STERLING CHEMICALS HOLDINGS INC /TX/
SEVERANCE AGREEMENT - PETER W. DE LEEUW
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>21
<FILENAME>h82651ex10-18.txt
<DESCRIPTION>SEVERANCE AGREEMENT - PETER W. DE LEEUW
<TEXT>

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                                                                   EXHIBIT 10.18


                               SEVERANCE AGREEMENT


                  This Severance Agreement (this "Agreement") is entered into as
of May 1, 2000 by and between Peter W. De Leeuw ("Employee") and Sterling
Chemicals Holdings, Inc. ("Holdings") and Sterling Chemicals, Inc. ("Chemicals"
and, together with Holdings, the "Company").

                  WHEREAS, the Company and Employee entered into an Employment
Agreement dated as of March 16, 1998 (the "Employment Agreement");

                  WHEREAS, Employee has announced his decision to retire from
the Company effective May 8, 2000 (the "Retirement Date"); and

                  WHEREAS, the Company and Employee are entering into this
Agreement primarily to set forth their mutual agreement as to the payments and
other benefits to be paid or provided to Employee in connection with or arising
out of the termination of his employment with the Company.

                  NOW, THEREFORE, for and in consideration of the premises and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby acknowledge, represent, warrant,
covenant and agree as follows:

                                    ARTICLE I

                                   Termination

                  Section 1.1 Termination of Employment. (a) On the Effective
Date, Employee's employment with the Company shall automatically terminate for
all purposes as of the Retirement Date. As used in this Agreement, "Effective
Date" means the date on which this Agreement becomes effective in accordance
with Section 5.5 below.

                  (b) Employee waives all rights to recall, reinstatement,
employment and reemployment with the Company and acknowledges and agrees that
the Company is not obligated or bound in any manner to provide employment to, or
otherwise engage or utilize the services of, Employee. Employee further agrees
not to apply for employment with Holdings, Chemicals or their direct and
indirect subsidiaries (collectively, the "Constituent Companies").

                  Section 1.2 Resignation as Director. Consistent with Section
4.05 of the Employment Agreement, Employee resigns as a director of all
Constituent Companies, effective as of the Retirement Date.




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                                   ARTICLE II

                                    Benefits

                  Section 2.1 Base Salary. Promptly after the Retirement Date,
but subject to all the provisions of this Agreement, the Company shall pay to
Employee a lump sum amount for all unpaid base salary earned by Employee as of
May 12, 2000.

                  Section 2.2 Severance Payment. As soon as practicable after
the Effective Date, but subject to all the provisions of this Agreement, the
Company agrees to pay to Employee a lump sum severance payment in the amount of
$1,235,000. Employee acknowledges and agrees that the severance payment provided
for in this Section 2.2 is in lieu of, and not in addition to, any severance
payment, separation payment, termination payment or other similar payment
payable to Employee under any contract or agreement (including, without
limitation, the Employment Agreement) or under any employee benefit plan
(including, without limitation, the Company's Key Employee Protection Plan),
program or practice of the Company.

                  Section 2.3 Bonus. Subject to all the provisions of this
Agreement, the Company agrees to pay to Employee a bonus in the prorated amount
of $341,250 (the "Employee Bonus"), such payment to be made when bonuses for
fiscal year 2000 are paid to salaried employees generally under the Company's
incentive compensation plan. The amount of the Employee Bonus was calculated on
the assumption that the Company will generate at least $150,000,000 of EBITDA
during fiscal 2000. In the event actual EBITDA for fiscal 2000 is less than
$150,000,000, then the amount of the Employee Bonus will be appropriately
reduced in accordance with the Company's incentive compensation plan, with the
amount of such reduction being calculated by the Company's Human Resources
Department. Employee acknowledges and agrees that the Employee Bonus is in lieu
of, and not in addition to, any bonus or other incentive compensation payable to
Employee under any contract or agreement (including, without limitation, the
Employment Agreement) or under any employee benefit plan (including, without
limitation, the Company's incentive compensation plan), program or practice of
the Company.

                  Section 2.4 Accrued Vacation. As soon as practicable after the
Effective Date, but subject to all the provisions of this Agreement, the Company
shall pay to Employee a lump sum payment in the amount of $20,837.50,
representing full and complete payment for all unused vacation time earned and
accrued by Employee as of the Retirement Date.

                  Section 2.5 Business Expenses. The Company ratifies and
confirms in all respects its obligation under Section 3.08 of the Employment
Agreement to reimburse Employee for business expenses. Employee understands and
agrees that the Company is not obligated to reimburse Employee for any expenses
incurred after May 12, 2000.


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                  Section 2.6 Stock Options, etc. (a) Employee acknowledges and
agrees as follows:

                  (i) Employee does not own or hold any options, warrants,
         calls, subscriptions or other rights of any nature to acquire any
         shares of capital stock or other securities of Holdings or any other
         Constituent Company, except that (A) Employee holds options to purchase
         125,000 shares of Holdings' common stock (the "Employee Options"), all
         of which were granted to Employee pursuant to Holdings' Omnibus Stock
         Awards and Incentive Plan and (B) as a participant in Holdings'
         Employee Stock Ownership Plan, Employee is the beneficial owner of a
         portion of the shares of Holdings' common stock currently held in such
         Plan;

                  (ii) Employee does not own or hold any phantom stock, stock
         appreciation right or any similar rights with respect to Holdings or
         any other Constituent Company; and

                  (iii) none of the Constituent Companies is obligated to
         repurchase, redeem or otherwise acquire any shares of capital stock or
         other securities owned or held by Employee.

                  (b) Subject to Sections 5.3 and 5.5 below, the Company agrees
that all Employee Options shall automatically vest in full on the Effective Date
and shall be exercisable at any time prior to March 16, 2008.

                  Section 2.7 Restricted Stock. Pursuant to Section 3.03 of the
Employment Agreement, the Company granted to Employee 10,000 shares of Holdings'
common stock contingent upon future vesting as therein provided. Subject to
Sections 5.3 and 5.5 below, the Company agrees that all of such shares shall
automatically vest in full on the Effective Date and that after the Effective
Date none of such shares shall be subject to the provisions or restrictions of
Holdings' Stockholders Agreement dated as of August 21, 1996, as heretofore or
hereafter amended.

                  Section 2.8 Tax Withholding. Each payment to Employee under
this Agreement will be subject to withholding for federal income and FICA taxes
and other elected deductions.

                                   ARTICLE III

                                 Mutual Releases

                  Section 3.1 Release by Employee. (a) Employee, on behalf of
himself and his heirs, beneficiaries and personal representatives and assigns,
knowingly and voluntarily releases, acquits and forever discharges the Company
Parties (defined below) of and from any and all claims, charges, complaints,
obligations, liabilities, promises, agreements, contracts, damages, actions,
causes of action, suits and accrued benefits of every kind and nature and
whether known or unknown, both at law (whether common law, statutory or
otherwise) and in equity, arising from or


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in any way connected with or related to Employee's employment with the Company
or the termination of Employee's employment with the Company or any of the
events or circumstances leading to, surrounding or resulting in such
termination. Employee acknowledges and agrees that the foregoing is a full and
complete release which covers, without limitation, any and all:

                  (i) claims, charges, complaints, obligations, liabilities,
         damages, actions, causes of action and suits based, in whole or in
         part, on wrongful termination, discrimination, breach of contract,
         retaliatory discharge, discharge in violation of public policy,
         intentional infliction of emotional distress, negligent infliction of
         emotional distress, defamation, fraud, invasion of privacy or violation
         of any federal, state or local law, including, but not limited to,
         Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
         Section 2000e et seq., the Equal Pay Act, 29 U.S.C. Section 206, the
         Employee Retirement Income Security Act of 1974, 29 U.S.C. Section 1001
         et seq., the Americans with Disabilities Act, 42 U.S.C. Section 12101
         et seq., the Fair Labor Standards Act, as amended, 29 U.S.C. Section
         215(a)(3), the Age Discrimination in Employment Act of 1967, as
         amended, 29 U.S.C. Section 621 et seq., the Family and Medical Leave
         Act, 29 U.S.C. Section 2601 et seq., the Worker Adjustment and
         Retraining Notification Act, 29 U.S.C. Section 201 et seq., the
         Occupational Safety and Health Act, 29 U.S.C. Section 660(c), the Texas
         Commission on Human Rights Act, Texas Labor Code Section 21.001, et.
         seq., the Texas Workers' Compensation Act, Texas Labor Code Sections
         451.001, Texas Payday Law, Title II, Chapter 61 and Texas Labor Code;
         and

                  (ii) claims for severance pay, bonuses or benefits under any
         compensation or employee benefit plan, program, policy, contract or
         other arrangement of the Company, but excluding (A) any severance pay,
         bonus or benefits which Employee is entitled to receive under Article
         II of this Agreement and (B) any benefits which Employee is entitled to
         receive under any Company plan that is a qualified plan under IRC
         Section 401(a), such as the Company's Salaried Employees' Pension Plan,
         Holdings' Employee Stock Ownership Plan and 401(k) Plan, or is a group
         health plan subject to the Consolidated Omnibus Recertification Act of
         1985, as amended, to the extent Employee properly elects and pays for
         continuation coverage under such Act.

Subject to Section 5.5 below, the foregoing release is unconditional and
irrevocable.

                  (b) As used herein, "Company Parties" means the Constituent
Companies and their respective former, present and future directors, officers,
employees, agents and stockholders and all persons acting by, through or in
concert with any of them.

                  Section 3.2 Release by Company. The Company, on behalf of
itself and its successors and assigns, knowingly and voluntarily releases,
acquits and forever discharges Employee of and from all claims, charges,
complaints, obligations, liabilities, promises, agreements, contracts, damages,
actions, causes of action and suits of every kind and nature and whether known
or unknown, both at law and in equity, arising from or in any way connected with
or related to Employee's employment with the Company or the termination of
Employee's employment with the


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Company, including, but not limited to, claims, charges, complaints,
obligations, liabilities, damages, actions, causes of action and suits based, in
whole or in part, on breach of contract. Subject to Section 5.5 below, the
foregoing release is unconditional and irrevocable.

                                   ARTICLE IV

                                Certain Covenants

                  Section 4.1 Non-Competition. Prior to the first anniversary of
the Retirement Date, Employee will not own an interest in, manage, operate,
join, control, lend money to or render financial or other assistance to or
participate or be connected with, as an officer, employee, partner, stockholder,
consultant or otherwise, any individual, corporation, partnership or other
business organization that competes with Holdings or any other Constituent
Company in the manufacture, marketing or sale of styrene monomer, acrylonitrile
or sodium chlorate; provided, however, that the foregoing restriction will not
preclude Employee from acquiring or holding up to 5% of the voting securities of
any corporation that are listed on a national securities exchange. Employee
acknowledges and agrees that the foregoing restriction is fair and reasonable in
all respects and is reasonably required for the protection of the Company.
Employee understands that the foregoing restriction may limit his ability to
engage in a business similar to the Company's business, but Employee
acknowledges that he will receive sufficiently high remuneration and benefits
from the Company hereunder to justify such restriction. If Employee delivers to
the Company a written request that the Company waive compliance with the
foregoing restriction as to a particular activity which Employee desires to
engage in, the Company agrees to consider such request in good faith and further
agrees not to unreasonably refuse such request. For this purpose, a refusal by
the Company of a request relating to any particular activity will not be deemed
unreasonable if such activity could have a detrimental or prejudicial effect on
the Company or any other Constituent Company. Nothing in this Section 4.1 shall
prohibit Employee from consulting with or serving as a director of any entity
whose only business is providing a neutral electronic marketplace (i.e., an
online business-to-business exchange) for independent sellers and buyers of
chemicals, plastics and rubbers.

                  Section 4.2 Confidentiality. (a) Employee ratifies and
confirms in all respects the covenants and agreements set forth in Article V of
the Employment Agreement, which provisions are hereby incorporated into this
Agreement as if set forth in their entirety. Employee acknowledges and agrees
that such covenants and agreement shall survive the termination of Employee's
employment with the Company.

                  (b) Each party agrees that the terms and conditions of this
Agreement, including without limitation the amount of money and other
consideration payable under this Agreement, shall not be revealed or disclosed
by such party to any other person or entity whatsoever except (i) that each
party may make such disclosures as are required by law or legal process, (ii)
that Employee may make disclosures to his family, accountants and legal, tax or
financial advisors, (iii) that the Company may make disclosures to its
directors, accountants and legal, tax or financial advisors and (iv) that the
Company may make disclosures to its employees on a need-to-know basis. The


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foregoing restriction shall not apply to any information about this Agreement
that is publicly known, including, without limitation, information contained in
the Company's public filings with the Securities and Exchange Commission.

                  Section 4.3 Non-disparagement. (a) Subject to Section 5.5
below, the Company agrees that it will not make any statements to third parties
which are intended to disparage, discredit or injure the reputation of Employee.

                  (b) Subject to Section 5.5 below, Employee agrees that he will
not make any statements to third parties which are intended to disparage,
discredit or injure the reputation of the Company or any of the other Company
Parties. Employee agrees that he will not do anything that would in any way tend
to harm the Company's good will and relationships with customers, suppliers and
others having business dealings with the Company.

                  (c) Nothing in this Section 4.3 shall obligate either party to
commit perjury or violate any law or court order.

                  Section 4.4 Return of Company Property, etc. Employee agrees
to promptly turn over to the Company all files, memoranda, records, documents,
credit cards, parking cards and other personal property of any Constituent
Company in the possession or under the control of Employee. Employee understands
and agrees that Employee is no longer authorized to incur any expenses,
obligations or liabilities or otherwise act in the name or on behalf of any
Constituent Company.

                  Section 4.5 Cooperation. Employee agrees that, if requested by
the Company, Employee will be reasonably available to, and will cooperate in all
reasonable respects with, the Company and the other Constituent Companies and
their respective counsel in connection with any litigation, proceeding or
investigation (administrative, civil or criminal). It is understood and agreed
that Employee shall not be required to devote more than one day of his time
pursuant to any particular request by the Company under this Section 4.5 unless
the parties shall have mutually agreed upon the amount of reasonable
compensation to be paid to Employee therefor. Upon written request accompanied
by appropriate documentation, the Company agrees to reimburse Employee for any
reasonable expenses incurred by Employee in connection with any actions taken by
Employee pursuant to this Section 4.5.


                                    ARTICLE V

                                  Miscellaneous

                  Section 5.1 Additional Representations, Warranties, etc. of
Employee. (a) Employee represents and warrants that he has not filed any
complaints, charges or lawsuits against any Company Party with any governmental
agency or in any court.


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                  (b) Employee acknowledges and agrees that the execution,
delivery and performance of this Agreement by the Company shall not to be
construed as an admission of liability of any kind on the part of, or as
evidence of unlawful or improper conduct of any kind by, the Company or any
other Company Party, all such liability and conduct being expressly denied.

                  (c) Employee voluntarily accepts the payments and other
benefits described in Article II hereof as sufficient payment for the release
contained in Section 3.1 hereof and the other representations, warranties and
agreements of Employee set forth in this Agreement. Employee acknowledges and
agrees that no promises, commitments, statements or representations (oral or
written) have been made to Employee by or on behalf of the Company or any other
Company Party which are contrary to the terms of this Agreement.

                  (d) Employee understands and agrees that the release contained
in Section 3.1 above is a full, complete and final release of the Company and
all other Company Parties. Employee represents and warrants that Employee has
completely read this Agreement and fully understands its terms, contents,
conditions and effects.

                  (e) Employee acknowledges that Employee has been represented
in connection with this Agreement by the law firm of Glickman & Hughes, his
attorneys of choice.

                  (f) Employee represents and warrants that Employee is not
presently affected by any disability which would prevent Employee from knowingly
and voluntarily signing this Agreement or granting the release set forth in
Section 3.1 above. Employee represents and warrants that the representations,
warranties, releases and agreements made by Employee in this Agreement are made
of his own free will and accord and were not made under duress, coercion or
undue influence and that Employee does not consider himself to be in a disparate
bargaining position relative to the Company with respect to the matters covered
by this Agreement.

                  (g) Employee expressly represents and warrants that Employee
has completely read this Agreement prior to executing it, has had an opportunity
to review it with Employee's counsel, has been offered twenty-one days within
which to consider this Agreement and to understand its terms, contents,
conditions and effects and has entered into this Agreement knowingly and
voluntarily.

                  Section 5.2 Entire Agreement. This Agreement constitutes the
entire understanding and agreement between the parties with respect to the
subject matter hereof and supersedes all prior contracts and agreements relating
to such matter, whether oral or written, provided, however, that, (i) the
Indemnity Agreement between the Company and Employee dated as of March 16, 1998
shall remain in full force and effect in accordance with its terms and (ii) to
the extent not inconsistent with or contrary to the terms of this Agreement,
Articles V and VI of the Employment Agreement shall remain in full force and
effect in accordance with its terms.


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                  Section 5.3 Dispute Resolution; Remedies. (a) In the event a
dispute shall arise between the parties as to whether the provisions of this
Agreement have been complied with, the parties agree, subject to paragraphs (b)
and (c) below, to resolve such dispute in accordance with the provisions of
Article VI of the Employment Agreement, which provisions are hereby incorporated
in this Agreement as if set forth in their entirety. In the event a dispute
under this Agreement is resolved by mediation or arbitration in accordance with
this paragraph (a), the non-prevailing party shall be responsible for the legal
fees and expenses incurred by the prevailing party in connection with such
mediation or arbitration.

                  (b) Employee acknowledges and agrees that a breach of any of
the covenants contained in Article IV hereof may result in material irreparable
injury to the Company for which there is no adquate remedy at law, that it will
not be possible to measure damages for such injuries precisely and that, in the
event of such a breach, the Company shall be entitled to obtain a temporary
restraining order and/or a preliminary or permanent injunction restraining
Employee from engaging in activities prohibited by such covenants or such other
relief as may be required or appropriate to specifically enforce any of such
covenants. Employee submits to the in personam jurisdiction before each and
every court in Harris County, Texas for that purpose.

                  (c) The Company acknowledges and agrees that a breach of
Section 4.3(a) hereof may result in material irreparable injury to Employee for
which there is no adquate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of such a breach,
Employee shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining the Company from engaging in
activities prohibited by Section 4.3(a) or such other relief as may be required
or appropriate to specifically enforce Section 4.3(a). The Company submits to
the in personam jurisdiction before each and every court in Harris County, Texas
for that purpose.

                  (d) If Employee breaches any of his obligations under this
Agreement, the Company shall be entitled, by giving prior written notice to
Employee, to (i) rescind and revoke its obligation to pay the bonus described in
Section 2.3 hereof, (ii) reduce the term of the Employee Stock Options so that
they may not be exercised after the first anniversary of the Retirement Date
and/or (iii) cause the shares described in Section 2.7 hereof to be subject to
the provisions Stockholders Agreement referred to therein to the same extent as
if this Agreement had not been entered into. Each notice given by the Company
pursuant to this paragraph (d) shall describe, in reasonable detail, the breach
of this Agreement by Employee which is the basis for such notice. Any dispute
under this paragraph (d) shall be resolved as provided in paragraph (a) of this
Section 5.3.

                  (e) Subject to paragraph (a) above, no right, power or remedy
granted under this Agreement is intended to be exclusive, but each shall be
cumulative and in addition to any and all other rights, powers and remedies
referred to in this Agreement or otherwise available at law or in equity.


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                  Section 5.4 Governing Law. THE VALIDITY, INTERPRETATION,
CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF TEXAS WITHOUT REGARD TO ITS CONFLICT OF LAWS PRINCIPLES.

                  Section 5.5 Employee's Right of Revocation. Employee
understands that Employee has until 4:00 p.m. on May 30, 2000 within which to
consider this Agreement and that this Agreement is revocable by Employee for a
period of seven days following the execution of this Agreement and, if not so
revoked, this Agreement will become effective and enforceable. For the
revocation to be effective, written notice of revocation must be delivered to
Robert O. McAlister, Vice President, Human Resources and Administration,
Sterling Chemicals, Inc., 1200 Smith Street, Suite 1900, Houston, TX, 77002, no
later than the close of business on the seventh day after Employee has signed
this Agreement. If Employee revokes this Agreement as aforesaid, this Agreement
shall automatically terminate and cease to be of any force or effect.

                  Section 5.6 Amendments and Waivers. No provision of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by the parties. The failure of
the Company or Employee to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver thereof or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other terms of the Agreement.

                  Section 5.7 Severability. The invalidity, illegality or
unenforceability of any provision of this Agreement shall not affect the
validity, legality or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.

                  Section 5.8 Counterparts. This Agreement may be signed in any
number of identical counterparts, each of which shall be deemed an original for
all purposes.

                  Section 5.9 Interpretation. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
The words "herein", "hereof" and "hereunder" and words of similar import refer
to this Agreement as a whole and not to any particular Article, Section or other
subdivision. No provision of this Agreement shall be construed against either
party solely because that party (or its counsel) drafted such provision.

                  Section 5.10 Successors and Assigns. This Agreement shall be
binding upon and enforceable against the Company and its successors and assigns.
Each other Company Party is a beneficiary of this Agreement and may enforce this
Agreement the same as if such Company Party were a party thereto. This Agreement
shall be binding upon and enforceable against Employee and his heirs,
beneficiaries, personal representatives and assigns.

                  Section 5.11 Further Assurances. Each party agrees, from time
to time, to do and perform any and all acts and to execute any and all further
instruments required or reasonably requested by the other party more fully to
effect and carry out the intent and purposes of this Agreement.


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                  IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.

                               EMPLOYEE



                               -----------------------------------------
                               Peter W. De Leeuw

                               Date: May ___, 2000

                               STERLING CHEMICALS HOLDINGS, INC.


                               By:
                                  --------------------------------------
                                  Frank P. Diassi, Chairman of the Board



                               STERLING CHEMICALS, INC.


                               By:
                                  --------------------------------------
                                  Frank P. Diassi, Chairman of the Board




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