STERLING CHEMICALS HOLDINGS INC /TX/, DEF 14A, 1997-12-22

STERLING CHEMICALS HOLDINGS INC /TX/
DEF 14A, 1997-12-22
INDUSTRIAL ORGANIC CHEMICALS

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SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [ ]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12

STERLING CHEMICAL HOLDINGS, INC.
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(Name of Registrant as Specified in its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE> 2
[COMPANY LOGO]

STERLING CHEMICALS HOLDINGS, INC.
1200 SMITH STREET
SUITE 1900
HOUSTON, TEXAS 77002-4312

========================

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 28, 1998

To the Stockholders of Sterling Chemicals Holdings, Inc.:

An Annual Meeting of Stockholders of Sterling Chemicals Holdings, Inc.
(the "Company") will be held at Texas Commerce Center Auditorium, 601 Travis
Street, Houston, Texas at 9:00 A.M., Houston time, on Wednesday, January 28,
1998 for the following purposes:

1. To elect nine directors to serve until the 1999
Annual Meeting and until their successors have been duly elected and
qualified;

2. To ratify and approve the appointment of Deloitte &
Touche LLP as the independent accountants of the books and accounts of
the Company for the fiscal year ending September 30, 1998;

3. To ratify and approve the Sterling Chemicals
Holdings, Inc. Omnibus Stock Awards and Incentive Plan (the "Omnibus
Plan"); and

4. To consider and act upon such other business as may
properly come before the Annual Meeting or any adjournment(s) or
postponement(s) thereof.

Stockholders of record at the close of business on December 8, 1997
are entitled to notice of and to vote at the Annual Meeting and any
adjournment(s) or postponement(s) thereof.

You are cordially invited to attend the Annual Meeting. Whether or
not you are planning to attend the Annual Meeting, you are urged to complete,
date and sign the enclosed proxy and return it promptly in the accompanying
envelope.

By Order of the Board of Directors

Frank P. Diassi
Chairman of the Board of Directors

Houston, Texas
December 22, 1997

================================================================================

YOUR VOTE IS IMPORTANT

TO ENSURE REPRESENTATION AT THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE WHETHER OR
NOT YOU INTEND TO BE PRESENT AT THE MEETING. NO ADDITIONAL POSTAGE IS
NECESSARY IF MAILED IN THE UNITED STATES.

================================================================================
<PAGE> 3
STERLING CHEMICALS HOLDINGS, INC.
1200 SMITH STREET
SUITE 1900
HOUSTON, TEXAS 77002-4312
(713) 650-3700

DECEMBER 22, 1997
========================

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 28, 1998

========================

INTRODUCTION

This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Sterling Chemicals
Holdings, Inc. (the "Company") for use at the Annual Meeting of Stockholders of
the Company to be held at Texas Commerce Center Auditorium, 601 Travis Street,
Houston, Texas at 9:00 A.M., Houston time, on Wednesday, January 28, 1998, and
at any adjournment(s) or postponement(s) thereof (the "Annual Meeting") for the
purposes set forth in this Proxy Statement and the accompanying Notice of
Annual Meeting (the "Notice"). This Proxy Statement, the Notice, the Company's
Annual Report to Stockholders for the Fiscal Year Ended September 30, 1997, and
the enclosed form of proxy are first being mailed to stockholders on or about
December 22, 1997.

PROXIES

The shares represented by any proxy in the enclosed form, if such
proxy is properly executed and is received by the Company prior to or at the
Annual Meeting, will be voted in accordance with the specifications made
thereon. Proxies that are properly signed and returned but on which no
specification has been made by the stockholder will be voted in favor of the
proposals described in this Proxy Statement. The Board of Directors is not
aware of any other matters that are expected to come before the Annual Meeting.
If any other matters are properly brought before the Annual Meeting, the
persons named in the accompanying proxy will vote the shares represented by
such proxies on such matters as instructed by the Board of Directors of the
Company, who have instructed the proxies to vote in accordance with the
proxies' own best judgment in the absence of express instruction from the Board
of Directors. The enclosed form of proxy may be revoked at any time before the
proxy is voted at the Annual Meeting by executing a new proxy with a later date
and delivering it to the Secretary or Assistant Secretary of the Company, by
voting in person at the Annual Meeting, or by giving written notice of
revocation to the Secretary or Assistant Secretary of the Company. The
presence of a stockholder at the Annual Meeting will not automatically revoke
that stockholder's proxy.

VOTING SECURITIES

Stockholders of record at the close of business on December 8, 1997
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting
and any adjournment(s) or postponement(s) thereof. As of the Record Date, the
issued and outstanding voting securities of the Company consisted of 12,357,191
shares of common stock, par value $0.01 per share (the "Common Stock"). Each
share of Common Stock is entitled to one vote on all matters that may properly
come before the Annual Meeting other than the election of directors. In the
election of directors, each share is entitled to cast one vote for each
director to be elected; cumulative voting is not permitted.

QUORUM AND OTHER MATTERS

The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum. Shares of Common Stock represented by a properly

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signed and returned proxy will be counted as present at the Annual Meeting for
purposes of determining a quorum, without regard to whether the proxy is marked
as casting a vote or abstaining. Shares of Common Stock held by nominees that
are voted on at least one matter coming before the Annual Meeting will also be
counted as present for purposes of determining a quorum, even if the beneficial
owner's discretion has been withheld (a "broker non-vote") for voting on some
or all other matters.

Directors will be elected by a favorable vote of a plurality of the
shares of Common Stock present, in person or by proxy, at the Annual Meeting
and entitled to vote. Accordingly, abstentions or broker non-votes will not
affect the election of the nominees receiving the plurality of votes.

All other matters to come before the Annual Meeting require the
approval of a majority of the shares of Common Stock present, in person or by
proxy, at the Annual Meeting and entitled to vote. Therefore, abstentions will
have the same effect as votes against the proposals on such matters. Broker
non-votes, however, will be deemed shares not present to vote on such matters,
and therefore will not count as votes for or against the proposals, and will
not be included in calculating the number of votes necessary for approval of
such matters.

Votes at the Annual Meeting will be tabulated by an Inspector of
Election appointed by the Company.

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

Directors will be elected by the favorable vote of a plurality of the
shares of Common Stock present, in person or by proxy, at the Annual Meeting
and entitled to vote. The Board of Directors recommends a vote FOR each of the
nominees listed and, unless authority to vote for the election of directors is
withheld as to any or all nominees, all shares represented by proxies will be
voted for the election of the nominees listed. If authority to vote for the
election of directors is withheld as to any but not all of the nominees listed,
all shares represented by any such proxy will be voted for the election of the
nominees as to whom authority is not withheld. If a nominee becomes
unavailable for any reason before the election, the shares represented by the
proxies will be voted for such person, if any, as may be designated by the
Board of Directors. However, the Board of Directors has no reason to believe
that any nominee will be unavailable. Any vacancy occurring following the
election of directors may be filled by the Board of Directors.

NOMINEES FOR ELECTION

All members of the Board of Directors of the Company will be elected
to hold office until the next annual meeting of stockholders and until their
respective successors are duly elected and have qualified. All nominees have
served as directors of the Company since August 21, 1996, with the exception of
(i) Mr. Waggoner, who has been a director since 1986, (ii) Mr. Damiris, who was
appointed by the Board of Directors, effective December 1, 1997, to fill a
vacancy and (iii) Mr. Towe, who was recently nominated by the Board of
Directors to replace Robert B. Calhoun. The following discussion sets forth
information with respect to each nominee for election as a director which has
been furnished by each such nominee. For information with respect to Common
Stock ownership by nominees, see the table in the section of this Proxy
Statement captioned "Principal Stockholders," including the footnotes thereto.

Frank P. Diassi. Age 64. Mr. Diassi is Chairman of the Company's
Board of Directors and is expected to become Chief Executive Officer effective
April 1, 1998. He is currently Managing General Partner of The Unicorn Group,
L.L.C. ("Unicorn"), a private financial organization. He organized Unicorn in
1981 and has originated investments in over 40 entrepreneurial companies.
Prior to forming Unicorn, Mr. Diassi organized and operated several businesses
ranging from chemical distribution to the manufacturing of organic chemicals
and detergent products, including being a founding director of Arcadian
Corporation. Mr. Diassi currently serves as Chairman of the Board of Software
Plus, Inc., a human resource software supplier. In addition, he serves as a
director of Mail-Well, Inc. ("Mail-Well"), an envelope manufacturer and
commercial printer, and several private companies.

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J. Virgil Waggoner. Age 70. Mr. Waggoner is Vice Chairman of
the Company's Board of Directors. Mr. Waggoner served as President and Chief
Executive Officer of the Company from 1986 until his retirement in August 1996.
From 1950 to 1980, Mr. Waggoner was employed by Monsanto Company ("Monsanto"),
last serving as Group Vice President and Managing Director of Monsanto's
Plastics and Resins Company. Mr. Waggoner was President of El Paso Products
Company, a commodity chemical and plastics company, from 1980 to 1983 and was a
self-employed industry consultant from 1983 to 1986. Mr. Waggoner has been on
the Board of Directors of Kirby Corporation since July 1983. He is currently
President and Chief Executive Officer of JVW Investments, Ltd., a private
company.

Robert W. Roten. Age 63. Mr. Roten spent the first 25 years of his
career with Monsanto and served as Vice President for sales and marketing for
El Paso Products Company from 1981 to 1983. Mr. Roten was President of
Materials Exchange, Inc., a Houston-based petrochemical and plastics marketing
firm, from 1983 until 1986. He served as Vice President--Commercial of the
Company from August 1986 until September 1991, when he became Vice
President--Corporate Development. Mr. Roten became Executive Vice President
and Chief Operating Officer of the Company in April 1993 and became President
and Chief Executive Officer of the Company in August 1996. Mr. Roten has
announced his retirement as Chief Executive Officer of the Company effective
April 1, 1998, but intends to continue to serve on the Board of Directors.

Allan R. Dragone. Age 71. Mr. Dragone is a director of Wellman,
Inc., a polyester fibers producer and plastic reclamation company and PM
Holding Corporation and its subsidiary, Purina Mills, Inc. (collectively,
"Purina Mills"), an animal feed producer. He also served as a director of
Arcadian Corporation from 1989 to its sale in 1996, and served as Chairman of
the Board thereof from 1989 to 1990. Mr. Dragone was President and Chief
Executive Officer of Akzo America, Inc., a chemicals producer, from 1986
through 1989, and was Chairman of the Board of Fiber Industries, Inc. ("Fiber
Industries"), a polyester fibers producer, from 1987 to 1989. He was Chairman
of the Board of the New York Racing Commission from 1990 to 1995, and currently
serves as a trustee thereof.

John L. Garcia. Age 41. Mr. Garcia has been a Managing Director and
Head of the Global Chemical Investment Banking Group with Credit Suisse First
Boston Corporation ("CSFB") since 1994 and prior thereto was a Managing
Director with Wertheim Schroder & Co. Inc., an investment banking firm. Mr.
Garcia also serves as a director of Acetex Corporation, a chemical
manufacturing company.

Frank J. Hevrdejs. Age 52. Mr. Hevrdejs is a principal and President
of The Sterling Group, Inc. ("TSG"), which he co-founded in 1982. Mr. Hevrdejs
has actively participated in acquisitions of over 40 businesses in the past 15
years. He is Chairman of the Board of First Sterling Ventures Corp., an
investment company, Enduro Holdings, Inc., a structural and electrical
manufacturing company, and Fibreglass Holdings, Inc., a truck accessory
manufacturer. He is also a director of Mail-Well, Purina Mills, and Eagle
U.S.A., an air-freight company.

Hunter Nelson. Age 45. Mr. Nelson is currently a principal with TSG.
Prior to joining TSG in 1989, he served as Vice President of Administration and
General Counsel of Fiber Industries. Mr. Nelson was previously a partner in
the law firm of Andrews & Kurth L.L.P., specializing in general corporate and
securities law. Mr. Nelson also serves on the board of Sterling Diagnostic
Imaging, Inc. and other private companies.

George J. Damiris. Age 37. Mr. Damiris has been with Koch
Industries, Inc. and its affiliates (collectively "Koch") since 1989, currently
serving as Vice President of Koch Ventures, Inc. He was Executive Vice
President of Koch's refining group from 1996 to 1997, Vice President of Koch's
chemical group from 1995 to 1996 and served as President of Koch's gas services
group from 1994 to 1995. Mr. Damiris started Koch's international chemicals
trading business in 1992 as Vice President of Koch Supply and Trading. From
1989 through 1992 Mr. Damiris was the Business Development Manager of Koch's
petroleum group. Prior to joining Koch, he held various positions in British
Petroleum's refining and chemicals divisions.

Rolf H. Towe. Age 59. Mr. Towe has served as Senior Managing
Director of The Clipper Group, L.P., since its formation in 1991 and is Vice
President of Clipper Asset Management, Inc. He was the Chairman of Executive

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<PAGE> 6
Partner Limited, an executive consulting firm, from 1989 to 1995. Earlier in
his career, he held various management positions over a period of nearly 20
years in Union Carbide Corporation, a multinational chemicals and plastics
manufacturer. Mr. Towe also serves as a director of American Heritage Life
Insurance Company, Sealy Corporation, a leading bedding manufacturer,
TravelCenters of America, Inc., a nationwide operator and franchiser of auto
and truck travel centers, and several private companies.

INFORMATION CONCERNING OPERATION OF THE BOARD OF DIRECTORS

In order to facilitate the functions of the Board of Directors, the
Board of Directors has created various committees including an Audit Committee
and a Compensation Committee. The Board of Directors does not have a
nominating committee.

Audit Committee. The members of the Audit Committee are Hunter Nelson
(Chairman), J. Virgil Waggoner and George J. Damiris (who became a member of
the Audit Committee on December 10, 1997). The functions of the Audit
Committee include the following: making recommendations to the Board of
Directors concerning the selection and termination of the Company's auditor;
reviewing the auditor's compensation and the scope and proposed terms of its
engagement as well as the nature and effect of any non-audit services provided;
reviewing the auditor's independence; considering the range of audit and
non-audit fees and, in consultation with the auditor, the adequacy of the
Company's internal financial controls; serving as a channel of communication
between the auditor and the Board of Directors; reviewing the results of each
audit, including any qualifications in the auditor's opinion and any related
management letter; reviewing the Company's annual financial statements and any
significant issues that arose in connection with the preparation of those
financial statements; reviewing major issues regarding accounting practices;
considering major changes and other questions regarding the Company's auditing
and accounting principles and practices to be followed when preparing the
Company's financial statements; reviewing the procedures employed by the
Company in preparing published financial statements; and performing such other
functions as may be necessary or appropriate in the efficient discharge of the
aforementioned duties. In the event the Company appoints an internal auditing
executive, the Audit Committee would also review the appointment, function and
performance of such internal auditor.

Compensation Committee. The members of the Compensation Committee are
Frank J. Hevrdejs (Chairman), Allan R. Dragone and Robert B. Calhoun (who will
be replaced by Mr. Towe assuming Mr. Towe's election as a director). The
functions of the Compensation Committee are to establish remuneration levels
for officers of Holdings and its subsidiaries, review significant employee
benefit programs and establish and administer executive compensation programs
(including bonus plans, stock option and other equity-based programs, deferred
compensation plans and other cash or stock incentive programs); establish, from
time to time, the annual fees to be paid to each director of the Company and
each of its subsidiaries and the fees to be paid to each director of the
Company and each of its subsidiaries in connection with the attendance by such
director at meetings of the relevant Board of Directors or committee thereof;
at the Company's expense, to retain and consult with such professional advisors
and other experts as the Compensation Committee shall deem necessary or
appropriate in connection with the performance of its duties and the exercise
of its authority and powers; and perform such other functions as may be
necessary or appropriate in the efficient discharge of its duties.

During the year ended September 30, 1997, the Board of Directors held
8 meetings, the Audit Committee held 5 meetings and the Compensation Committee
held 3 meetings. With the exception of Mr. Calhoun, no director attended fewer
than 75% of director meetings or of meetings of committees on which such
director served.

COMPENSATION OF DIRECTORS

Non-employee directors of the Company are paid a fee of $2,500 per
quarter ($5,000 for the Vice Chairman) and an attendance fee of $1,000 for each
meeting of the Board of Directors ($400 for telephonic meetings lasting 30
minutes or more). Committee members of the Board of Directors are paid $700
for each committee meeting ($1,400 for committee chairmen). In addition,
pursuant to the terms of the 1997 Nonqualified Stock Option Plan, each non-

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employee director receives annual automatic grants of options to purchase 1,000
shares of Common Stock (2,000 shares for the Vice Chairman) effective October 1
each year. Members of the Board of Directors who are employees of the Company
or its subsidiaries do not receive a fee for their services as directors. All
directors are reimbursed for travel expenses for their services as directors.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)

During fiscal 1997, the Compensation Committee (the "Committee")
consisted of the following non-employee members of the Company's Board of
Directors: Frank J. Hevrdejs (Chairman), Allan R. Dragone and Robert B.
Calhoun. The Committee meets regularly throughout the year to review general
compensation issues and determine the compensation of all officers and other
key employees of the Company and its subsidiaries. The Committee's role is to
discharge the compensation responsibilities of the Board of Directors. In this
connection, the Committee recommends and administers those employee benefit
plans that provide benefits to the executive officers.

The Committee's overall policy regarding compensation of the Company's
executive officers is to provide salary levels and compensation incentives
that (i) attract, motivate and retain talented and productive executives, (ii)
recognize individual performance and the performance of the Company relative to
the performance of other companies of comparable size, complexity and quality,
and (iii) support both the short-term and the long-term goals of the Company.
The Committee believes this approach ensures an appropriate link between the
compensation of the Company's executives and the accomplishment of Company
goals that coincide with shareholder objectives.

In order to develop a competitive compensation program for officers
and key employees, the Company has obtained compensation review data prepared
by independent compensation consultants. For comparison purposes, the
Committee defines the marketplace by comparing the Company to a group of
chemical and allied products corporations. A select group of non-chemical
companies chosen for size and performance comparability to the Company was used
as a secondary source of comparison. The compensation peer group is not the
same as the S&P Chemicals Index which appears in the Stock Performance Graph
because the Committee believes that the Company does not compete with many of
the corporations that are included in such index.

The Company's executive compensation program consists of a base
salary, short-term incentive compensation and long-term incentive compensation.
The Committee's goal is to set base salaries at or below competitive market
rates of comparable companies, while setting long-term incentive gain
opportunity, linked to Company financial performance, above competitive market
rates. The Committee believes focusing executive compensation on variable
incentive pay will allow the Company to meet its performance goals and enhance
shareholder value.

Base Salary. The Committee periodically reviews base salaries for all
executive officers. Generally, base salaries are determined according to the
individual executive's experience level, job classification level and
performance. As indicated above, the Committee sets a target range for base
salaries at or below that of the competitive market based upon information
compiled by its compensation consultants.

Short-Term Incentive Compensation. In January 1997, the Board of
Directors, upon recommendation of the Committee, approved the establishment of
a Profit Sharing Plan designed to benefit all executive officers and qualified
employees, and a Bonus Plan providing for annual bonuses to executive officers
and key employees based on the Company's annual financial performance. The
Company must meet certain threshold financial performance levels before awards
are made under either plan. For fiscal 1997, no bonuses were earned or paid.

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(1) Notwithstanding Securities and Exchange Commission ( SEC ) filings by
the Company that have incorporated or may incorporate by reference other SEC
filings (including this proxy statement) in their entirety, the Board of
Directors Compensation Committee Report on Executive Compensation shall not be
incorporated by reference into such filings and shall not be deemed to be
filed with the SEC except as specifically provided otherwise or to the extent
required by Item 402 of Regulation S-K.

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<PAGE> 8
Long-Term Incentive Compensation. In April 1997, the Board of
Directors, upon recommendation of the Committee, but subject to shareholder
approval at the 1998 Annual Meeting, approved the establishment of the Omnibus
Plan. See "Proposal No. 3." Under the Omnibus Plan, the Committee may grant
to executive officers and key employees incentive stock options, non-qualified
stock options, stock appreciation rights, restricted stock awards, performance
awards and phantom stock awards. The terms and amounts of the awards are
determined by the Committee in accordance with the Omnibus Plan. During fiscal
1997, awards under the Omnibus Plan consisted solely of non-qualified stock
options granted for an aggregate of 260,252 shares of the Company's Common
Stock. The Committee determines the number of options to be granted to an
individual executive based upon a variety of factors, including the
individual's job classification level, the extent to which his base salary is
below industry levels and his present and potential contributions to the
Company's success.

Chief Executive Officer Compensation. In January 1997 Mr. Roten's
base salary per annum was adjusted to $240,000, representing an increase of
$26,250 over his 1996 base salary rate. The adjustment occurred in Mr. Roten's
salary as a result of his promotion to President and CEO of the Company.
Based upon information compiled by its compensation consultants, the Committee
believes that Mr. Roten's 1997 salary, as adjusted, was below the mid-point
salary paid to similar individuals in the competitive market. Mr. Roten was
also awarded non-qualified stock options with respect to 38,942 shares of the
Common Stock of the Company pursuant to the Omnibus Plan, all with an exercise
price of $12.00.

Tax Treatment. The Committee considers the anticipated tax treatment
of the Company's executive compensation program. Section 162(m) of the Code
generally limits the corporate tax deduction for compensation paid to executive
officers to $1 million, unless certain conditions are met. The Company's
policy is to qualify all executive compensation for deduction under applicable
tax laws to the maximum extent possible. As the fiscal 1997 compensation
subject to the $1 million threshold of Section 162(m) for each of the Named
Executive Officers was below such threshold, the Committee believes the
requirements of Section 162(m) will not affect the tax deductions available to
the Company in connection with its executive compensation for the 1997 fiscal
year.

The Compensation Committee of the Board of Directors

Frank J. Hevrdejs (Chairman)
Allan R. Dragone
Robert B. Calhoun

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COMPENSATION OF EXECUTIVE OFFICERS

Set forth below is information regarding compensation arrangements and
benefits paid or made available to (i) the Chief Executive Officer and (ii) the
four most highly compensated executive officers of the Company (collectively,
the "Named Executive Officers") for the three fiscal years ended September 30,
1997. Compensation during such fiscal years included participation in certain
stock option, SAR and other benefit plans sponsored by the Company or its
subsidiaries that were terminated in connection with the Company's August 1996
recapitalization (the "Recapitalization").

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION (1) AWARDS
-------------------------- ---------------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (2) BONUS (3) AWARD(S) OPTIONS COMPENSATION
------------------------------ ------- ----------- -------------- ------------- ------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Roten . . . . . . . 1997 $ 231,250 $ -0- -0- 38,942 $ 3,247(4)
President and Chief 1996 205,000 105,313 -0- -0- 9,403
Executive Officer 1995 205,000 266,394 -0- 20,000 9,364

Frank P. Diassi . . . . . . . 1997 334,231 -0- -0- 63,492 4,693(4)
Chairman of the Board of
Directors

Robert N. Bannon . . . . . . 1997 195,000 -0- -0- 25,396 1,123(4)
Vice President--Operations, 1996 180,000 92,469 -0- -0- 8,462
President--Petrochemicals 1995 180,000 233,906 -0- 15,000 9,045
Division

Richard K. Crump . . . . . . 1997 187,500 -0- -0- 20,106 1,080(4)
Vice President-- 1996 180,000 92,469 -0- -0- 8,462
Strategic Planning 1995 180,000 233,906 -0- 15,000 9,045

Jim P. Wise (6) . . . . . . . 1997 187,500 -0- -0- 18,766 12,042(5)
Vice President--Finance and 1996 180,000 92,469 -0- -0- 204,255(7)
Chief Financial Officer 1995 180,000 413,906(8) 186,975 12,500 1,620
</TABLE>
_________________________

(1) No Named Executive Officer received any perquisites and other
personal benefits the aggregate amount of which exceeded the lesser
of either $50,000 or 10% of the total annual salary and bonus
reported for the relevant fiscal year in the Summary Compensation
Table.
(2) Includes amounts deferred under the Company's 401(k) Savings and
Investment Plan.
(3) Paid pursuant to the Company's Profit Sharing Plan.
(4) Consists of premiums for group term life insurance paid by the
Company.
(5) Consists of premiums for group term life insurance paid by the
Company of $1,080, and compensation for unused vacation time of
$10,962 paid upon Mr. Wise's resignation as an officer of the
Company.
(6) Mr. Wise resigned from the Company effective September 30, 1997.
(7) Includes $198,247 paid upon consummation of the Recapitalization
pursuant to a change of control provision of Mr. Wise's employment
agreement. Such agreement was terminated in connection with the
Recapitalization.
(8) In addition to payments pursuant to the Company's Profit Sharing
Plan, this amount includes an additional $90,000 in cash and the
value of 12,000 shares of restricted Common Stock awarded to Mr.
Wise. The fair market value of such restricted Common Stock was
$8.13 per share.

Option Grants in Last Fiscal Year. The following sets forth
certain information relating to options granted in fiscal1997 to purchase
shares of Common Stock of the Company. Such grants were made under the Omnibus
Plan, and are subject to the ratification and approval of the Omnibus Plan at
the Annual Meeting. See "Proposal No. 3."

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<TABLE>
<CAPTION>

Percent of Potential Realizable Value
Number of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to Exercise for Option Term (3)
Options Employees in Price (1) -------------------------------
Granted (#) Fiscal Year Per Share Expiration Date 0% 5% 10%
------------ ----------- --------- --------------- ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Roten . . . . . . 38,942 15.0% $12.00 January 1, 2007 $-0- $275,094 $ 686,999
Frank P. Diassi . . . . . . 63,492 24.4% 12.00 January 1, 2007 -0- 448,520 1,120,100
Robert N. Bannon . . . . . 25,396 9.8% 12.00 January 1, 2007 -0- 179,402 448,026
Richard K. Crump . . . . . 20,106 7.7% 12.00 January 1, 2007 -0- 142,033 354,702
Jim P. Wise (4) . . . . . . 18,766 7.2% 12.00 January 1, 2007 -0- 132,567 331,062

</TABLE>
_________________________

(1) Options were granted at 100% of fair market value on the date of
grant.
(2) The options granted on July 7, 1997 vest in increments of 20% per year
beginning January 1, 1998.
(3) The dollar amounts set forth under these columns are the result of
calculations of assumed annual rates of stock price appreciation from
July 7, 1997 (the date of grant of the options awarded) to January 1,
2007 (the date of expiration of such options) of 0%, 5% and 10%.
Based on these assumed annual rates of stock price appreciation of 0%,
5% and 10%, respectively, the Company's stock price at January 1, 2007
is projected to be $12.00, $19.07 and $29.68, respectively. These
assumptions are not intended to forecast future appreciation of the
Company's stock price. The Company's stock price may increase or
decrease in value over the time period set forth above. Optionees
will not realize value under their option grants without stock price
appreciation which will benefit all stockholders. The potential
realizable value computation does not take into account federal or
state income tax consequences of option exercises or sales of
appreciated stock.
(4) The options granted to Mr. Wise during fiscal 1997 terminated upon his
resignation, which was effective on September 30, 1997.

Aggregate Year-end Option Values. The following table provides
information on the value of the Named Executive Officers' unexercised options
at September 30, 1997. There were no exercises of options or SARs during
fiscal 1997 by any of the Named Executive Officers, and no such officer held
SARs at September 30, 1997.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS/SARS AT
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
---------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert W. Roten . . . . . . . . . . . . . . . . . . -- 38,942 $-- $ 9,736
Frank P. Diassi . . . . . . . . . . . . . . . . . . -- 63,492 - 15,873
Robert N. Bannon . . . . . . . . . . . . . . . . . -- 25,396 -- 6,349
Richard K. Crump . . . . . . . . . . . . . . . . . -- 20,106 -- 5,027
Jim P. Wise (1) . . . . . . . . . . . . . . . . . . -- 18,766 -- 4,692
</TABLE>
_________________________

(1) The options granted to Mr. Wise during fiscal 1997 terminated upon his
resignation, which was effective on September 30, 1997.

Pension Plans.

The Company maintains a defined benefit Salaried Employees' Pension
Plan (the "Pension Plan") covering substantially all salaried employees,
including the Named Executive Officers. Pension costs are borne solely by the
Company and determined annually on an actuarial basis with contributions made
accordingly. The pension benefits payable under the Pension Plan for
individuals hired by Monsanto (from which the Company acquired its Texas City,
Texas petrochemical plant (the "Texas City Plant")) prior to April 1, 1986 are
based on such individual's vested percentage times years of service multiplied
by 1.4% of Average Earnings (as defined below). Individuals hired by Monsanto
on or after April 1, 1986 and other individuals hired by the Company receive a
pension payable under the

-8-
<PAGE> 11
Pension Plan based on such individual's vested percentage times years of
service multiplied by 1.2% of Average Earnings. Average Earnings excludes,
among other things, amounts received under the Company's Profit Sharing Plan
and is generally defined as the greater of (i) average compensation received
during the highest three of the final five calendar years of employment or (ii)
average compensation received during the final 36 months of employment.

For those Company employees who were (i) employed by the Company prior
to October 1, 1986, (ii) previously employed by Monsanto and (iii) accruing a
Monsanto pension plan benefit, the Company recognizes Monsanto pension plan
years of service offset by any vested benefit under the Monsanto pension plan.
For those Company employees as of August 21, 1992 who were (i) previously
employed by Albright & Wilson based in the United States and (ii) participants
in the Tenneco, Inc. Retirement Plan, the Company recognizes Tenneco, Inc.
Retirement Plan years of service offset by any vested benefit under that plan.

For those Company employees as of January 31, 1997 who (i) were
previously employed by Cytec Industries, Inc. ("Cytec") and (ii) elect to
retire from the Company on or before January 31, 1999, the Company supplements
the standard pension payable such that the employee's total combined pension
from the Company and from the Cytec Nonbargaining Employees' Retirement Plan
equals the amount the employee would have received had he or she remained an
employee of Cytec until retirement.

The following table ("Table A") illustrates the aggregate of the
annual normal retirement benefits payable under the Pension Plan, Equalization
Plan and Supplemental Plan (as defined below) based on 1.4% of Average
Earnings, without reduction for any offset amounts.

<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------
AVERAGE EARNINGS 10 20 30 40
---------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
$ 50,000 . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,000 $ 14,000 $ 21,000 $ 28,000
100,000 . . . . . . . . . . . . . . . . . . . . . . . . . 14,000 28,000 42,000 56,000
150,000 . . . . . . . . . . . . . . . . . . . . . . . . . 21,000 42,000 63,000 84,000
200,000 . . . . . . . . . . . . . . . . . . . . . . . . . 22,400 44,800 67,200 89,600
250,000 . . . . . . . . . . . . . . . . . . . . . . . . . 22,400 44,800 67,200 89,600
300,000 . . . . . . . . . . . . . . . . . . . . . . . . . 22,400 44,800 67,200 89,600
350,000 . . . . . . . . . . . . . . . . . . . . . . . . . 22,400 44,800 67,200 89,600
400,000 . . . . . . . . . . . . . . . . . . . . . . . . . 22,400 44,800 67,200 89,600
</TABLE>
The following table illustrates the annual normal retirement benefits
payable under the Pension Plan based on 1.2% of Average Earnings, without
reduction for any offset amounts. Such benefit levels assume retirement at age
65, the years of service shown, continued existence of the Pension Plan,
Equalization Plan and Supplemental Plan without substantial change and payment
in the form of a single life annuity.

The benefits under the Pension Plan are computed by multiplying
Average Earnings by credited years of service times the respective percentages
referred to above. The benefits payable under the Pension Plan are not reduced
by any benefits payable under Social Security or other offset amounts. The
benefits payable to Table A participants are reduced by the amount of pension
benefits to which participants may be entitled under Monsanto's pension plan.
The number of credited years of service of each of the named executive officers
are as follows: Frank P. Diassi--1 year;

-9-
<PAGE> 12
Robert W. Roten--36 years; Richard K. Crump--11 years; and Robert N. Bannon--26
years. Mr. Roten has announced his retirement as an employee of the Company
effective April 1, 1998 and Mr. Bannon has announced his resignation effective
January 31, 1998. As a result of his resignation on September 30, 1997, Mr.
Wise will not be eligible for benefits under the Pension Plan.

Pension Benefit Equalization Plan. The Company maintains the Sterling
Chemicals, Inc. Pension Benefit Equalization Plan (the "Equalization Plan").
The Equalization Plan provides additional benefits to employees whose
retirement benefits under the Pension Plan are reduced, curtailed or otherwise
limited as a result of certain limitations under the Internal Revenue Code of
1986, as amended (the "Code"). The additional benefits provided by the
Equalization Plan are in an amount equal to the benefits under the Pension Plan
which are reduced, curtailed or limited by reason of the application of such
limitations. All employees who participate in the Pension Plan are eligible to
participate in the Equalization Plan. Benefits have been paid to participants
under the Equalization Plan and such benefits are generally payable at the
time, and in the manner, benefits are payable under the Pension Plan.

Supplemental Employee Retirement Plan. The Company maintains the
Sterling Chemicals, Inc. Supplemental Employee Retirement Plan (the
"Supplemental Plan"). The Supplemental Plan also provides additional benefits
to certain employees whose retirement benefits under the Pension Plan are
reduced, curtailed or otherwise limited because such employee's annual
compensation is in excess of $160,000 or because certain Social Security
integration benefits were removed from the Pension Plan. The additional
benefits provided by the Supplemental Plan are in an amount equal to the
benefits under the Pension Plan which are reduced, curtailed or limited by
reason of the applications of such limitations. Only those employees who are a
part of management or are "highly compensated" and are subject to limitations
on Pension Plan benefits imposed by the Code may participate in the
Supplemental Plan. Benefits have been paid to participants under the
Supplemental Plan and such benefits are generally payable at the time, and in
the manner, benefits are payable under the Pension Plan.

Assuming retirement at age 65, or after five years of service, if
later, and the continuation of their current levels of base salary until such
retirement, as of September 30, 1997, total retirement benefits under the
Equalization Plan and/or the Supplemental Plan payable to Messrs. Diassi and
Crump will be $18,000 and $56,804 per year, respectively, reduced by the value
of the benefits payable under the Pension Plan, which are $9,600 and $47,835
per year, respectively. Mr. Roten has announced his retirement as an employee
of the Company effective April 1, 1998. Assuming his retirement, the total
retirement benefits under the Equalization Plan and the Supplemental Plan
payable to Mr. Roten will be $91,947 per year, reduced by $60,122.28 of
benefits payable under the Pension Plan.

Termination Pay Plan.

On April 24, 1996, the Company adopted a Consolidated Termination Pay
Plan for All Salaried Employees of the Company and its Subsidiaries, which
supersedes and replaces all prior termination pay plans. The Consolidated
Termination Pay Plan was amended and restated on May 20, 1996 and further
amended on August 19, 1996 (as amended, the "Consolidated Plan"). Each of the
Named Executive Officers, with the exception of Frank P. Diassi, is covered by
the Consolidated Plan. The Recapitalization constituted a "change of control"
under the Consolidated Plan and thus triggered the running of a 24-month
"Protection Period" under the Consolidation Plan.

As amended, the Consolidated Plan will terminate on August 19, 1998
and would provide benefits to any full-time salaried employee of the Company
who is terminated for any reason (other than the employee's death or
disability, resignation or retirement or termination for cause), or if such
employee is requested to accept a new job which is less than equivalent to his
or her job immediately prior to the Recapitalization in terms of compensation,
job level, job responsibilities or credits, then such employee shall be
entitled to receive termination pay. Such an event giving rise to termination
pay under the plan is defined as a "Triggering Event." No payments are
currently expected to be made under the Consolidation Plan.

The termination pay payable to any eligible employee following a
Triggering Event is equal to 36 months' pay (for certain members of senior
management, including the Named Executive Officers), or 24 months' pay (for all
other

-10-
<PAGE> 13
salaried employees) (the relevant period being referred to as such employee's
"Termination Pay Period") at the employee's base pay rate in effect at the time
of the Recapitalization, and is payable as and when such base salary would
otherwise have been payable to such employee if such employee had not been
terminated. An affected employee is to receive continued health benefits for
the Termination Pay Period, and an amount equal to the projected amount of
profit sharing that would have been received by the affected employee under the
Company's Amended and Restated Salaried Employees' Profit Sharing Plan during
the Termination Pay Period.

Other amounts payable upon a Triggering Event include benefits accrued
under the Company's Amended and Restated Savings and Investment Plan (the
"Savings Plan"), the Pension Plan, the Supplemental Plan or the Equalization
Plan, or any similar plan in effect for Canadian employees, which would be
forfeited by the employee due to the Triggering Event. The Consolidated Plan
also provides for outplacement services and gross-up payments for any excise
tax imposed by Section 4999 of the Code or any interest or penalty thereon.

Assuming that Messrs. Roten, Crump and Bannon were entitled to receive
payments under the Consolidated Plan as of September 30, 1997, and assuming
projected profit sharing amounts of zero for the Termination Pay Period, such
payments would have totaled $615,000, $540,000 and $540,000, respectively. The
resignation of Mr. Wise did not trigger benefits to him under the Consolidated
Plan.

CERTAIN TRANSACTIONS

The holders of 6,471,952 shares of Common Stock, representing
approximately 52% of the outstanding Common Stock, have entered into an Amended
and Restated Voting Agreement dated January 22, 1997 (the "Voting Agreement").
The parties to the Voting Agreement are Frank P. Diassi, Frank J. Hevrdejs and
Hunter Nelson, each a director of the Company, and William C. Oehmig, Susan O.
Rheney (Trustee of The Rheney Living Trust), Koch Capital Services, Inc.
(formerly known as Koch Equities Inc.) ("Koch Capital"), affiliates of Clipper
Capital Partners, L.P. (collectively, "The Clipper Group"), FSI No. 2
Corporation (a wholly owned subsidiary of Fayez Sarofim & Co.), Olympus Growth
Fund II, L.P. ("Olympus Growth"), Olympus Executive Fund, L.P. ("Olympus
Executive") and CSFB. The Voting Agreement provides for each of such parties
to vote shares of Common Stock owned or subsequently acquired by such parties
in favor of a nominee to the Board of Directors of the Company to be selected
by each of Koch Capital and The Clipper Group. George J. Damiris is the
current designee of Koch Capital and Robert B. Calhoun is the current designee
of The Clipper Group (Mr. Calhoun will be replaced by Rolf H. Towe assuming Mr.
Towe's election as a director). The rights of Koch Capital and The Clipper
Group to select a nominee under the Voting Agreement are terminated in the
event their ownership of Common Stock represents less than 5% of the total
outstanding shares of Common Stock.

The holders of 8,999,866 shares of Common Stock, representing
approximately 73% of the outstanding Common Stock, are parties to a
Stockholders Agreement and a Tag-Along Agreement. The Stockholders Agreement
restricts transfer of shares of Common Stock held by such stockholders (with
certain exceptions) unless such shares are first offered to the Company's
employee stock ownership plan (the "ESOP"), second to the Company and finally
to other stockholders party to the agreement. In addition, the agreement
restricts the ability of any stockholder who is a party to the agreement to
initiate a disposition of a control position in the Company without first
complying with the right of first refusal provisions. The Tag-Along Agreement
provides that if any of the parties thereto propose to transfer, sell or
otherwise dispose of an aggregate of 51% or more of the Common Stock issued and
outstanding at the time of such transfer, all other holders of Common Stock
will have the right to participate in such transfer on a pro rata basis and on
the same terms and conditions.

In connection with the Recapitalization, the Company and TSG entered
into an agreement (the "Consulting Agreement"), which provides that if the
Company or any of its subsidiaries determines prior to April 23, 1998 to
dispose of or acquire any assets or businesses or to offer its securities for
sale or to raise any debt or equity financing, the Company or such subsidiary
will retain TSG as a consultant with respect to the transaction, provided that
TSG's fees are competitive and the Company and TSG mutually agree on the terms
of the engagement, and the Company will indemnify TSG against liabilities
relating to their services. Pursuant to the Consulting Agreement, the Company
has

-11-
<PAGE> 14
paid to TSG consulting and advisory fees of approximately $0.7 million in
connection with the Company's July 1997 acquisition of the assets of Saskatoon
Chemicals, Ltd. (the "Saskatoon Acquisition"), and approximately $1.1 million
in connection with the Company's January 1997 acquisition of the acrylic fibers
business of Cytec.

Mr. Frank J. Hevrdejs, a director of the Company, was a founder and is
a principal of TSG and Hunter Nelson, also a director of the Company, is a
principal of TSG. Mr. Frank P. Diassi, Chairman of the Company's Board of
Directors, Mr. J. Virgil Waggoner, Vice Chairman of the Company's Board of
Directors, Robert W. Roten, Chief Executive Officer and a director of the
Company, and Richard K. Crump, Vice President--Strategic Planning of the
Company, have previously co-invested with principals of TSG in several
transactions.

CSFB served as the lead Initial Purchaser for the April 1997 private
placement of $150,000,000 of 11 1/4% Senior Subordinated Notes Due 2007 of
Sterling Chemicals, Inc., the Company's wholly owned operating subsidiary, for
which CSFB received net compensation of approximately $1.0 million. In
connection with the Recapitalization, CSFB served as managing underwriter for
the public offering of certain of the Company's debt securities and provided
certain financial advisory services to the Company, for which CSFB received
underwriting discounts and commissions and financial advisory fees totaling
approximately $17 million. John L. Garcia, a director and stockholder of the
Company, is a Managing Director of CSFB.

In connection with the Saskatoon Acquisition, Clipper Capital
Associates, Inc. ("Clipper"), a member of The Clipper Group, and Olympus
Partners, an affiliate of Olympus Growth and Olympus Executive ("Olympus"),
acted as placement agents for a private placement of approximately $7.3 million
of units, consisting of Series B Preferred Stock and warrants to purchase
Common Stock of the Company ("Units"), for which they received a total fee of
$0.1 million. In addition, Clipper and Olympus purchased approximately 30% and
29%, respectively, of the Units in the private placement.

Since October 1, 1991, the Company and certain affiliates of Koch
Industries have had ongoing commercial relationships in the ordinary course of
business, including, from time to time, supply of raw materials or sales of
petrochemicals and transportation of natural gas. For the fiscal year ended
September 30, 1997, (i) product sales to and raw material purchases from Koch
Chemical, an indirect wholly owned subsidiary of Koch Industries; (ii) payments
to John Zink Company, an indirect wholly owned subsidiary of Koch Industries,
in consideration for certain contracting and construction services performed at
the Texas City Plant; and (iii) payments to Koch Gateway Pipeline Company for
the transportation of natural gas to the Company's acrylic fiber plant through
a pipeline in which it is a partner, each represented less than 1% of the
Company's revenues.

-12-
<PAGE> 15
PERFORMANCE GRAPH

The following Stock Performance Graph compares the Company's
cumulative total stockholder return on its Common Stock for a five-year period
with the cumulative total return of the Standard & Poor's Stock Index and the
Standard & Poor's Chemicals Index. The graph assumes $100 was invested on
September 30, 1992 in the Company's Common Stock, the S&P 500 Index and the S&P
Chemicals Index and that dividends were reinvested.

In connection with the Recapitalization, the Common Stock was delisted
from the New York Stock Exchange and is now included in the OTC Electronic
Bulletin Board maintained by the National Association of Securities Dealers,
Inc. The Company believes that the delisting combined with the reductions in
the number of shares of Common Stock outstanding and the number of record
holders of Common Stock has significantly reduced the liquidity of the trading
market for the Common Stock.

There can be no assurance as to future trends in the cumulative total
return of the Company's Common Stock or of the following indices. The Company
does not make or endorse any predictions as to future stock performance.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
BASED ON $100 INVESTED ON SEPTEMBER 30, 1992 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.

[GRAPH]

SEP-92 SEP-93 SEP-94 SEP-95 SEP-96 SEP-97
------ ------ ------ ------ ------ ------
<C> <C> <C> <C> <C> <C>
STERLING CHEMICALS 100 92 343 209 311 311
HOLDINGS, INC.

S & P 500 100 108 117 152 183 257

S & P CHEMICALS 100 113 142 188 217 284
</TABLE>

-13-
<PAGE> 16
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of December 8, 1997, by (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each director and nominee for director
of the Company, (iii) each Named Executive Officer (other than Mr. Wise, who
was no longer an officer of the Company as of such date), and (iv) all of the
directors and executive officers as a group. In addition, an aggregate of
640,662 shares of Common Stock are held by the ESOP on behalf of the employees
of the Company, including certain of the Company's executive officers,
representing approximately 5% of the outstanding Common Stock, of which 48,694
shares have been allocated to employees' accounts to date. These shares are
held of record by Merrill Lynch & Co. Incorporated ("Merrill Lynch"), as
trustee, who disclaims beneficial ownership of such shares. Merrill Lynch
exercises sole power to vote the shares of Common Stock held by the ESOP until
such time as shares are allocated to the account of an employee, who then has
sole power to vote his respective ESOP shares. Unless otherwise indicated,
each of the stockholders has sole voting and investment power with respect to
the shares beneficially owned. The information is based upon information
furnished to the Company by each individual or entity named below.

<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) SHARES PERCENT
- ---------------------------------------- ----------------------------------
<S> <C> <C>
Frank P. Diassi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661,509 (2)(3) 5.3%
J. Virgil Waggoner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412,306 (4) 3.3
Robert B. Calhoun . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,142,104 (5) 17.3
Allan R. Dragone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,385 (6) *
John L. Garcia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,757 (7) *
George J. Damiris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,133,716 (8) 9.2
Frank J. Hevrdejs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 865,886 (2)(9) 7.0
Hunter Nelson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,758 (2)(10) *
Rolf H. Towe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,063,204 (11) 16.7
Robert W. Roten . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,588 (12) 1.4
Robert N. Bannon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,757 (13) *
Richard K. Crump . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,741 (14) *
Clipper Capital Associates, Inc. . . . . . . . . . . . . . . . . . . . . . . 2,063,204 (2)(15) 16.7
Koch Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,133,716 (2)(16) 9.2
Fayez Sarofim & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 654,548 (2)(17) 5.3
Olympus Growth Fund II, L.P. . . . . . . . . . . . . . . . . . . . . . . . . 678,770 (2)(18) 5.5
Olympus Executive Fund, L.P. . . . . . . . . . . . . . . . . . . . . . . . . 7,926 (2)(19) *
All executive officers and directors of the Company as a group (13 persons) . 5,648,001 (20) 45.5
</TABLE>

_________________________

* Less than 1%
(1) Unless otherwise noted, the mailing address of each such beneficial
owner is 1200 Smith Street, Suite 1900, Houston, Texas 77002-4312.
(2) Each of such stockholders is a party to the Voting Agreement. See
"Certain Transactions." Other parties to the Voting Agreement include
William C. Oehmig, who beneficially owns 361,772 shares of Common
Stock, and the Rheney Living Trust (Susan O. Rheney and Clarke Rheney,
Trustees), which beneficially owns 48,307 shares of Common Stock. The
parties to the Voting Agreement may be deemed to be members of a
"group" within the meaning of Rule 13d-5(b)(1) under the Securities
Exchange Act of 1934, and accordingly may be deemed to have beneficial
ownership of all of the shares of

-14-
<PAGE> 17
Common Stock subject to the Voting Agreement. An aggregate of
6,471,952 shares of Common Stock, representing 52% of the outstanding
Common Stock, are subject to the Voting Agreement. However, each
party to the Voting Agreement expressly disclaims membership in such
group and beneficial ownership of such shares of Common Stock, other
than shares identified herein as beneficially owned by such party.
(3) Includes (i) 20,000 shares held as Trustee of the Gabrielle Diassi
Trust, (ii) 40,000 shares held as Trustee of the Diassi Children's
Trust, (iii) 10,000 shares held by Mr. Diassi's wife, (iv) 166 shares
held by Merrill Lynch, as Trustee of the ESOP, and allocated to Mr.
Diassi's account, and (v) 12,699 shares subject to Options.
(4) Of such shares, 6,000 represent shares subject to options granted by
the Company that are currently exercisable. The remainder represent
shares owned by the Waggoner Investment Partnership, Ltd., a family
limited partnership of which Mr. Waggoner is the managing general
partner and a limited partner and of which Mr. Waggoner's wife is both
a general partner and a limited partner. Mr. Waggoner disclaims
beneficial ownership of the Holdings Common Stock owned by such
partnership except to the extent of his pecuniary interest therein.
(5) Mr. Calhoun is the sole stockholder of Clipper and Curacao, and as
such may be deemed to have beneficial ownership of shares of Common
Stock beneficially owned by Clipper Associates, Clipper I, Clipper II,
Clipper III and Clipper IV, each of which is defined and discussed
below in footnote 15. In addition, Mr. Calhoun may be deemed to have
beneficial ownership of shares of Common Stock beneficially owned by
CS First Boston Merchant Investments 1995/96, L.P. ("CSFB
Investments"), a Delaware limited partnership principally engaged in
making investments. CSFB Investments may be deemed to directly
beneficially own 75,900 shares of Common Stock. Mr. Calhoun's
beneficial ownership also includes 3,000 shares subject to options
granted by the Company that are currently exercisable.
(6) Includes 3,000 shares subject to options granted by the Company that
are currently exercisable.
(7) Of such shares, 3,000 represent shares subject to options granted by
the Company that are currently exercisable. The remainder are held by
Clipper Capital Associates, L.P. ("Clipper Associates"), under a
nominee agreement pursuant to which Clipper Associates exercises sole
voting and dispositive power with respect to such shares.
(8) Represents shares held by Koch Capital, a wholly owned subsidiary of
Koch Industries, with respect to which, as Vice President of Koch
Ventures, Inc., Mr. Damiris may be deemed to have beneficial
ownership. Mr. Damiris disclaims beneficial ownership of such shares.
(9) Includes 1,990 shares owned by Mr. Hevrdejs' wife and 3,000 shares
subject to options granted by the Company that are currently
exercisable.
(10) Includes 3,000 shares subject to options granted by the Company that
are currently exercisable.
(11) Represents shares held by The Clipper Group with respect to which Mr.
Towe, as Senior Managing Director of The Clipper Group, L.P. and Vice
President of Clipper Asset Management, Inc., may be deemed to have
beneficial ownership. Mr. Towe disclaims beneficial ownership of such
shares.
(12) Includes 36,972 shares held by Merrill Lynch, as Trustee of the ESOP,
and allocated to Mr. Roten's account, and 7,789 shares subject to
options granted by the Company that are exercisable within 60 days.
(13) Includes 8,499 shares held by Merrill Lynch, as Trustee of the ESOP,
and allocated to Mr. Bannon's account, and 5,080 shares subject to
options granted by the Company that are exercisable within 60 days.
(14) Includes 7,644 shares held by Merrill Lynch, as Trustee of the ESOP,
and allocated to Mr. Crump's account, and 4,022 shares subject to
options granted by the Company that are exercisable within 60 days.
(15) Clipper may be deemed to be the beneficial owner of such shares of
Common Stock by virtue of its relationship with entities that have
beneficial ownership of such shares as discussed herein. Clipper and
its affiliated entities described herein are collectively referred to
as "The Clipper Group." Clipper is the sole general partner of
Clipper Associates, and is a Delaware corporation principally engaged
in holding investments, formed for the purpose of serving as general
partner of Clipper Associates. The mailing address of Clipper is
Tower 49, 12 East 49th Street, New York, NY 10017. Clipper Associates
is a Delaware limited partnership principally engaged in making
investments, directly or indirectly through other entities and is the
sole general partner of Clipper Equity Partners I, L.P. ("Clipper I")
and Clipper/Merchant Partners, L.P. ("Clipper II"), with sole voting
and dispositive power with respect to the securities held by such
partnerships. Each of Clipper I and Clipper II is a Delaware limited
partnership, principally engaged in making investments. Clipper
Associates may be deemed to directly beneficially own 11,831 shares of
Common Stock and indirectly beneficially own 201,776 shares of Common
Stock by virtue of its status as nominee under certain nominee
agreements, pursuant to which it exercises sole voting and dispositive
power with respect to such shares. Clipper I may be deemed to
directly beneficially own 444,537 shares of Common Stock. Clipper II
may be deemed to directly beneficially own 516,031 shares of Common
Stock.
Each of Clipper/Merban, L.P. ("Clipper III") and Clipper/European Re,
L.P. ("Clipper IV") is a Delaware limited partnership, principally
engaged in making investments. Clipper Associates is the sole
investment general partner of Clipper III and Clipper IV, having sole
voting and dispositive power with respect to securities held by such
partnerships. Clipper III may be deemed to directly beneficially own
592,701 shares of Common Stock. Clipper IV may be deemed to directly
beneficially own 296,328 shares of Common Stock. Clipper Curacao,
Inc. ("Curacao"), a corporation organized under the laws of the
British Virgin Islands, is the sole administrative general partner of
Clipper III and Clipper IV, responsible for the administrative
functions of such partnerships.

-15-
<PAGE> 18
The share amounts set forth in this footnote include currently
exercisable warrants to purchase Common Stock ("Warrants") in the
amount of 28 shares with respect to Clipper Associates; 13,605 shares
with respect to Clipper I; 18,149 shares with respect to Clipper II;
18,149 shares with respect to Clipper III; and 9,089 shares
with respect to Clipper IV.
(16) Koch Industries may be deemed to be the beneficial owner of such
shares of Common Stock, which are directly beneficially owned by Koch
Capital. Includes 19,031 shares subject to Warrants and 3,000 shares
subject to Options. The mailing address of Koch Industries and Koch
Capital is 4111 East 37th Street North, Wichita, KS 67220.
(17) Fayez Sarofim & Co. may be deemed to be the beneficial owner of such
shares of Common Stock, which are directly beneficially owned by FSI
No. 2 Corporation, a wholly owned subsidiary of Fayez Sarofim & Co.
The majority owner of Fayez Sarofim & Co. is Fayez Sarofim. The
mailing address of Fayez Sarofim, Fayez Sarofim & Co. and FSI No. 2
Corporation is Two Houston Center, Suite 2907, Houston, TX 77010.
(18) Olympus Growth and Olympus Executive are Delaware limited partnerships
principally engaged in making investments. The shares amounts include
shares subject to Warrants in the amount of 58,387 shares with respect
to Olympus Growth and 633 shares with respect to Olympus Executive.
OGP II, L.P., a Delaware limited partnership ("OGP") is the sole
general partner of Olympus Growth, OEF, L.P., a Delaware limited
partnership, is the sole general partner of Olympus Executive. The
three general partners of both OGP and OEF are LJM, L.L.C. ("LJM"),
RSM, L.L.C. ("RSM"), and Conroy, L.L.C. ("Conroy"); each of LJM, RSM
and Conroy is a Delaware limited liability company. The majority
owner of LJM is Louis J. Mischianti. The majority owner of RSM is
Robert S. Morris. The majority owner of Conroy is James A. Conroy.
The mailing address of Olympus Growth, Olympus Executive, OGP, OEF,
LJM, RSM, Conroy and Messrs. Mischianti, Morris and Conroy is Metro
Center, One Station Place, Stanford, Connecticut 06902.
(19) Includes 60,975 shares held by Merrill Lynch, as Trustee of the ESOP,
and allocated to the accounts of certain of such officers and
directors.

EXECUTIVE OFFICERS OF THE COMPANY

The following list sets forth the names, ages and offices of the
executive officers of the Company. The periods during which such persons have
served in such capacities are indicated in the description of business
experience of such persons below.

<TABLE>
<CAPTION>
NAME AND AGE POSITION WITH THE COMPANY
------------ -------------------------
<S> <C>
Frank P. Diassi (64) . . . . . . . . . . . . . . Chairman of the Board of Directors

Robert W. Roten (63) . . . . . . . . . . . . . . President, Chief Executive Officer and Director (1)
Richard K. Crump (51) . . . . . . . . . . . . . . Vice President--Strategic Planning
Gary M. Spitz (42) . . . . . . . . . . . . . . . Vice President and Chief Financial Officer (2)

David G. Elkins (55) . . . . . . . . . . . . . . Vice President, General Counsel and Secretary (3)
Robert N. Bannon(52) Vice President--Operations, President--Petrolchemicals
Division (4)
Robert O. McAlister (58) . . . . . . . . . . . . Vice President--Human Resources and Administration
Stewart H. Yonts (52) . . . . . . . . . . . . . . Treasurer and Assistant Secretary
</TABLE>

__________________________
(1) Mr. Roten has announced his retirement as President and Chief
Executive Officer effective April 1, 1998.
(2) Mr. Spitz was appointed effective January 19, 1998.
(3) Mr. Elkins was appointed effective January 1, 1998.
(4) Mr. Bannon has announced his resignation effective January 31, 1998.

Frank P. Diassi. Mr. Diassi is currently Managing General Partner of
Unicorn, a private financial organization. He organized Unicorn in 1981 and
has originated investments in over 40 entrepreneurial companies. Prior to
forming Unicorn, Mr. Diassi organized and operated several businesses ranging
from chemical distribution to the manufacturing of organic chemicals and
detergent products, including being a founding director of Arcadian
Corporation. Mr. Diassi currently serves as Chairman of the Board of Software
Plus, Inc., a human resource software company. In addition, he serves as a
director of Mail-Well, an envelope manufacturer and commercial printer, and
several private companies.

-16-
<PAGE> 19
Mr. Diassi became Chairman of the Board of Directors of the Company in August
1996, and is expected to become Chief Executive Officer effective April 1,
1998.

Robert W. Roten. Mr. Roten spent the first 25 years of his career
with Monsanto and served as Vice President for sales and marketing for El Paso
Products Company from 1981 to 1983. Mr. Roten was President of Materials
Exchange, Inc., a Houston-based petrochemical and plastics marketing firm, from
1983 until 1986. He served as Vice President--Commercial of the Company from
August 1986 until September 1991, when he became Vice President--Corporate
Development. Mr. Roten became Executive Vice President and Chief Operating
Officer of the Company in April 1993, and became President and Chief Executive
Officer in August 1996. Mr. Roten has announced his retirement as Chief
Executive Officer of the Company effective April 1, 1998, but intends to
continue to serve on the Board of Directors.

Richard K. Crump. Mr. Crump was Vice President of Materials
Management for El Paso Products Company from 1976 through 1983 and Vice
President of Sales for Rammhorn Marketing from 1984 to August 1986. He served
as Director--Commercial of the Company from August 1986 until October 1991,
when he became Vice President--Commercial. Effective December 1, 1996, Mr.
Crump became Vice President--Strategic Planning, assuming responsibility for
strategic planning for the Company, which includes acquisition and merger
activity.

Gary M. Spitz. Mr. Spitz will become Vice President and Chief
Financial Officer effective January 19, 1998. Mr. Spitz is currently Vice
President and Chief Financial Officer of Grace Davison (a division of W.R.
Grace and Company), a catalyst manufacturing and chemicals company. Mr. Spitz
has held various financial positions with divisions of W. R. Grace and Company
since 1979.

David G. Elkins. Mr. Elkins will become Vice President, General
Counsel and Secretary of the Company effective January 1, 1998. Mr. Elkins is
currently a partner at Andrews & Kurth, L.L.P., where he has practiced law in
the area of corporate and securities matters for over 5 years.

Robert N. Bannon. Mr. Bannon was employed by Monsanto for 15 years,
last serving as Manager, Strategic Operations--Sales. He became a director in
the Company's Commercial Department in August 1986. Mr. Bannon served as
Director of Manufacturing for the Company from October 1989 until October 1991
and as Vice President--Operations since October 1991. Mr. Bannon was also
President of Sterling Pulp Chemicals, Ltd. from August 1992 through November
1996. Effective December 1, 1996, Mr. Bannon became President of the Company's
Petrochemicals Division, assuming responsibility for petrochemical operations
at the Texas City Plant. Mr. Bannon is also a director of Mainland Bank in
Texas City, Texas. Mr. Bannon has announced his resignation effective January
31, 1998.

Robert O. McAlister. Mr. McAlister was employed by Champlin Petroleum
Company, a subsidiary of Union Pacific Corporation, from 1974 to 1987 where he
held a variety of positions in Human Resources, Marketing and Strategic
Planning. In 1987, he joined Champlin Refining and Chemicals, Inc., a joint
venture between Champlin Petroleum and PDVSA, the national oil company of
Venezuela, as Vice President of Human Resources. He joined the Company in 1991
as Director of Human Resources and was promoted to Vice President--Human
Resources and Administration on July 26, 1995.

Stewart H. Yonts. Mr. Yonts was employed by Tenneco, Inc. from 1976
to 1980, last serving as Tax Counsel. Mr. Yonts was Tax Manager of Home
Petroleum Corporation from 1980 to 1982 and Director of Taxes of MCO Resources,
Inc., a natural resources company, from 1982 to 1986. He joined the Company as
Tax Manager in August 1986 and served as Manager of Taxes and Benefits
Accounting from November 1989 until he became the Treasurer and Assistant
Secretary on October 1, 1994.

-17-
<PAGE> 20

PROPOSAL NO. 2:

RATIFICATION OF INDEPENDENT ACCOUNTANTS

The Company has engaged Deloitte & Touche LLP ("Deloitte") as its
independent accountants for the fiscal year ending September 30, 1998. The
Board of Directors recommends a vote FOR the proposal to ratify the appointment
of Deloitte and, unless authority to vote for the appointment is withheld, all
shares represented by proxies will be voted for the appointment. Proposal No.
2 will be adopted by the affirmative vote of a majority of the shares of Common
Stock present, in person or by proxy, at the Annual Meeting and entitled to
vote. Representatives of Deloitte will be present at the Annual Meeting, will
be given an opportunity to make a statement, if they desire to do so, and will
be available to respond to appropriate questions.

Termination of Coopers & Lybrand L.L.P. On October 25, 1995, the
Audit Committee of the Board of Directors of the Company recommended, and the
Board of Directors of the Company approved, the engagement of the firm of
Arthur Andersen LLP ("Andersen") as its independent accountants for the year
ending September 30, 1996, to replace the firm of Coopers & Lybrand L.L.P.
("Coopers"). The termination by the Company of the engagement of Coopers was
effective upon the completion of the audit for the year ended September 30,
1995, and the filing of the Company's Annual Report on Form 10-K for such year.
The appointment of Andersen as the Company's independent accountants for the
fiscal year ending September 30, 1996 was ratified by the stockholders at the
1996 Annual Meeting of Stockholders.

During the two previous fiscal years and the subsequent period through
December 18, 1995, the date of filing of the Company's Annual Report on Form
10-K, there were no disagreements with Coopers on any matter of accounting
principles or practices, financial statement disclosure, or audit scope or
procedures, which disagreements, if not resolved to their satisfaction, would
have caused them to make reference in connection with their report to the
subject matter of the disagreement.

During the two previous fiscal years and the subsequent period through
December 18, 1995, the date of filing of the Company's Annual Report on Form
10-K, the Company was not advised by Coopers of any of the reportable events
listed in Item 304(a)(1)(v)(A) through (D) of SEC Regulation S-K and during
such period the Company did not consult with Andersen regarding any matter
referenced under Item 304(a)(2) of the SEC Regulation S-K.

The audit reports of Coopers on the consolidated financial statements
of the Company as of and for the fiscal years ended September 30, 1995 and
1994, did not contain any adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope, or accounting
principles, except for an explanatory paragraph noting that the Company changed
its method of accounting for income taxes effective October 1, 1993.

The Company requested that Coopers furnish a letter addressed to the
SEC stating whether Coopers agreed with the above statements. A copy of the
Coopers letter to the SEC stating that such firm agreed with the above
statements, dated December 18, 1995, was filed with the SEC as Exhibit 16 to
the Company's Form 8-K, dated December 18, 1995.

Resignation of Arthur Andersen LLP. On August 21, 1996, Andersen
resigned effective immediately in connection with the Recapitalization. The
Company engaged Deloitte as its independent accountants for the fiscal year
ended September 30, 1996. Prior to the Recapitalization, Deloitte served as
independent accountants of STX Acquisition Corp., which was merged with the
Company as part of the Recapitalization.

Andersen did not perform an audit of the Company's financial
statements for any period. During the period of the engagement of Andersen,
there were no disagreements with Andersen on any matter of accounting
principles or practices or financial statement disclosure. The Company has not
been advised by Andersen of any of the reportable events listed in Item
304(a)(1)(v)(A) through (D) of Regulation S-K.

-18-
<PAGE> 21
The Company requested that Andersen furnish a letter, addressed to the
SEC, stating whether Andersen agreed with the above statements. A copy of the
letter of Andersen to the SEC stating that such firm agreed with the above
statements, dated August 28, 1996, was filed with the SEC as Exhibit 16.1 to
the Company's Form 8-K, dated August 21, 1996.

PROPOSAL NO. 3:
APPROVAL OF OMNIBUS STOCK AWARDS AND INCENTIVE PLAN

The Board of Directors has unanimously approved the Omnibus Plan and
unanimously recommends a vote FOR approval of the Omnibus Plan. Unless
authority to vote for the Omnibus Plan is withheld, all shares represented by
proxies will be voted for the Omnibus Plan. Proposal No. 3 will be adopted by
the affirmative vote of a majority of the shares of Common Stock present, in
person or by proxy, at the Annual Meeting and entitled to vote.

The Omnibus Plan authorizes the grant of various stock, stock-related
and cash awards to employees of the Company. The Omnibus Plan became effective
as of April 23, 1997 and is contingent upon the approval of the stockholders.
The purpose of the Omnibus Plan is to provide a means through which the Company
and its subsidiaries may attract able persons to enter the employ of the
Company and its subsidiaries and to provide a means whereby those employees
upon whom the responsibilities of the successful administration and management
of the Company and its subsidiaries rest, and whose present and potential
contributions to the welfare of the Company and its subsidiaries are of
importance, can acquire and maintain stock ownership, thereby strengthening
their concern for the welfare of the Company and its subsidiaries and their
desire to remain in the Company's and its subsidiaries' employ. A further
purpose of the Omnibus Plan is to provide such employees with additional
incentive and reward opportunities designed to enhance the profitable growth of
the Company and its subsidiaries.

SUMMARY OF THE OMNIBUS PLAN

The full text of the Omnibus Plan is set forth in Appendix A to this
Proxy Statement. The essential features of the Omnibus Plan are summarized
below, but such summary is qualified in its entirety by reference to the full
text of the Omnibus Plan.

TYPES OF AWARDS

The Omnibus Plan permits the granting of any or all of the following
types of awards ("Awards"): stock options, stock appreciation rights ("SARs"),
restricted stock, performance awards and phantom stock.

ELIGIBILITY FOR PARTICIPATION

All officers and employees of the Company or any subsidiary of the
Company will be eligible for participation in certain Awards under the Omnibus
Plan. Currently, the Company has approximately 1,700 employees eligible to
participate in the Omnibus Plan.

ADMINISTRATION

The Omnibus Plan is administered by the Compensation Committee (the
"Committee"), which must consist of "outside directors," within the meaning of
Section 162(m) of the Code, who are "disinterested persons" within the meaning
of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Committee will select the participants who will receive Awards,
determine the type and terms of Awards to be granted and interpret and
administer the Omnibus Plan.

-19-
<PAGE> 22
AMENDMENT AND TERMINATION

The Board of Directors, in its discretion may at any time or times
amend, suspend or terminate the Plan; provided, however, such action shall be
subject to the approval of the stockholders of the Company where stockholder
approval (i) is required by applicable law or (ii) the Board of Directors
determines (A) such approval is necessary to comply with any requirements of
any securities exchange on which the stock is listed or (B) such approval is
desired for any other reason; provided, further, however, that no amendment,
suspension or termination of the Omnibus Plan may, without the consent of the
holder of an Award, terminate such Award or adversely affect such person's
rights in any material respect.

TERM OF THE OMNIBUS PLAN

Although the Omnibus Plan may be sooner terminated, no additional
Awards may be granted under the Omnibus Plan after April 23, 2007. However,
the Omnibus Plan will remain in effect until all Awards granted prior to April
23, 2007 have been satisfied or expired.

STOCK SUBJECT TO THE OMNIBUS PLAN

Subject to adjustment as described below, 1,000,000 shares of Common
Stock may be awarded under the Omnibus Plan.

EMPLOYEE STOCK OPTIONS

Stock options may be granted as incentive stock options ("ISOs")
under Section 422 of the Code, non-qualified stock options or a combination
thereof. Stock options granted under the Omnibus Plan are subject to the terms
and conditions determined by the Committee, except that: (i) no stock options
may be granted after the termination of the Omnibus Plan; (ii) a non-qualified
exercise price is determined by the Committee and an ISO exercise price cannot
be less than the market value per share of Common Stock at the date of grant;
and (iii) no ISO may be granted to an employee who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company, unless (a) at the time such ISO is granted, the option price is at
least 110% of the fair market value of the stock subject to the option and (b)
such ISO by its terms is not exercisable more than 5 years after it is granted.
The Committee will determine the form in which payment of the exercise price
may be made.

STOCK APPRECIATION RIGHTS

An SAR is the right to receive cash, stock or a combination thereof
equal in amount to the excess, if any, of the fair market value of a share of
Common Stock on the date such right is exercised over the exercise price of
such SAR. An SAR may be granted in tandem with stock options or separate and
apart from a grant of option rights. The exercise price of an SAR shall be
determined by the Committee, and the Committee has discretion to determine the
form in which payment will be made.

RESTRICTED STOCK

The Committee may also authorize grants of restricted stock.
Restricted stock may not be disposed of by the Holder until the restrictions
specified in the Award expire. The Committee may base the expiration of the
restrictions upon (i) the attainment of certain financial targets established
by the Committee and/or (ii) the Holder's continued employment with the Company
for a specified period of time. The Holder will have, with respect to
restricted stock, the right to vote the shares, receive any dividends and enjoy
all other stockholder rights. The Committee shall determine the amount and
form of any payment for stock received pursuant to an Award, provided that in
the absence of such a determination, a Holder shall not be required to make any
payment for stock received pursuant to the Award, except to the extent
otherwise required by law.

-20-
<PAGE> 23
PERFORMANCE AWARDS

Performance Awards may consist of payments in cash, shares of Common
Stock or a combination thereof, payable upon the achievement of certain
performance goals by the Holder, the Company or any business unit in which the
Holder is employed or providing services to during the performance period. The
Committee shall determine the performance goals to be achieved during any
performance period and the length of any performance period. Each Award shall
have a maximum value established by the Committee at the time of such Award. A
Performance Award shall terminate if the Holder does not remain continuously
employed by the Company at all times during the applicable performance period.

PHANTOM STOCK

The Committee may grant Phantom Stock Awards, payable in cash, shares
of Common Stock or a combination thereof, in consideration of the fulfillment
of such conditions as the Committee may specify. The Committee shall establish
a period over which or the event upon which the Award shall vest, and each
Award shall have a maximum value established by the Committee at the time of
such Award. A Phantom Stock Award shall terminate if the Holder does not
remain continuously employed by the Company at all times during the applicable
vesting period.

TRANSFERABILITY

An Award is not transferable otherwise than by will or the laws of
descent and distribution and shall be exercisable during the Holder's lifetime
only by such Holder or the Holder's guardian or legal representative.
However, the Committee may, in its discretion, provide in an option agreement
(other than with respect to an ISO) that the option right granted to the
individual may be transferred (in whole or in part) and shall be subject to
such terms and conditions as the Committee may impose thereon.

ADJUSTMENTS

The Committee may provide for adjustment of Awards under the Omnibus
Plan if it determines such adjustment is required to prevent dilution or
enlargement of the rights of participants in the Omnibus Plan that would
otherwise result from a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, reorganization or other similar
corporate transaction.

FEDERAL INCOME TAX CONSEQUENCES WITH RESPECT TO OPTIONS

The following summary is based on the applicable provisions of the
Code as currently in effect and the income tax regulations and proposed income
tax regulations thereunder. The Omnibus Plan is not qualified under Section
401(a) of the Code.

Non-qualified Options. No federal income tax is imposed on the
optionee upon the grant of a non-qualified option. Upon the exercise of a
non-qualified option, the optionee will generally be treated as receiving
compensation taxable as ordinary income in the year of exercise, in an amount
equal to the excess of the fair market value of the shares of Common Stock at
the time of exercise over the exercise price paid for such shares of Common
Stock. Upon a subsequent disposition of the shares of Common Stock received
upon exercise of a non-qualified option, any difference between the fair market
value of the shares of Common Stock at the time of exercise and the amount
realized on the disposition would be treated as long-term or short-term capital
gain or loss, depending on the holding period of the shares. Upon an
optionee's exercise of a non-qualified option, the Company may claim a
deduction for compensation paid at the same time and in the same amount as
income is recognized by the optionee, if and to the extent that the amount is
an ordinary expense and satisfies the test of reasonable compensation.

Incentive Stock Options. No federal income tax is imposed on the
optionee upon the grant of an ISO. If the optionee does not dispose of shares
acquired pursuant to his exercise of an ISO within two years from the date the
option

-21-
<PAGE> 24
was granted or within one year after the shares were transferred to him (the
"Holding Period"), except for the item of tax adjustment described below under
"Alternative Minimum Tax," no income would be recognized by the optionee by
reason of his exercise of the option, and the difference between the option
price and the amount realized upon a subsequent disposition of the shares of
Common Stock would be treated as a long-term capital gain or loss. In such
event, the Company would not be entitled to any deduction in connection with
the grant or exercise of the option or the disposition of the shares of Common
Stock so acquired.

If, however, an optionee disposes of shares of Common Stock acquired
pursuant to his exercise of an ISO before the Holding Period has expired, the
optionee would be treated as having received, at the time of disposition,
compensation taxable as ordinary income. In such event the Company may claim a
deduction for compensation paid at the same time and in the same amount as
compensation is treated as being received by the optionee. The amount treated
as compensation is the excess of the fair market value of the shares of Common
Stock at the time of exercise (or, in the case of a sale in which a loss, if
sustained, would be recognized, the amount realized on the sale, if less) over
the option price; any amount realized in excess of the fair market value of the
shares of Common Stock at the time of exercise would be treated as long-term or
short-term capital gain, depending on the holding period of the shares of
Common Stock.

Alternative Minimum Tax. The excess of the fair market value of
shares of Common Stock acquired upon exercise of an ISO over the exercise price
paid for such shares is an adjustment to alternative minimum taxable income for
the optionee's taxable year in which such exercise occurs (unless the shares of
Common Stock are disposed of in the same taxable year).

Payment of Option Price in Shares. In the case of a non-qualified
option, if the option price is paid by the delivery of shares of Common Stock
previously acquired by the optionee having a fair market value equal to the
option price ("Previously Acquired Shares"), gain or loss would not be
recognized on the exchange of the Previously Acquired Shares for a like number
of shares of Common Stock pursuant to such an exercise of the option, and the
optionee's basis in the number of shares of Common Stock received equal to the
Previously Acquired Shares would be the same as his basis in the Previously
Acquired Shares. In addition, the optionee would be treated as receiving
compensation taxable as ordinary income equal to fair market value at the time
of exercise of the shares of Common Stock received in excess of the number of
Previously Acquired Shares, and the optionee's basis in such excess shares of
Common Stock would generally be equal to their fair market value at the time of
exercise.

In the case of an ISO, the federal income tax consequences to the
optionee of the payment of the option price with Previously Acquired Shares
will depend on the nature of the Previously Acquired Shares. If the Previously
Acquired Shares were acquired through the exercise of a qualified stock option,
an ISO or an option granted under an employee stock purchase ("Statutory
Option") and if such Previously Acquired Shares were being transferred prior to
the expiration of the applicable minimum statutory holding period, the transfer
would be treated as a disqualifying disposition of the Previously Acquired
Shares. If the Previously Acquired Shares were acquired other than pursuant
to the exercise of a Statutory Option, or were acquired pursuant to the
exercise of a Statutory Option but have been held for the applicable minimum
statutory holding period, no gain or loss should be recognized on the exchange
of the Previously Acquired Shares. In either case, (i) the optionee's basis in
the number of shares of Common Stock acquired equal to the number of
Previously Acquired Shares would be the same as his basis in the Previously
Acquired Shares, increased by any income recognized to the optionee upon the
disqualifying disposition of the Previously Acquired Shares, (ii) the
optionee's basis in the shares of Common Stock acquired in excess of the number
of Previously Acquired Shares would be zero and (iii) the other incentive
stock option rules would apply. Upon a subsequent disqualifying disposition of
the shares of Common Stock so received, the shares of Common Stock with the
lowest basis would be treated as disposed of first.

Additional Tax Consequences. In the event that the acceleration of
vesting or any payment, distribution or issuance of stock is subject to the
golden parachute 20% excise tax pursuant to Section 4999(a) of the Code, the
participant whose benefit is subject to such tax is entitled to receive a
gross-up payment from the Company so that the amount of the "net" benefit
received by such participant shall equal the amount of the benefit that would
have been

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<PAGE> 25
received in the absence of a golden parachute tax. Section 280G of the Code
prevents the deductibility by the Company of amounts subject to the excise tax
under Code Section 4999.

GRANTS UNDER THE OMNIBUS PLAN

Future Awards that may be made to executive officers and other
employees under the Omnibus Plan are not presently determinable. If the
stockholders approve the Omnibus Plan, such Awards will be made at the
discretion of the Committee in accordance with its compensation policies,
discussed in the "Compensation Committee Report on Executive Compensation," and
with the provisions of the Omnibus Plan. A number of non-qualified stock
options have been granted to executive officers and other employees under the
Omnibus Plan. All of such awards are subject to stockholder approval of the
Omnibus Plan. The following table sets forth, as to the Named Executive
Officers, all current executive officers as a group and all other employees as
a group, the number of shares covered by the outstanding options granted under
the Omnibus Plan as of September 30, 1997. Such options were granted with
five-year vesting periods at an exercise price of $12.00, which was the fair
market value of the Common Stock at the time of grant. On December 8, 1997,
the closing price of the Common Stock was $12.00.

<TABLE>
<CAPTION>
DOLLAR VALUE SHARES
OF SHARES UNDERLYING
NAME AND POSITION UNDERLYING AWARDS (1) AWARDS
----------------- --------------------- ------
<S> <C> <C>
Robert W. Roten, President and Chief Executive Officer . . . . . . . $ 467,304 38,942
Frank P. Diassi, Chairman of the Board of Directors . . . . . . . . . 761,904 63,492
Robert N. Bannon, Vice President - Operations . . . . . . . . . . . . 304,752 25,396
Richard K. Crump, Vice President - Strategic Planning . . . . . . . . 241,272 20,106
Jim P. Wise, Vice President - Finance, Chief Financial Officer (2). . 225,192 18,766
Executive Officers as a Group (6 persons) . . . . . . . . . . . . . . 2,319,024 193,252(3)
Non-executive Employees as a Group (29 persons) . . . . . . . . . . . 804,000 67,000
</TABLE>
_________________________

(1) Based on the closing price of the Common Stock on December 8, 1997 of
$12.00.
(2) The options granted to Mr. Wise under the Omnibus Plan terminated upon
his resignation, which was effective on September 30, 1997.
(3) Includes options to purchase 32,876 shares that were terminated upon
the resignations of the grantees.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who beneficially own 10% of a registered class of the
Company's equity securities (the "Reporting Persons"), to file reports
regarding their ownership and changes in ownership with the SEC. Based solely
on a review of the copies of such forms furnished to the Company and written
representations from certain of the Reporting Persons, the Company believes
that during fiscal 1997, the Reporting Persons complied with all Section 16(a)
filing requirements applicable to them.

EXPENSES OF SOLICITATION

The cost of preparing, printing and soliciting proxies will be borne
by the Company. Solicitations of proxies are being made by the Company through
the mail, and may also be made in person or by telephone. Employees and
directors of the Company may be utilized in connection with such solicitation.
The Company will also request brokers and nominees to forward soliciting
materials to the beneficial owners of the stock held of record by such persons
and will reimburse them for their reasonable forwarding expenses.

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<PAGE> 26

DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS

In order for stockholder proposals to be included in the Company's
Proxy Statement and proxy relating to the Company's 1999 Annual Meeting of
Stockholders, such proposals must be received by the Company at its principal
executive offices not later than August 24, 1998.

OTHER MATTERS

The Board of Directors does not intend to bring any other matters
before the meeting and has not been informed that any other matters are to be
presented by others. In the event any other matters properly come before the
meeting, the persons named in the enclosed form of proxy will vote all proxies
in accordance with their best judgment on such matters.

Whether or not you are planning to attend the meeting, you are urged
to complete, date and sign the enclosed proxy and return it in the enclosed
stamped envelope at your earliest convenience.

STERLING CHEMICALS HOLDINGS, INC. WILL FURNISH A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1997, WITHOUT EXHIBITS,
WITHOUT CHARGE TO EACH PERSON WHO FORWARDS A WRITTEN REQUEST TO STERLING
CHEMICALS HOLDINGS, INC., ATTENTION MICHAEL NOONAN, INVESTOR RELATIONS, 1200
SMITH STREET, SUITE 1900, HOUSTON, TEXAS 77002-4312.

By Order of the Board of Directors

Frank P. Diassi
Chairman of the Board of Directors

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<PAGE> 27
APPENDIX A

STERLING CHEMICALS HOLDINGS, INC.

OMNIBUS STOCK AWARDS AND INCENTIVE PLAN

(AS AMENDED)

I. PURPOSE

The purpose of the STERLING CHEMICALS HOLDINGS, INC. OMNIBUS STOCK
AWARDS AND INCENTIVE PLAN (the "Plan") is to provide a means through which
STERLING CHEMICALS HOLDINGS, INC., a Delaware corporation (the "Company"), and
its Subsidiaries (as defined herein), may attract able persons to enter the
employ of the Company and its Subsidiaries and to provide a means whereby those
employees upon whom the responsibilities of the successful administration and
management of the Company and its Subsidiaries rest, and whose present and
potential contributions to the welfare of the Company and its Subsidiaries are
of importance, can acquire and maintain stock ownership, thereby strengthening
their concern for the welfare of the Company and its Subsidiaries and their
desire to remain in the Company's and its Subsidiaries' employ. A further
purpose of the Plan is to provide such employees with additional incentive and
reward opportunities designed to enhance the profitable growth of the Company
and its Subsidiaries. Accordingly, the Plan provides for granting Incentive
Stock Options, Nonqualified Stock Options, Stock Appreciation Rights,
Restricted Stock Awards, Performance Awards, Phantom Stock Awards, or any
combination of the foregoing, as is best suited to the circumstances of the
particular employee as provided herein.

II. DEFINITIONS

The following definitions shall be applicable throughout the Plan
unless specifically modified by any paragraph:

(a) "Affiliates" means any "parent corporation" of the Company and
any "subsidiary" of the Company within the meaning of Code Sections 424(e) and
(f), respectively.

(b) "Agreement" means, individually or collectively, any Option
Agreement, Performance Award Agreement, Phantom Stock Award Agreement,
Restricted Stock Agreement and Stock Appreciation Rights Agreement.

(c) "Award" means, individually or collectively, any Option,
Restricted Stock Award, Phantom Stock Award, Performance Award or Stock
Appreciation Right.

(d) "Board" means the Board of Directors of the Company.

(e) "Change of Control" means the occurrence of any of the
following events: (i) the Company 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 of the Company),
(ii) the Company sells, leases or exchanges all or substantially all of its
assets to any other person or entity (other than a wholly-owned subsidiary of
the Company), (iii) the Company is to be dissolved and liquidated, (iv) any
person or entity, including a "group" as contemplated by Section 13(d)(3) of
the 1934 Act, acquires or gains ownership or control (including, without
limitation, power to vote) of more than 50% of the outstanding shares of the
Company's voting stock (based upon voting power), or (v) as a result of or in
connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board.

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(f) "Change of Control Value" shall mean (i) the per share price
offered to stockholders of the Company in any such merger, consolidation,
reorganization, sale of assets or dissolution transaction, (ii) the price per
share offered to stockholders of the Company in any tender offer or exchange
offer whereby a Change of Control takes place, or (iii) if such Change of
Control occurs other than in (i) or (ii) above, the Fair Market Value per share
of the shares into which Awards are exercisable, as determined by the
Committee, whichever is applicable. In the event that the consideration
offered to stockholders of the Company consists of anything other than cash,
the Committee shall determine the fair cash equivalent of the portion of the
consideration offered which is other than cash.

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

(h) "Committee" means the Compensation Committee of the Board
which shall be (i) constituted so as to permit the Plan to comply with Rule
16b-3 and (ii) constituted solely of "outside directors," within the meaning of
section 162(m) of the Code and applicable interpretive authority thereunder.

(i) "Company" means Sterling Chemicals Holdings, Inc. and any
successors thereto.

(j) "Director" means an individual elected to the Board by the
stockholders of the Company or by the Board under applicable corporate law who
is serving on the Board on the date the Plan is adopted by the Board or is
elected to the Board after such date.

(k) "Disabled" means a Holder who is on Long-Term Disability as
defined in the Pension Plan.

(l) An "employee" means any person (including an officer or a
Director) in an employment relationship with the Employer.

(m) "Employer" means the Company, an Affiliate or any Subsidiary.

(n) "Fair Market Value" means, with respect to a share of Stock as
of any specified date, (i) if the Stock is listed on a national stock exchange,
the mean of the high and low sales prices of the Stock reported on the stock
exchange composite tape on that date, or if no prices are reported on that
date, on the last preceding date on which such prices of Stock are so reported;
or (ii) in the event the Stock is not traded on a national stock exchange, the
fair market value of a share of Stock determined by the Committee in such
reasonable manner as it deems appropriate.

(o) "Forfeiture Restrictions" means with regard to shares of Stock
that are subject to a Restricted Stock Award, restrictions placed on a Holder's
disposition of such shares under certain circumstances or an obligation of a
Holder to forfeit and surrender such shares under certain circumstances.

(p) "Holder" means an employee who has been granted an Award.

(q) "Incentive Stock Option" means an incentive stock option
within the meaning of section 422(b) of the Code.

(r) "Initial Public Offering" or "IPO" means the consummation of
an underwritten public offering of Stock pursuant to a registration statement
of the Company filed under the Securities Act of 1933, as amended, after the
effective date of the Plan (other than any registration statement (a) relating
to warrants, options or shares of capital stock of the Company granted or to be
granted or sold primarily to employees, directors, or officers of the Company,
(b) filed in connection with a transaction described in Rule 145 under the
Securities Act of 1933, as amended, or any successor rule, (c) relating to
employee benefit plans or interests therein, or (d) primarily relating to
preferred stock or other securities issued in connection with any financing by
the Company which is principally debt or preferred stock financing) wherein the
aggregate net proceeds (after deducting all costs, discounts, commissions and
other expenses of the offering) to the Company are at least $100,000,000.

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<PAGE> 29
(s) "1934 Act" means the Securities Exchange Act of 1934, as
amended.

(t) "Nonqualified Stock Option" means an option granted under
Paragraph VII of the Plan to purchase Stock which does not constitute an
Incentive Stock Option.

(u) "Option" means an Award granted under Paragraph VII of the
Plan and includes both Incentive Stock Options to purchase Stock and
Nonqualified Stock Options to purchase Stock.

(v) "Optionee" means a Holder who has been granted an Option.

(w) "Option Agreement" means a written agreement between the
Company and a Holder with respect to an Option.

(x) "Pension Plan" means the Sterling Chemicals, Inc. Amended and
Restated Salaried Employees' Pension Plan (Effective as of May 1, 1996).

(y) "Performance Award" means an Award granted under Paragraph X
of the Plan.

(z) "Performance Award Agreement" means a written agreement
between the Company and a Holder with respect to a Performance Award.

(aa) "Phantom Stock Award" means an Award granted under Paragraph
XI of the Plan.

(bb) "Phantom Stock Award Agreement" means a written agreement
between the Company and a Holder with respect to a Phantom Stock Award.

(cc) "Plan" means the Sterling Chemicals Holdings, Inc. Omnibus
Stock Awards and Incentive Plan, as amended from time to time.

(dd) "Restricted Stock Agreement" means a written agreement between
the Company and a Holder with respect to a Restricted Stock Award.

(ee) "Restricted Stock Award" means an Award granted under
Paragraph IX of the Plan.

(ff) "Retirement" means a Holder's Early Retirement, Normal
Retirement or Late Retirement as set forth in the Pension Plan.

(gg) "Rule 16b-3" means SEC Rule 16b-3 promulgated under the 1934
Act, as such may be amended from time to time, and any successor rule,
regulation or statute fulfilling the same or a similar function.

(hh) "Spread" means, in the case of a Stock Appreciation Right, an
amount equal to the excess, if any, of the Fair Market Value of a share of
Stock on the date such right is exercised over the exercise price of such Stock
Appreciation Right; provided, however, the Committee may establish, in its sole
discretion, in any Stock Appreciation Rights Agreement, the maximum amount of
Spread attributable to a Stock Appreciation Right.

(ii) "Stock" means the common stock, $0.01 par value of the
Company.

(jj) "Stock Appreciation Right" means an Award granted under
Paragraph VIII of the Plan.

(kk) "Stock Appreciation Rights Agreement" means a written
agreement between the Company and a Holder with respect to an Award of Stock
Appreciation Rights.

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<PAGE> 30
(ll) "Subsidiary" means any corporation or entity of which more
than 50% of the outstanding securities or ownership interests having ordinary
voting power to elect a majority of the members of the Board of Directors, or
persons in similar capacity of such corporation or entity, is, directly or
indirectly owned by the Company.

III. EFFECTIVE DATE AND DURATION OF THE PLAN

The Plan shall be effective upon the date of its adoption by the
Board, provided that the Plan is approved by the stockholders of the Company
within twelve months thereafter. No further Awards may be granted under the
Plan after the expiration of ten years from the date of its adoption by the
Board. The Plan shall remain in effect until all Awards granted under the Plan
have been satisfied or expired.

IV. ADMINISTRATION

(a) Committee. The Plan shall be administered by the Committee.

(b) Powers. Subject to the provisions of the Plan, the Committee
shall have sole authority, in its discretion, to determine which employees
shall receive an Award, the time or times when such Award shall be made,
whether an Incentive Stock Option, Nonqualified Option or Stock Appreciation
Right shall be granted, the number of shares of Stock which may be issued under
each Option, Stock Appreciation Right or Restricted Stock Award, and the value
of each Performance Award and Phantom Stock Award. In making such
determinations the Committee may take into account the nature of the services
rendered by the respective employees, their present and potential contributions
to the Employer's success and such other factors as the Committee in its
discretion shall deem relevant.

(c) Additional Powers. The Committee shall have such additional
powers as are delegated to it by the other provisions of the Plan. Subject to
the express provisions of the Plan, the Committee is authorized to construe the
Plan and the respective agreements executed thereunder, to prescribe such rules
and regulations relating to the Plan as it may deem advisable to carry out the
Plan, and to determine the terms, restrictions and provisions of each Award,
including such terms, restrictions and provisions as shall be requisite in the
judgment of the Committee to cause designated Options to qualify as Incentive
Stock Options, and to make all other determinations necessary or advisable for
administering the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in any agreement relating to an Award
in the manner and to the extent it shall deem expedient to carry it into
effect. The determinations of the Committee on the matters referred to in this
Article IV shall be conclusive.

(d) Expenses. All expenses and liabilities incurred by the
Committee in the administration of this Plan shall be borne by the Company. The
Committee may employ attorneys, consultants, accountants or other persons to
assist the Committee in the carrying out of its duties hereunder.

V. STOCK SUBJECT TO THE PLAN

(a) Stock Grant and Award Limits. The Committee may from time to
time grant Awards to one or more employees determined by it to be eligible for
participation in the Plan in accordance with the provisions of Paragraph VI.
Subject to Paragraph XII, the aggregate number of shares of Stock that may be
issued under the Plan shall not exceed 1,000,000 shares. The shares subject to
this Plan shall consist of authorized but unissued shares of Stock or
previously issued shares of Stock reacquired and held by the Company, and such
number of shares shall be and is hereby reserved for such purpose. Shares of
Stock shall be deemed to have been issued under the Plan only to the extent
actually issued and delivered pursuant to an Award. To the extent that an
Award lapses or the rights of its Holder terminate or the Award is to only be
paid in cash or is paid in cash, any shares of Stock subject to such Award
shall again be available for the grant of an Award. To the extent that an Award
lapses or the rights of its Holder terminate, any shares of Stock subject to
such Award shall again be available for the grant of an Award. Separate stock
certificates shall be issued by the Company for those shares acquired pursuant
to the exercise of an Incentive Stock Option and for those shares acquired
pursuant to the exercise of a Nonqualified Stock Option.

A-4
<PAGE> 31
(b) Stock Offered. The stock to be offered pursuant to the grant
of an Award may be authorized but unissued Stock or Stock previously issued and
outstanding and reacquired by the Company.

VI. ELIGIBILITY

Awards may be granted only to persons who, at the time of grant, are
employees. Awards may not be granted to any Director who is not an employee.
An Award may be granted on more than one occasion to the same person, and,
subject to the limitations set forth in the Plan, such Award may include an
Incentive Stock Option or a Nonqualified Stock Option, a Stock Appreciation
Right, a Restricted Stock Award, a Performance Award, a Phantom Stock Award or
any combination thereof.

VII. STOCK OPTIONS

(a) Option Period. The term of each Option shall be as specified
by the Committee at the date of grant.

(b) Limitations on Exercise of Option. An Option shall be
exercisable in whole or in such installments and at such times as determined by
the Committee.

(c) Special Limitations on Incentive Stock Options. To the extent
that the aggregate Fair Market Value (determined at the time the respective
Incentive Stock Option is granted) of Stock with respect to which Incentive
Stock Options are exercisable for the first time by an employee during any
calendar year under all incentive stock option plans of the Company and its
Affiliates exceeds $100,000, such Incentive Stock Options shall be treated as
Nonqualified Stock Options as determined by the Committee. The Committee shall
determine, in accordance with applicable provisions of the Code, Treasury
Regulations and other administrative pronouncements, which of an Optionee's
Incentive Stock Options will not constitute Incentive Stock Options because of
such limitation and shall notify the Optionee of such determination as soon as
practicable after such determination. No Incentive Stock Option shall be
granted to an employee if, at the time the Option is granted, such employee
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of its parent or subsidiary corporation,
within the meaning of section 422(b)(6) of the Code, unless (i) at the time
such Option is granted the option price is at least 110% of the Fair Market
Value of the Stock subject to the Option and (ii) such Option by its terms is
not exercisable after the expiration of five years from the date of grant.

(d) Option Agreement. Each Option shall be evidenced by an Option
Agreement in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify an Incentive Stock Option
under section 422 of the Code. An Option Agreement may provide for the payment
of the option price, in whole or in part, in cash or by the delivery of a
number of shares of Stock (plus cash if necessary) having a Fair Market Value
equal to such option price. Each Option shall specify the effect of
termination of employment on the exercisability of the Option; provided, that
upon the death of an Optionee, the Retirement of an Optionee, or upon the
Optionee becoming Disabled, all outstanding Options of such Optionee shall
immediately vest and become exercisable. Moreover, an Option Agreement may
provide for a "cashless exercise" of the Option by establishing procedures
whereby the Holder, by a properly-executed written notice, directs (i) an
immediate market sale or margin loan respecting all or a part of the shares of
Stock to which he is entitled upon exercise pursuant to an extension of credit
by the Company to the Holder of the option price, (ii) the delivery of the
shares of Stock from the Company directly to a brokerage firm and (iii) the
delivery of the option price from the sale or margin loan proceeds from the
brokerage firm directly to the Company. Such Option Agreement may also
include, without limitation, provisions relating to (i) vesting of Options,
subject to the provisions hereof accelerating such vesting upon the occurrence
of an IPO or a Change of Control, (ii) tax matters (including provisions (y)
permitting the delivery of additional shares of Stock or the withholding of
shares of Stock from those acquired upon exercise to satisfy federal or state
income tax withholding requirements and (z) dealing with any other applicable
employee wage withholding requirements), and (iii) any other matters not
inconsistent with the terms and provisions of this Plan that the Committee
shall in its sole discretion determine. The terms and conditions of the
respective Option Agreements need not be identical.

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<PAGE> 32
(e) Option Price and Payment. The price at which a share of Stock
may be purchased upon exercise of an Option shall be determined by the
Committee, but (i) such purchase price shall not be less than the Fair Market
Value of Stock subject to an Incentive Stock Option on the date the Incentive
Stock Option is granted and (ii) such purchase price shall be subject to
adjustment as provided in Paragraph XII. The Option or portion thereof may be
exercised by delivery of an irrevocable notice of exercise to the Company. The
purchase price of the Option or portion thereof shall be paid in full in the
manner prescribed by the Committee.

(f) Stockholder Rights and Privileges. The Holder shall be
entitled to all the privileges and rights of a stockholder only with respect to
such shares of Stock as have been purchased under the Option and for which
certificates of stock have been registered in the Holder's name.

(g) Options and Rights in Substitution for Stock Options Granted
by Other Corporations. Options and Stock Appreciation Rights may be granted
under the Plan from time to time in substitution for stock options held by
individuals employed by corporations who become employees as a result of a
merger or consolidation of the employing corporation with the Company, an
Affiliate, or any Subsidiary, or the acquisition by the Company, an Affiliate
or a Subsidiary of the assets of the employing corporation, or the acquisition
by the Company, an Affiliate or a Subsidiary of stock of the employing
corporation with the result that such employing corporation becomes a
Subsidiary.

VIII. STOCK APPRECIATION RIGHTS

(a) Stock Appreciation Rights. A Stock Appreciation Right is the
right to receive an amount equal to the Spread with respect to a share of Stock
upon the exercise of such Stock Appreciation Right. Stock Appreciation Rights
may be granted in connection with the grant of an Option, in which case the
Option Agreement will provide that exercise of Stock Appreciation Rights will
result in the surrender of the right to purchase the shares under the Option as
to which the Stock Appreciation Rights were exercised. The Spread with respect
to a Stock Appreciation Right may be payable either in cash, shares of Stock
with a Fair Market Value equal to the Spread or in a combination of cash and
shares of Stock. With respect to Stock Appreciation Rights that are subject to
Section 16 of the 1934 Act, however, the Committee shall, except as provided in
Paragraph XII(c), retain sole discretion (i) to determine the form in which
payment of the Stock Appreciation Right will be made (i.e., cash, securities or
any combination thereof) or (ii) to approve an election by a Holder to receive
cash in full or partial settlement of Stock Appreciation Rights.

(b) Stock Appreciation Rights Agreement. Stock Appreciation Rights
granted independently of Options shall be evidenced by a Stock Appreciation
Rights Agreement. Each Stock Appreciation Rights Agreement shall specify the
effect of termination of employment on the exercisability of the Stock
Appreciation Rights; provided, that upon the death of a Holder of a Stock
Appreciation Right, the Retirement of such Holder, or upon such Holder becoming
Disabled, all outstanding Stock Appreciation Rights of such Holder shall
immediately vest and become exercisable. Stock Appreciation Rights Agreements
may also include, without limitation, provisions relating to (i) vesting of
Awards, subject to the provisions hereof accelerating vesting upon the
occurrence of an IPO or a Change of Control, (ii) tax matters (including
provisions covering applicable wage withholding requirements), and (iii) any
other matters not inconsistent with the terms and provisions of this Plan, that
the Committee shall in its sole discretion determine. The terms and conditions
of the respective Stock Appreciation Rights Agreements need not be identical.

(c) Exercise Price. The exercise price of each Stock Appreciation
Right shall be determined by the Committee in its sole discretion and shall be
subject to adjustment as provided in Paragraph XII.

(d) Exercise Period. The term of each Stock Appreciation Right
shall be as specified by the Committee at the date of grant.

(e) Limitations on Exercise of Stock Appreciation Right. A Stock
Appreciation Right shall be exercisable in whole or in such installments and at
such times as determined by the Committee.

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<PAGE> 33
IX. RESTRICTED STOCK AWARDS

(a) Restricted Stock Awards. A Restricted Stock Award shall be
represented by a certificate of Stock registered in the name of the Holder of
such Restricted Stock Award. The Holder shall have the right to receive
dividends with respect to Stock subject to a Restricted Stock Award, to vote
Stock subject thereto and to enjoy all other stockholder rights, except that
(i) the Holder shall not be entitled to delivery of the Stock certificate until
the Forfeiture Restrictions shall have expired, (ii) the Company shall retain
custody of the Stock until the Forfeiture Restrictions shall have expired,
(iii) the Holder may not sell, transfer, pledge, exchange, hypothecate or
otherwise dispose of the Stock until the Forfeiture Restrictions shall have
expired, and (iv) a breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Agreement shall cause a forfeiture
of the Restricted Stock Award.

(b) Forfeiture Restrictions to be Established by the Committee.
The Forfeiture Restrictions on shares of Stock that are the subject of a
Restricted Stock Award shall be determined by the Committee in its sole
discretion, and the Committee may provide that the Forfeiture Restrictions
shall lapse upon (i) the attainment of targets established by the Committee
that are based on (1) the price of a share of Stock, (2) the Company's earnings
per share, (3) the Company's revenue, (4) the revenue of a business unit of the
Company designated by the Committee, (5) the return on stockholders' equity
achieved by the Company, or (6) the Company's pre-tax cash flow from
operations, (ii) the Holder's continued employment with the Employer for a
specified period of time, or (iii) a combination of any two or more of the
factors listed in clauses (i) and (ii) of this sentence. Each Restricted Stock
Award may have different Forfeiture Restrictions, in the discretion of the
Committee. The Forfeiture Restrictions applicable to a particular Restricted
Stock Award shall not be changed except as permitted by Paragraph IX(b) or
Paragraph XII.

(c) Other Terms and Conditions. At the time of a Restricted Stock
Award, the Committee may, in its sole discretion, prescribe additional terms,
conditions or restrictions relating to Restricted Stock Awards, including, but
not limited to, rules pertaining to the termination of employment of a Holder
prior to expiration of the Forfeiture Restrictions; provided, that upon the
death of a Holder of a Restricted Stock Award, the Retirement of such Holder,
or upon such Holder becoming Disabled, all Forfeiture Restrictions applicable
to all Restricted Stock Awards of such Holder shall lapse and expire. Such
additional terms, conditions or restrictions shall be set forth in a Restricted
Stock Agreement made in conjunction with the Award. Such Restricted Stock
Agreement may also include, without limitation, provisions relating to (i)
subject to the provisions hereof accelerating vesting upon the occurrence of an
IPO or a Change of Control, vesting of Awards, (ii) tax matters (including
provisions (y) covering any applicable employee wage withholding requirements
and (z) prohibiting an election by the Holder under section 83(b) of the
Code), and (iii) any other matters not inconsistent with the terms and
provisions of this Plan that the Committee shall in its sole discretion
determine. The terms and conditions of the respective Restricted Stock
Agreements need not be identical.

(d) Payment for Restricted Stock. The Committee shall determine
the amount and form of any payment for Stock received pursuant to a Restricted
Stock Award, provided that in the absence of such a determination, a Holder
shall not be required to make any payment for Stock received pursuant to a
Restricted Stock Award, except to the extent otherwise required by law.

(e) Agreements. At the time any Award is made under this
Paragraph IX, the Company and the Holder shall enter into a Restricted Stock
Agreement setting forth each of the matters as the Committee may determine to
be appropriate. The terms and provisions of the respective Restricted Stock
Agreements need not be identical.

X. PERFORMANCE AWARDS

(a) Performance Period. The Committee shall establish, with
respect to and at the time of each Performance Award, a performance period over
which the performance of the Holder shall be measured.

(b) Performance Awards. Each Performance Award shall have a
maximum value established by the Committee at the time of such Award.

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<PAGE> 34
(c) Performance Measures. A Performance Award shall be awarded to
an employee contingent upon future performance of the employee, the Company, an
Affiliate, any Subsidiary, or any division or department thereof by or in which
he is employed during the performance period. The Committee shall establish
the performance measures applicable to such performance prior to the beginning
of the performance period but subject to such later revisions as the Committee
shall deem appropriate to reflect significant, unforeseen events or changes.

(d) Awards Criteria. In determining the value of Performance
Awards, the Committee shall take into account an employee's responsibility
level, performance, potential, other Awards and such other considerations as it
deems appropriate.

(e) Payment. Following the end of the performance period, the
Holder of a Performance Award shall be entitled to receive payment of an
amount, not exceeding the maximum value of the Performance Award, based on the
achievement of the performance measures for such performance period, as
determined by the Committee. Payment of a Performance Award may be made in
cash, Stock or a combination thereof, as determined by the Committee. Payment
shall be made in a lump sum or in installments as prescribed by the Committee.
Any payment to be made in Stock shall be based on the Fair Market Value of the
Stock on the payment date. If a payment of cash is to be made on a deferred
basis, the Committee shall establish whether interest shall be credited, the
rate thereof and any other terms and conditions applicable thereto.

(f) Termination of Employment. A Performance Award shall
terminate if the Holder does not remain continuously in the employ of the
Employer at all times during the applicable performance period, except as may
be determined by the Committee or as may otherwise be provided in the Award at
the time granted.

(g) Agreements. At the time any Award is made under this
Paragraph X, the Company and the Holder shall enter into a Performance Stock
Award Agreement setting forth each of the matters contemplated hereby, and, in
addition such matters are set forth in Paragraph IX(b) as the Committee may
determine to be appropriate. The terms and provisions of the respective
agreements need not be identical.

XI. PHANTOM STOCK AWARDS

(a) Phantom Stock Awards. Phantom Stock Awards are rights to
receive shares of Stock (or cash in an amount equal to the Fair Market Value
thereof), or rights to receive an amount equal to any appreciation in the Fair
Market Value of Stock (or portion thereof) over a specified period of time,
which vest over a period of time (subject to the provisions hereof accelerating
vesting upon the occurrence of an IPO or a Change of Control) as established by
the Committee, without payment of any amounts by the Holder thereof (except to
the extent otherwise required by law) or satisfaction of any performance
criteria or objectives. Each Phantom Stock Award shall have a maximum value
established by the Committee at the time of such Award.

(b) Award Period. The Committee shall establish, with respect to
and at the time of each Phantom Stock Award, a period over which or the event
upon which the Award shall vest with respect to the Holder.

(c) Awards Criteria. In determining the value of Phantom Stock
Awards, the Committee shall take into account an employee's responsibility
level, performance, potential, other Awards and such other considerations as it
deems appropriate.

(d) Payment. Following the end of the vesting period for a
Phantom Stock Award, the Holder of a Phantom Stock Award shall be entitled to
receive payment of an amount, not exceeding the maximum value of the Phantom
Stock Award, based on the then vested value of the Award. Payment of a Phantom
Stock Award may be made in cash, Stock or a combination thereof as determined
by the Committee. Payment shall be made in a lump sum or in installments as
prescribed by the Committee in its sole discretion. Any payment to be made in
Stock shall be based on the Fair Market Value of the Stock on the payment date.
Cash dividend equivalents may be paid during or after the vesting period with
respect to a Phantom Stock Award, as determined by the Committee. If a payment
of cash is to be

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<PAGE> 35
made on a deferred basis, the Committee shall establish whether interest shall
be credited, the rate thereof and any other terms and conditions applicable
thereto.

(e) Termination of Employment. Except as may be otherwise
determined by the Committee or as set forth in the Award at the time of grant,
a Phantom Stock Award shall terminate if the Holder does not remain
continuously in the employ of the Employer at all times during the applicable
vesting period; provided, however, that upon the death of a Holder of a Phantom
Stock Award, the Retirement of such Holder, or upon such Holder becoming
Disabled, all outstanding Phantom Stock Awards of such Holder shall immediately
vest and become distributable.

(f) Agreements. At the time any Award is made under this
Paragraph XI, the Company and the Holder shall enter into a Phantom Stock Award
Agreement setting forth each of the matters contemplated hereby and, in
addition, such matters as are set forth in Paragraph IX(b) as the Committee may
determine to be appropriate. The terms and provisions of the respective
agreements need not be identical.

XII. RECAPITALIZATION OR REORGANIZATION

(a) The shares with respect to which Awards may be granted are
shares of Stock as presently constituted, but if, and whenever, prior to the
expiration of an Award theretofore granted, the Company shall effect a
subdivision or consolidation of such shares of Stock or other capital
readjustment, the number of shares of Stock with respect to which such Award
may thereafter be exercised or satisfied, as applicable, (i) in the event of an
increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced, and the purchase price per share shall be
proportionately increased.

(b) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise or satisfaction, as applicable, of an
Award theretofore granted the Holder shall be entitled to (or entitled to
purchase, if applicable) under such Award, in lieu of the number of shares of
Stock then covered by such Award, the number and class of shares of stock and
securities to which the Holder would have been entitled pursuant to the terms
of the recapitalization if, immediately prior to such recapitalization, the
Holder had been the holder of record of the number of shares of Stock then
covered by such Award.

(c) In the event of an IPO or a Change of Control, all outstanding
Awards shall immediately vest and become exercisable or satisfiable, as
applicable. The Committee, in its discretion, may determine that upon the
occurrence of a Change of Control, each Award other than an Option outstanding
hereunder shall terminate within a specified reasonable number of days after
notice to the Holder, and such Holder shall receive, with respect to each share
of Stock subject to such Award, cash in an amount equal to the excess, if any,
of the Change of Control Value over any exercise price or purchase price paid,
if applicable. Further, in the event of a Change of Control, the Committee, in
its discretion shall act to effect one or more of the following alternatives
with respect to outstanding Options, which may vary among individual Holders
and which may vary among Options held by any individual Holder: (i) determine
a reasonable period of time on or before a specified date (before or after
such Change of Control) after which specified date all unexercised Options and
all rights of Holders thereunder shall terminate, (2) require the mandatory
surrender to the Company by selected Holders of some or all of the outstanding
Options held by such Holders (irrespective of whether such Options are then
exercisable under the provisions of the Plan) as of a date, before or after
such Change of Control, specified by the Committee, in which event the
Committee shall thereupon cancel such Options and the Company shall pay to each
Holder an amount of cash per share equal to the excess, if any, of the Change
of Control Value of the shares subject to such Option over the exercise
price(s) under such Options for such shares, or (3) provide that thereafter
upon any exercise of an Option theretofore, granted the Holder shall be
entitled to purchase under such Option, in lieu of the number of shares of
Stock then covered by such Option, the number and class of shares of stock or
other securities or property (including, without limitation, cash) to which the
Holder would have been entitled pursuant to the terms of the agreement of
merger, consolidation or sale of assets and dissolution if, immediately prior
to such merger, consolidation or sale of assets and dissolution the Holder has
been the holder of record of the number of shares of Stock then covered by such
Option. The provisions contained in this paragraph shall not terminate any

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<PAGE> 36
rights of the Holder to further payments pursuant to any other agreement with
the Company following a Change of Control.

(d) In the event of changes in the outstanding Stock by reason of
recapitalization, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the date
of the grant of any Award and not otherwise provided for by this Paragraph XII,
any outstanding Awards and any agreements evidencing such Awards shall be
subject to adjustment by the Committee at its reasonable discretion as to the
number and price of shares of Stock or other consideration subject to such
Awards. In the event of any such change in the outstanding Stock, the
aggregate number of shares available under the Plan may be appropriately
adjusted by the Committee, whose determination shall be reasonable and
conclusive.

(e) The existence of the Plan and the Awards granted hereunder
shall not affect in any way the right or power of the Board or the stockholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of debt or
equity securities ahead of or affecting Stock or the rights thereof, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.

(f) Any adjustment provided for in Subparagraphs (a), (b), (c) or
(d) above shall be subject to any required stockholder action.

(g) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares
of stock of any class, for cash, property, labor or services, upon direct sale,
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares of obligations of the Company convertible into such shares
or other securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Stock subject to Awards theretofore granted or the purchase
price per share, if applicable.

XIII. AMENDMENT AND TERMINATION OF THE PLAN

The Board, in its discretion, may at any time or times amend,
suspend or terminate the Plan; provided, however, such action shall be subject
to the approval of the stockholders of the Company where stockholder approval
(i) is required by applicable law or (ii) the Board determines (A) such
approval is necessary to comply with any requirements of any securities
exchange on which the stock is listed or (B) such approval is desired for any
other reason; provided, further, however, that no amendment, suspension or
termination of the Plan may, without the consent of the holder of an Award,
terminate such Award or adversely affect such person's rights in any material
respect.

XIV. MISCELLANEOUS

(a) No Right to An Award. Neither the adoption of the Plan by the
Company nor any action of the Board or the Committee shall be deemed to give an
employee any right to be granted an Award to purchase Stock, a right to a Stock
Appreciation Right, a Restricted Stock Award, a Performance Award or a Phantom
Stock Award or any of the rights hereunder except as may be evidenced by an
Award or by an Option Agreement, Stock Appreciation Rights Agreement,
Restricted Stock Agreement, Performance Award Agreement or Phantom Stock Award
Agreement on behalf of the Company, and then only to the extent and on the
terms and conditions expressly set forth therein. The Plan shall be unfunded.
The Company shall not be required to establish any special or separate fund or
to make any other segregation of funds or assets to assure the payment of any
Award.

(b) Employees' Rights Unsecured. The right of an employee to
receive Stock, cash or any other payment under this Plan shall be an unsecured
claim against the general assets of the Company. The Company may, but shall
not be obligated to, acquire shares of Stock from time to time in anticipation
of its obligations under this Plan, but a Participant shall have no right in or
against any shares of Stock so acquired. All Stock shall constitute the
general assets of the Company and may be disposed of by the Company at such
time and for such purposes as it deems appropriate.

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<PAGE> 37
(c) Agreement Controls. No discretionary action by the Committee
as set forth herein shall amend or supersede the express terms of any
Agreement.

(d) No Employment Rights Conferred. Nothing contained in the Plan
shall (i) confer upon any employee any right with respect to continuation of
employment with any Employer or (ii) interfere in any way with the right of any
Employer to terminate an employee's employment at any time.

(e) Other Laws; Withholding. The Company shall not be obligated
to issue any Stock pursuant to any Award granted under the Plan at any time
when the shares covered by such Award have not been registered under the
Securities Act of 1933 and such other state and federal laws, rules or
regulations as the Company or the Committee deems applicable and, in the
opinion of legal counsel for the Company, there is no exemption from the
registration requirements of such laws, rules or regulations available for the
issuance and sale of such shares. Unless the Awards and Stock covered by this
Plan have been registered under the Securities Act of 1933, or the Company has
determined that such registration is unnecessary, each Holder exercising an
Award under this Plan may be required by the Company to give representation in
writing that such Holder is acquiring such shares for his or her own account
for investment and not with a view to, or for sale in connection with, the
distribution of any part thereof. No fractional shares of Stock shall be
delivered, nor shall any cash in lieu of fractional shares be paid. The
Company shall have the right to deduct in connection with all Awards any taxes
required by law to be withheld and to require any payments required to enable
it to satisfy its withholding obligations.

(f) No Restriction on Corporate Action. Nothing contained in the
Plan shall be construed to prevent the Company, an Affiliate or any Subsidiary
from taking any corporate action which is deemed by the Company, an Affiliate
or any Subsidiary to be appropriate or in its best interest, whether or not
such action would have an adverse effect on the Plan or any Award made under
the Plan. No employee, beneficiary or other person shall have any claim
against the Company, an Affiliate or any Subsidiary as a result of any such
action.

(g) Restrictions on Transfer. Except as provided below, an Award
shall not be transferable otherwise than by will or the laws of descent and
distribution and shall be exercisable during the Holder's lifetime only by such
Holder or the Holder's guardian or legal representative. However, the
Committee may, in its discretion, provide in an option agreement (other than
with respect to an Incentive Stock Option) that the option right granted to the
individual may be transferred (in whole or in part and shall be subject to such
terms and conditions as the Committee may impose thereon, including, without
limitation, the approval by the Company of the form of transfer agreement) by
the individual to (i) the spouse, children or grandchildren of the individual
("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit
of the Immediate Family Members and, if applicable, the individual, (iii) a
partnership in which such Immediate Family Members and, if applicable, the
individual are the only partners, or (iv) any other person or entity otherwise
permitted by the Committee. Following transfer, any such transferred option
rights shall continue to be subject to the same terms and conditions as were
applicable to the option rights immediately prior to transfer; provided,
however, that no transferred option rights shall be exercisable unless
arrangements satisfactory to the Company have been made to satisfy any tax
withholding obligations the Company may have with respect to the option rights.

(h) Beneficiary Designation. Each Holder may name, from time to
time, any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case of his
or her death before he or she receives any or all of such benefit. Each
designation will revoke all prior designations by the same Holder, shall be in
a form prescribed by the Committee, and will be effective only when filed by
the Holder in writing with the Committee during his lifetime. In the absence
of any such designation, benefits remaining unpaid at the Holder's death shall
be paid to his estate.

(i) Rule 16b-3. It is intended that the Plan and any grant of an
Award made to a person subject to Section 16 of the 1934 Act meet all of the
requirements of Rule 16b-3. If any provision of the Plan or any such Award
would disqualify the Plan or such Award under, or would otherwise not comply
with, Rule 16b-3, such provision or Award shall be construed or deemed amended
to conform to Rule 16b-3.

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<PAGE> 38
(j) Section 162(m). If the Plan is subject to Section 162(m) of
the Code, it is intended that the Plan comply fully with and meet all the
requirements of Section 162(m) of the Code so that Options and Stock
Appreciation Rights granted hereunder and, if determined by the Committee,
Restricted Stock Awards, shall constitute "performance- based" compensation
within the meaning of such section. If any provision of the Plan would
disqualify the Plan or would not otherwise permit the Plan to comply with
Section 162(m) as so intended, such provision shall be construed or deemed
amended to conform to the requirements or provisions of Section 162(m);
provided that no such construction or amendment shall have an adverse effect on
the economic value to a Holder of any Award previously granted hereunder.

(k) Indemnification. Each person who is or shall have been a
member of the Committee or of the Board and any employee delegated authority
hereunder shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him in connection with or resulting from any claim,
action, suit, or proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof, with
the Company's approval, or paid by him in satisfaction of any judgment in any
such action, suit, or proceeding against him, provided he shall give the
Company prompt written notice of any such action, suit or proceeding, and an
opportunity, at its own expense, to handle, defend and/or settle the same
before he undertakes to handle, defend and/or settle it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights
or indemnification to which such persons may be entitled under the Company's
Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.

(l) Governing Law. This Plan shall be construed in accordance
with the laws of the State of Delaware and applicable federal law.

IN WITNESS WHEREOF, Sterling Chemicals Holdings, Inc. has caused this
document to be duly executed in its name and behalf by its proper officer
thereunto duly authorized, effective for all purposes as of the date of the
adoption of the Plan by the Board, being April 23, 1997.

STERLING CHEMICALS HOLDINGS, INC.

By: /s/ FRANK P. DIASSI
-----------------------------------
Frank P. Diassi
Chairman of the Board of Directors

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<PAGE> 39

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STERLING CHEMICALS HOLDINGS, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JANUARY 28, 1998

The undersigned hereby constitutes and appoints Frank P. Diassi,
Robert W. Roten and Hunter Nelson, and each of them, attorneys and
P agents, with full power of substitution to vote as proxy all the
shares of Common Stock standing in the name of the undersigned at the
R Annual Meeting of Stockholders of Sterling Chemicals Holdings, Inc. to
be held at Texas Commerce Center Auditorium, 601 Travis Street,
O Houston, Texas at 9:00 A.M., Houston time, on Wednesday, January 28,
1998, and at any adjournments thereof, in accordance with the
X instructions noted below, and with discretionary authority with
respect to such other matters as may properly come before said meeting
Y or any adjournments thereof. Receipt of notice of the meeting and
Proxy Statement dated December 22, 1997 is hereby acknowledged.

The undersigned hereby revokes any proxies heretofore given and
directs said attorneys to act or vote as follows:

ELECTION OF DIRECTORS NOMINEES: Frank P. Diassi, Frank J. Hevrdejs,
Allan R. Dragone, J. Virgil Waggoner,
Hunter Nelson, John L. Garcia,
Robert W. Roten, George J. Damiris,
Rolf H. Towe.
<TABLE>
<S> <C>
1. ELECTION OF [ ] FOR all nominees listed (except
DIRECTORS as marked to the contrary below)

1. ELECTION OF [ ] WITHHOLD AUTHORITY to vote for all
DIRECTORS nominees listed
</TABLE>

FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S):

2. Proposal to ratify the appointment of Deloitte & Touche LLP as
independent auditors of the books and accounts of Sterling
Chemicals Holdings, Inc. for the year ending September 30,
1998.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. Proposal to ratify and approve the Sterling Chemicals Holdings,
Inc. Omnibus Stock Awards and Incentive Plan (the "Omnibus
Plan").

[ ] FOR [ ] AGAINST [ ] ABSTAIN

(Continued and to be signed and dated on other side)
- --------------------------------------------------------------------------------

<PAGE> 40

- --------------------------------------------------------------------------------

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE
VOTED IN ACCORDANCE WITH THE STOCKHOLDER'S APPLICATIONS HEREON. IN THE
ABSENCE OF SUCH SPECIFICATION, THE PROXY WILL BE VOTED IN FAVOR OF
EACH NOMINEE FOR DIRECTOR AND "FOR" THE PROPOSALS TO RATIFY THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AND TO RATIFY AND APPROVE THE
OMNIBUS PLAN.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

Date ___________________, 199_

Signature(s) _________________

Date ___________________, 199_

Signature(s) _________________

NOTE: Please sign as name
appears herein. Joint owners
each should sign. When
signing as attorney,
trustee, administrator,
executive, etc., please
indicate your full title as
such. If a corporation,
please sign in full
corporate name by President
or other authorized officer.
If a partnership, please
sign in partnership name by
authorized person.

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