
under the circumstances and (B) the disputants shall provide such firm with all books, records
and other information relevant to such dispute as such firm may reasonably request. No firm
engaged as aforesaid shall be liable or responsible to the Company (including the Compensation
Committee) or any Participant for any determination made by such firm in good faith.

     “Gross-Up Payment” has the meaning specified in Section 2.05.

     “Misconduct” means, with respect to any Participant:

	 	(a)	 	the commission by such Participant of acts of dishonesty or gross
misconduct which are demonstrably injurious to the Company (monetarily or
otherwise) in any material respect;
	 
	 	(b)	 	the failure of such Participant to observe and comply in all material
respects with the Company’s published policies relating to alcohol and drugs,
harassment or compliance with applicable laws;
	 
	 	(c)	 	the failure of such Participant to observe and comply with any other
lawful published policy of the Company, but, in the case of any such failure that
is capable of being remedied, only if such failure shall have continued unremedied
for more than 30 days after written notice thereof is given to such Participant by
the Company;
	 
	 	(d)	 	the willful failure of such Participant to observe and comply with all
lawful and ethical directions and instructions of the Board or the Chief Executive
Officer of the Company;
	 
	 	(e)	 	the refusal or willful failure of such Participant to perform, in any
material respect, his or her duties with the Company, but only if such failure was
not caused by disability or incapacity and shall have continued unremedied for more

-5-

 

	 	 	 	than 30 days after written notice thereof is given to such Participant by the
Company;

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

For purposes of clauses (d), (e) and (g) above, no act or failure to act on the part of any
Participant shall be considered “willful” if such act or failure to act was done or omitted to
be done by such Participant in good faith and with the reasonable belief that such
Participant’s action or omission was in the best interest of the Company. In case of any
dispute regarding whether or not any conduct by a Participant meets any of the standards set
forth in clauses (a) through (g) above, the burden of proof shall rest with the Company.

     “Participants” means, except as otherwise provided in Section 2.01(c), the
Existing Participants and those employees of the Company or any Subsidiary who are from time
to time designated by the Compensation Committee as Participants in accordance with Section
2.01(b).

     “Plan” means this Fourth Amended and Restated Key Employee Protection Plan, as
amended, supplemented or modified from time to time in accordance with its terms.

     “Protection Period” means (a) with respect to any Participant having an
Applicable Multiplier that is greater than or equal to 1.5, the period commencing 180 days
prior to the date on which the relevant Change of Control occurs and ending two years after
the date on which such Change of Control occurs, and (b) with respect to any Participant
having an Applicable Multiplier that is less than 1.5, the period commencing 180 days prior to
the date on which the relevant Change of Control occurs and ending 18 months after the date on
which such Change of Control occurs.

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

     “Subsidiary” means any corporation, limited partnership, general partnership,
limited liability company or other form of entity, a majority of any class of voting stock or
other voting rights of which is owned, directly or indirectly, by the Company.

     “Successor” means a successor to all or substantially all of the capital stock,
business, operations or assets of the Company (whether direct or indirect, by purchase,
merger, consolidation or otherwise).

     “Targeted Bonus” means, with respect to any Participant, the amount determined by
multiplying (a) the annual base salary of such Participant in effect immediately prior to the

-6-

 

Date of Computation times (b) such Participant’s Bonus Percentage, if any, in effect at the
“Target Payout Level” (i.e., 1x level) on the Date of Computation under the Company’s bonus
plan for salaried employees.

     “Termination Date” means, with respect to any Participant, the termination date
specified in the Termination Notice delivered by such Participant to the Company in accordance
with Section 3.01 or the actual date of termination of such Participant’s employment by the
Company for any reason other than Misconduct or Disability, as applicable.

     “Termination Notice” means, as appropriate, (a) a notice from a Participant to
the Company purporting to terminate such Participant’s employment for Good Reason in
accordance with Section 3.01 or (b) a notice from the Company to a Participant purporting to
terminate such Participant’s employment for Misconduct or Disability in accordance with
Section 3.02.

     “Triggering Payment” has the meaning specified in Section 2.05.

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

Article II

Eligibility and Benefits

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

          (b) In addition to the Existing Participants, the Compensation Committee shall be authorized
from time to time after the Effective Date to designate one or more employees of the Company as
Participants. Each such designation shall be evidenced by an Instrument of Designation signed by
the Company and such Participant substantially in the form of Exhibit A hereto. Each such
Instrument of Designation, and the designation evidenced thereby, shall be binding on the Company.

          (c) In the event that the Compensation Committee determines in good faith that any Participant
is no longer a key employee of the Company and thus should not continue to participate in this
Plan, the Compensation Committee shall be permitted, subject to the limitations set forth below, to
terminate such Participant’s participation in this Plan on such date as shall be specified in a
written notice delivered to such Participant not less than 60 days prior to

-7-

 

the date so specified, which notice shall state that it is a termination notice given pursuant to
this Section 2.01(c). Upon the effective date of such termination, such Participant shall cease to
be a Participant and, accordingly, such Participant shall no longer be entitled to receive any
rights or benefits hereunder; provided, however, that such termination shall not affect the rights
or benefits of such Participant or the obligations of the Company accrued under this Plan as of the
effective date of such termination or the rights or benefits of such Participant or the obligations
of the Company accruing under this Plan after the effective date of such termination on account of
any Change of Control that occurred on or before such effective date or that occurs within 180 days
after such effective date. Notwithstanding the foregoing, the Compensation Committee shall not be
permitted to terminate any Participant’s participation in this Plan unless the sole reason therefor
is that, in the good faith opinion of the Compensation Committee, such Participant has ceased to be
a key employee of the Company and thus should not continue to participate in this Plan. Without
limitation of the foregoing, the Compensation Committee may not terminate any Participant’s
participation in this Plan if such termination is directly or indirectly related to, connected
with, in anticipation of, in furtherance of, pursuant to the terms of or during the pendency of any
Change of Control or is for the purpose of directly or indirectly encouraging or facilitating a
Change of Control. In case of any dispute regarding whether or not any purported termination of
any Participant’s participation in this Plan is permitted by, or satisfies any of the requirements
of, this paragraph (c), the burden of proof shall rest with the Company.

          Section 2.02. Description of Benefits Triggered by Termination During the Protection
Period. (a) Each Participant shall be entitled to receive the benefits described below if a
Change of Control occurs and if, during the Protection Period for such Participant, either such
Participant terminates or has terminated his or her employment for Good Reason in accordance with
Section 3.01 or the Company terminates or has terminated such Participant’s employment for any
reason other than Misconduct or Disability in accordance with Section 3.02:

     (i) subject to paragraph (c) below, the Company shall pay to such Participant, within 30
days after such Participant’s Termination Date or, in the event that such Participant’s
Termination Date occurred within the 180-day period immediately preceding the occurrence of a
Change of Control, within 30 days after such Change of Control, a lump sum cash payment equal
to the sum of (A) an amount (the “Severance Amount”) equal to (subject to Section
2.04(b)) such Participant’s Annual Compensation as of the applicable Date of Computation
times such Participant’s Applicable Multiplier as of the applicable Date of Computation, plus
(B) all unused vacation time accrued by such Participant as of such Participant’s Termination
Date under the Company’s vacation policy, plus (C) all accrued but unpaid compensation earned
by such Participant as of such Participant’s Termination Date, plus (D) all unpaid vested
benefits earned or accrued by such Participant as of such Participant’s Termination Date under
any Benefit Plan (other than a “qualified plan” within the meaning of section 401(a) of the
Code) in effect immediately prior to the date on which the Change of Control occurs; provided,
however, that (x) any amounts payable to any Participant pursuant to this clause (i) shall be
reduced by an amount equal to the aggregate amount previously paid to such Participant by the
Company as severance (including payments previously made by the Company pursuant to this
Section 2.02(a)(i) or Section 2.03) and (y) if a Participant becomes entitled to benefits
under this Plan with respect to the Change of Control that occurred on December 19, 2002,

-8-

 

such Participant’s Severance Amount due in respect of such Change in Control shall be equal to
the greater of (1) the amount which would have been payable to the Participant under the
Existing Plan or (2) the amount which would be payable to such Participant pursuant to Section
2.03, determined as if such Change of Control had not occurred.

     (ii) for a period of 24 months (including 18 months of COBRA coverage) following such
Participant’s Termination Date (including any period during which such Participant was covered
by such plans and programs pursuant to Section 2.03), such Participant shall continue to be
covered by all life, health care, medical and dental insurance plans and programs (excluding
disability) of the Company by which he or she was covered on his or her Termination Date
notwithstanding any subsequent termination or amendment of any such plan or programs and
notwithstanding any eligibility provisions thereof to the contrary, provided that (A) such
Participant makes a timely COBRA election following such Participant’s Termination Date and
(B) such Participant pays the regular employee premium required by such plans and programs or
by COBRA, as the case may be.

          (b) No Participant shall be entitled to receive any of the benefits described in this Section
2.02 on account of any Change of Control unless (i) such Change of Control occurred (A) while such
Participant was employed by the Company or (B) within 180 days after such Participant’s Termination
Date and (ii) either such Participant terminates or has terminated his or her employment for Good
Reason in accordance with Section 3.01 or the Company terminates or has terminated such
Participant’s employment for any reason other than Misconduct or Disability in accordance with
Section 3.02, in each case, during the Protection Period for such Participant.

          (c) Notwithstanding anything to the contrary contained in this Section 2.02, if a Participant
who has an Applicable Multiplier of 2.00 or higher is entitled to receive a Severance Amount
pursuant to Section 2.02(a), up to 50% of the Severance Amount paid to such Participant shall be
subject to repayment by such Participant if, within one year after the date of termination of such
Participant’s employment with the Company, such Participant owns, manages, operates or controls (or
joins in the ownership, management, operation or control of), or becomes employed by or connected
in any manner with, any business engaged in the manufacture or sale of styrene, acrylonitrile or
acetic acid anywhere in the world (each, a “Competitive Position”). In the event that a
Participant is required to repay any portion of his or her Severance Amount pursuant to this
paragraph (c), such portion shall be determined by multiplying 50% of his or her Severance Amount
by a fraction, the numerator of which is the number of days from the date such Participant begins
in such Competitive Position until the first anniversary of the date of termination of such
Participant’s employment with the Company, and the denominator of which is 365. This paragraph (c)
shall not be applicable to any Severance Amount paid to a Participant pursuant to Section 2.03
unless such Severance Amount is later increased due to the subsequent occurrence of a Change of
Control within the relevant Participant’s Protection Period to the Severance Amount determined by
using 100% of such Participant’s Applicable Multiplier.

          Section 2.03. Description of Benefits Triggered by Termination Outside the Protection
Period. If any Participant terminates his or her employment for Good Reason in accordance with
Section 3.01 or the Company terminates such Participant’s employment for any

-9-

 

reason other than Misconduct or Disability in accordance with Section 3.02, and such termination
does not occur within such Participant’s Protection Period, then such Participant shall be entitled
to receive, and the Company shall be obligated to pay and provide, all the benefits described in
Section 2.02 to the same extent as if a Change of Control had occurred on the date which is 60 days
prior to the relevant Termination Date; provided, however, that, for purposes of calculating the
Severance Amount payable to such Participant under this Section 2.03, the Applicable Multiplier of
such Participant shall be reduced by 50%. In the case of each termination of employment covered by
this Section 2.03, a Change of Control shall be deemed to have occurred on the date which is 60
days prior to the relevant Termination Date and, accordingly, all other provisions of this Plan
shall be construed as if a Change of Control had actually occurred on such date.

          Section 2.04. Additional Provisions Relating to Benefits under Sections 2.02 and 2.03.
(a) Anything in this Plan to the contrary notwithstanding, the Company’s obligation to continue
the benefits described in Section 2.02(a)(ii) for any Participant shall cease if and when such
Participant becomes employed, on a full-time basis, by a third party which provides such
Participant with substantially similar benefits.

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

          Section 2.05. Certain Additional Payments by the Company. Anything in this Plan to
the contrary notwithstanding, in the event it shall be determined that any payment or distribution
to or for the benefit of any Participant under this Plan (“Triggering Payment”) would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax, together with any such interest or penalties, being
collectively referred to below as the “Excise Tax”), then such Participant shall be
entitled to receive from the Company an additional payment (the “Gross-Up Payment”) in an
amount equal to the lesser of (a) an amount such that after payment by such Participant of all
taxes (including any interest or penalties imposed with respect to such taxes) including any Excise
Tax imposed on the Gross-Up Payment, such Participant retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Triggering Payment, and (b) 25% of such Participant’s
Annual Compensation. If a Participant is entitled to a Gross-Up Payment under this Section 2.05,
the Company shall pay the Participant his or her Gross-Up Payment on or before March 15 of the
calendar year immediately following the calendar year in which the Participant’s employment was
terminated. All determinations required to be made under this Section 2.05 with respect to a
particular Participant shall be made by the independent accounting firm then retained by the
Company in the ordinary course of business (which firm shall provide detailed supporting
calculations to the Company and such Participant) and such determination shall be final and binding
on the Company (including the Compensation Committee) and all Participants.

-10-

 

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

Article III

Termination Notices

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

          Section 3.02. Termination Notices from Company. For purposes of this Plan, in order
for the Company to terminate any Participant’s employment for Misconduct, the Company must give a
written notice of termination to such Participant, which notice shall (a) specify the termination
date, (b) state that the termination is for Misconduct and (c) set forth in reasonable detail the
facts and circumstances claimed to provide a basis for such termination for Misconduct. For
purposes of this Plan, in order for the Company to terminate any Participant’s employment for
Disability, the Company must give a written notice of termination to such Participant, which notice
shall (i) specify the termination date, (ii) state that the termination is for Disability and (iii)
set forth in reasonable detail the facts and circumstances claimed to provide a basis for such
termination for Disability. Any Termination Notice given by the Company that is not in compliance,
in all material respects, with the foregoing requirements shall be invalid and ineffective for
purposes of this Plan. Any Termination Notice purported to be given by the Company to any
Participant after the death or retirement of such Participant shall be invalid and ineffective.

Article IV

Dispute Resolution

          Section 4.01. Negotiation. Subject to Section 4.03, in case a dispute or controversy
shall arise between any Participant (or any person claiming by, through or under any Participant)
and the Company (including the Compensation Committee) relating to or arising out of this Plan,
either disputant may give written notice to the other disputant (“Dispute Notice”) that it
wishes to resolve such dispute or controversy by negotiations, in which event the disputants shall
attempt

-11-

 

in good faith to negotiate a resolution of such dispute or controversy. If the dispute or
controversy is not so resolved within 30 days after the effective date of the Dispute Notice,
subject to Section 4.03, either disputant may initiate arbitration of the matter as provided in
Section 4.02. All negotiations pursuant to this Section 4.01 shall be held at the Company’s
principal offices in Houston, Texas (or such other place as the disputants shall mutually agree)
and shall be treated as compromise and settlement negotiations for the purposes of the federal and
state rules of evidence and procedure.

          Section 4.02. Arbitration. Subject to Section 4.03, any dispute or controversy
arising out of or relating to this Plan which has not been resolved by negotiations in accordance
with Section 4.01 within 30 days of the effective date of the Dispute Notice shall, upon the
written request of either disputant, be finally settled by arbitration conducted expeditiously in
accordance with the labor arbitration rules of the American Arbitration Association. The
arbitrator shall be not empowered to award damages in excess of compensatory damages and each
disputant shall be deemed to have irrevocably waived any damages in excess of compensatory damages.
The arbitrator’s decision shall be final and legally binding on the disputants and their
successors and assigns. The fees and expenses of the arbitrator shall be borne solely by the
prevailing disputant or, in the event there is no clear prevailing disputant, as the arbitrator
deems appropriate. All arbitration conferences and hearings shall be held in Houston, Texas.

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

Article V

Miscellaneous Provisions

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

          Section 5.02. No Mitigation. No Participant shall be required to mitigate the amount
of any payment provided for in this Plan by seeking or accepting other employment following a
termination of his or her employment with the Company or otherwise. The amount of any payment
provided for in this Plan shall not be reduced by any compensation or benefit earned by a
Participant as the result of employment by another employer or by retirement benefits. The
Company’s obligations to make payments to any Participant required under this Plan shall not be
affected by any set off, counterclaim, recoupment, defense or other claim, right or action that the
Company may have against such Participant.

-12-

 

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

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

          (c) Notwithstanding the foregoing, no termination of this Plan and no Material Amendment shall
be effective with respect to, binding upon or reduce any benefits payable hereunder to any person
who at the time is a Participant if such termination or Material Amendment is (i) directly or
indirectly related to, connected with, in anticipation of, in furtherance of, pursuant to the terms
of or during the pendency of any Change of Control or is for the purpose of directly or indirectly
encouraging or facilitating a Change of Control or (ii) made on, after or within 180 days prior to
the date of any Change of Control.

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

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

          Section 5.04. Enforceability. The provisions of this Plan (a) are for the benefit of,
and may be enforced directly by, each Participant the same as if the provisions of this Plan were
set forth in their entirety in a written instrument executed and delivered by the Company and such
Participant and (b) constitute a continuing offer to all present and future Participants. The
Company, by its adoption of this Plan, (i) acknowledges and agrees that each present and future
Participant has relied upon and will continue to rely upon the provisions of this Plan in becoming,
and serving as, an employee of the Company, (ii) waives reliance upon, and all notices of
acceptance of, this Plan by the Participants and (iii) acknowledges and agrees that no present or
future Participant shall be prejudiced in his or her right to enforce directly the provisions of
this Plan in accordance with its terms by any act or failure to act on the part of the Company.

-13-

 

          Section 5.05. Administration. (a) The Compensation Committee shall have full and
final authority to make determinations with respect to the administration of this Plan, to construe
and interpret its provisions and to take all other actions deemed necessary or advisable for the
proper administration of this Plan, but such authority shall be subject to the provisions of this
Plan. No discretionary action by the Compensation Committee shall amend or supersede the express
provisions of this Plan.

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

          (c) The Company shall indemnify and hold harmless each member of the Compensation Committee
against and all expenses and liabilities arising out of his or her administrative functions or
fiduciary responsibilities, including any expenses and liabilities that are caused by or result
from an act or omission of such member acting in good faith in the performance of such functions or
responsibilities. Expenses against which such member shall be indemnified hereunder shall include
the amounts of any settlement or judgment, costs, counsel fees and related charges reasonably
incurred in connection with a claim asserted or a proceeding brought or settlement thereof.

          Section 5.06. Release of Claims. As a condition to receipt of the benefits under this
Plan, a Participant will be required to sign an agreement, to be prepared by the Company, in which
he or she releases the Company and its successors, assigns, divisions, subsidiaries,
representatives, agents, officers, directors, stockholders and employees from any claims, demands
and causes of action relating to or arising out of the termination of his or her employment with
the Company, including any statutory claims under the Age Discrimination in Employment Act of 1967,
the Americans with Disabilities Act of 1990, the Civil Rights Acts of 1964 and 1991 and the Texas
Commission on Human Rights Act.

          Section 5.07. Assignability. The Company shall have the right to assign this Plan and
to delegate its duties and obligations hereunder; provided, however, that no such assignment or
delegation shall relieve or discharge the Company of or from any of its obligations under this
Plan. Unless otherwise approved by the Compensation Committee, no Participant shall transfer or
assign any of his or her rights under this Plan except by will or the laws of descent and
distribution.

          Section 5.08. Consolidations, Mergers, Etc. The Company will require any person, firm
or entity which becomes its Successor to expressly assume and agree to perform this Plan in
writing, in the same manner and to the same extent that the Company would be required to perform
hereunder if no such succession had taken place.

          Section 5.09. Successors and Assigns. This Plan shall be binding upon and inure to the
benefit of the Company and its successors and assigns. This Plan and all rights of each
Participant shall inure to the benefit of and be enforceable by such Participant and his or her
personal or legal representatives, executors, administrators, heirs and permitted assigns. If any

-14-

 

Participant should die while any amounts are due and payable to such Participant hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this
Plan to such Participant’s devisees, legatees or other designees or, if there be no such devisees,
legatees or other designees, to such Participant’s estate.

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

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

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

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

          In Witness Whereof, and as conclusive evidence of the adoption of this Plan by the
Board, the Company has caused this Plan to be duly executed in its name and behalf by its proper
officer thereunto duly authorized as of the Effective Date.

	 	 	 	 	 	 	 
	 	 	Sterling Chemicals, Inc. 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 	 	Printed Name:	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 	 	 	 	 

-15-

 

Exhibit A

Sterling Chemicals, Inc.

Instrument of Designation

          This Instrument Of Designation is intended to evidence the designation by the
Compensation Committee of the Board of Directors of Sterling Chemicals, Inc., a Delaware
corporation (the “Corporation”), of the undersigned employee as a “Participant” within the
meaning of that certain Fourth Amended and Restated Key Employee Protection Plan of the
Corporation, with an Applicable Multiplier (as defined therein) of                     .

          In Witness Whereof, the Corporation has caused its duly authorized officer to execute
this Instrument of Designation effective as of the date set forth below.

	 	 	 	 	 	 	 	 	 	 	 
	Dated:	 	 	 	 	 	Sterling Chemicals, Inc. 
	 

	 	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Printed Name:	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 
	 	 	 	 	 	 	 	 	 

Employee:

	 	 	 	 	 
	 	 	 
	Printed Name:
	 	 	 	 
	 

	 	 

	 	 

 A-i

 

 

Exhibit B

Participants as of the Effective Date

	 	 	 	 	 
	Name
	 	Applicable Multiplier
	Richard K. Crump
	 	 	2.75	 
	Paul G. Vanderhoven
	 	 	2.00	 
	Kenneth M. Hale
	 	 	2.00	 
	John Beaver
	 	 	1.00	 
	Eugene Kenyon
	 	 	2.00	 
	Wayne R. Parker
	 	 	2.00	 
	John S. Land
	 	 	1.00	 
	Paul C. Rostek
	 	 	1.00	 
	Robert W. Fransham
	 	 	1.00	 
	Daniel R. Withers
	 	 	1.00	 
	Walter B. Treybig
	 	 	2.00	 

 B-i

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