2ND Amended Key Employee Protection Plan

STERLING CHEMICALS HOLDINGS, INC.
STERLING CHEMICALS, INC.


SECOND AMENDED AND RESTATED KEY EMPLOYEE PROTECTION PLAN


PRELIMINARY STATEMENTS


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


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


C. On July 13, 2001, the Holdings Board and the Chemicals Board approved
certain amendments to the Existing Plan.


D. The Holdings Board and the Chemicals Board desire to document such
amendments to the Existing Plan by amending and restating the Existing Plan
in its entirety, effective as of July 13, 2001 (the "Effective Date").


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


ARTICLE I


Definitions and Interpretations


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


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


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


"Benefit Plan" shall mean any employee benefit plan (including any employee benefit plan within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974), program, arrangement or practice maintained, sponsored or provided by Holdings or any Subsidiary, including those relating to bonuses, incentive compensation, retirement benefits, stock options, stock ownership or stock awards, healthcare and medical benefits, disability benefits, death benefits, disability, life, accident and travel insurance, sick leave, vacation pay or termination pay.


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


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


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


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constitute a "Change of Control" for purposes of this clause (ix) with respect to any Participant who was not assigned to work on a full-time basis in the relevant SBU at the time of such sale, lease or exchange and, provided further, that the sale, lease or exchange of all or substantially all of the assets or capital securities of Sterling Fibers, Inc. or Sterling Chemicals Acquisitions, Inc. (or any of its direct or indirect subsidiaries) shall not constitute a "Change of Control" with respect to any Participant.


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


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


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


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


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


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


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


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


"Good Reason" shall mean, when used with reference to any Participant, any of the following actions or failures to act, but in each case only if it occurs (a) on or after the date that is 180 days prior to the date on which a Change of Control occurs and (b) while such Participant is employed by Holdings or any Subsidiary and then only if it is not consented to by such Participant in writing:


(i) if (but only if) such Participant is Grade S23 or higher, a material
change in such Participant's reporting responsibilities, titles or
elected or appointed offices as in effect immediately prior to the
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


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change that occurs in connection with such Participant's death,
disability or retirement;


(ii) if (but only if) such Participant is Grade S23 or higher, the
assignment to such Participant of duties and/or responsibilities
that are materially inconsistent with such Participant's status,
positions, duties, responsibilities and functions with the Company
immediately prior to the 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 continue such Participant's
eligibility for participation in employee benefit plans, programs,
arrangements and practices providing benefits that, in the
aggregate, are at least as favorable to such Participant as those
provided under the Benefit Plans in which he or she was a
participant immediately prior to the effective date of such failure;


(v) 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;


(vi) 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;


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


(viii) 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 60 days after such Participant acquires actual knowledge of such action or failure to act unless, prior to such date, such Participant gives a Termination Notice pursuant to Section 3.01. In the event of any dispute between the Company, on the one hand, and any Participant, on the other hand, with respect to the amount of total compensation of such Participant for purposes of clause (c) above or the aggregate value or level of any of such Participant's


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benefits for purposes of clause (d) or (e) above, the Company and such Participant shall use their best efforts to resolve such dispute themselves. If they are unable to resolve the dispute within 15 business days, Deloitte & Touche L.L.P., or such other nationally recognized accounting firm or employee benefits firm acceptable to the Company and such Participant, shall be engaged by the Company to make its own determination with respect to the dispute and the determination by such firm shall be final and binding on the Company (including the Compensation Committee) and such Participant. If any firm is engaged with respect to any dispute as aforesaid, (i) such firm shall be instructed to make its determination as soon as practicable and to use such materiality standard as such firm may determine to be reasonable under the circumstances and (ii) the disputants shall provide such firm with all books, records and other information relevant to such dispute as such firm may reasonably request. No firm engaged as aforesaid shall be liable or responsible to the Company (including the Compensation Committee) or any Participant for any determination made by such firm in good faith.


"Grade" shall mean when used with reference to any Participant for purposes of any action described in clauses (i) and (ii) of the definition of Good Reason, his or her salary classification by the Company immediately prior to such action.


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


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


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


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


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


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


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


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


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


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


For purposes of clauses (d) and (g) above, no act or failure to act on the part of any Participant shall be considered "willful" if such act or failure to act was done or omitted to be done by such Participant in good faith and with the reasonable belief that such Participant's action or omission was in the best interest of the Company. If any Participant is a party to a written employment agreement with the Company, then clause (d) above shall not apply to any directions or instructions that are contrary to or inconsistent with any of the positions, functions, duties or reporting responsibilities of such Participant as set forth in such written employment agreement or that violate ...