UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT
REPORT
PURSUANT TO
SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date
of Earliest Event Reported)
May 29, 2008 (May 27, 2008)
STERLING
CHEMICALS, INC.
(Exact Name of Registrant as Specified
in Charter)
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|
|
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Delaware
(State or other
jurisdiction of
incorporation) |
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000-50132
(Commission File No.) |
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76-0502785
(IRS
Employer
Identification
No.) |
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333 Clay Street,
Suite 3600
Houston, Texas
(Address of principal executive
offices) |
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77002-4109
(Zip Code) |
(713) 650-3700
(Registrant’s telephone number,
including area code)
Not
Applicable
(Former names or former address, if changed since last report)
Check the appropriate
box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see
General Instruction A.2. below):
o Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 1.01.
Entry into a Material Definitive Agreement.
On May 27, 2008, Sterling
Chemicals, Inc. (“Sterling”) entered into a Third Amended and
Restated Plasticizers Production Agreement (the “Agreement”) with
BASF Corporation (“BASF”), with an effective date of April 1, 2008.
Since 1986, Sterling has provided all
of its plasticizers production exclusively to BASF pursuant to a Plasticizers
Production Agreement, which as been amended several times (most recently
pursuant to the Agreement). Under the Agreement, BASF provides Sterling with
most of the required raw materials, markets the plasticizers Sterling produces
and is obligated to make certain fixed quarterly payments to Sterling and to
reimburse Sterling for its actual monthly production costs and capital
expenditures relating to Sterling’s plasticizers facility. The current term of
the Agreement extends to 2013, subject to early termination rights held by BASF
beginning in 2010.
The Agreement amends certain provisions
of the Second Amended and Restated Plasticizers Production Agreement between
Sterling and BASF, dated as of January 1, 2006 (the “Old
Agreement”). The Agreement was entered into in connection with BASF’s
nomination of zero pounds of phthalic anhydride (“PA”) under the
Old Agreement in response to deteriorating market conditions which were not
expected to improve over the next few years, causing the shutdown of Sterling’s
PA unit.
The Agreement relieves BASF of most of
its obligations under the Old Agreement related to Sterling’s PA manufacturing
unit. BASF’s obligations under the Old Agreement related to Sterling’s esters
manufacturing unit are unaffected by the Agreement and are continuing in
accordance with the same terms as existed under the Old Agreement. In exchange
for being relieved of its obligations related to Sterling’s PA manufacturing
unit, BASF is required to pay Sterling an aggregate amount of approximately
$3.2 million, with $3.0 million of that amount being due and payable
on or before May 31, 2008 and the balance being due and payable on or
before August 15, 2008. However, Sterling is obligated to refund 75% of
this amount if Sterling restarts its PA manufacturing unit before
January 1, 2009, 50% of this amount if Sterling restarts its PA
manufacturing unit during 2009 and 25% of this amount if Sterling restarts its
PA manufacturing unit during 2010. During the first half of 2008, BASF is also
required to pay approximately $3.7 million to Sterling for reimbursement of
certain direct fixed and variable costs associated with the shutdown and
decontamination of Sterling’s PA manufacturing unit, which amounts are not
subject to refund.
In addition, under the Agreement, the
methods for calculating (i) payments required to be made by BASF to
Sterling for achieving reductions in direct fixed and variable costs and
(ii) BASF’s right to terminate the Agreement in the event that direct fixed
and variable costs exceed a specified threshold (unless Sterling elected to cap
BASF’s reimbursement obligations), have both been modified to exclude costs
savings and direct fixed and variable costs pertaining to Sterling’s PA
manufacturing unit.
After April 1, 2008, the Agreement
also removed all restrictions or rights BASF formerly had during the term of the
Old Agreement with respect to Sterling’s use or disposition of the PA
manufacturing unit, including a limited purchase right, the right to request
capacity increases and consultation rights regarding future capital expenditures
with respect to Sterling’s PA unit.