Exhibit 10.20

Hexion Specialty Chemicals, Inc.

2007 INCENTIVE COMPENSATION PLAN (the “Plan”)

Purpose of the Plan

The purpose of the Plan is to reward associates for profitably growing the
business. The Plan is designed to link rewards with critical financial metrics
for the purposes of promoting leadership actions which are the most beneficial
to the company’s short-term and long-term value creation.

Plan Year

January 1, 2007 – December 31, 2007

Eligibility

Participation is based on each individual associate’s scope of responsibility
and contribution within the organization.

Associates must be employed in a bonus-eligible position for at least three full
months during the plan period and must be actively employed by Hexion Specialty
Chemicals, Inc. or a subsidiary company on December 31, 2007.

Eligible compensation for incentive is based on the participant’s rate of pay as
of December 31, 2007. The participant’s incentive calculation will be prorated
if a change in salary or incentive target occurs during the course of the plan
year.

Plan Performance Measures

Financial Measures:

The primary financial metric will be:

 

  •  

EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization and
excluding restructuring (as approved by the Board), gain/losses from the sale of
businesses and integration expenses (same as ‘Segment’ EBITDA)

The achievement of EBITDA growth is the critical measure on which the investment
community and future shareholders will evaluate Hexion’s performance in 2007. As
a result, the participants who belong to the global divisions are focused and
incentivized to manage the business to achieve growth in EBITDA.

EBITDA will be measured for global Hexion Specialty Chemicals and also at the
global level for each division/business unit.

Personal Objectives Measures:

Each bonus-eligible associate will also be measured on achievement of personal
performance objectives. Personal Objectives are to be established at the
beginning of the year as part of the IMPACT process. Personal Objectives must be
specific and measurable (see IMPACT materials) and cannot be redundant to
site/business unit/division/corporate EBITDA targets. At the conclusion of the
year, the associate’s manager is responsible for the evaluation of the percent
of Personal Objectives completed. A participant’s achievement of Personal
Objectives cannot exceed 100%

 

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Payment of the Personal Objectives measure is first contingent upon the
achievement of the participant’s lowest level of Financial Measures (business
unit, division or Hexion Global). This measure must meet the minimum EBITDA
payout threshold for Personal Objectives to payout. And in any case, the
Personal Objectives payout will not be higher than the EBITDA performance
percent payout for the division/business unit. For example: if a participant’s
division payout is at 98%, then the payout for 100% achievement of Personal
Objectives cannot exceed 98%.

Examples of acceptable Personal Objectives are:

 

  o To reduce imperfect inventory by 15%

  o To train 100% of site associates on new OSHA standard by October 1

Examples of unacceptable Personal Objectives are:

 

  o To reduce imperfect inventory

  o To hold safety training

Plan Incentive Targets

Each eligible participant will have a target incentive opportunity expressed as
a percent of their base salary. Targets are determined by the associate’s pay
band and by the scope and contributions to the organization.

If the maximum EBITDA performance targets are attained and the participant’s
performance against their Personal Objectives goals is evaluated to be Exceeds,
this Plan can generate an award maximum of 175% of the Target Incentive Award.

Plan Payout Structure

The structure of each participant’s incentive is determined by the individual’s
role in the organization and whether they report at a business unit level, a
divisional level or at the corporate level.

 

Reporting

relationship:

  

Global Hexion

EBITDA

  

Division

EBITDA

  

Business Unit

EBITDA

  

Personal

Objectives

Hexion   

70%

(funds Personal

Objectives)

               30% Division    20%   

50%

(funds Personal

Objectives)

         30% Business Unit          20%   

50%

(funds Personal

Objectives)

   30%

Calculation of Incentive Payments

Financial Measure:

EBITDA

 

    Actual less Minimum Threshold      EBITDA Payment Calculation:       Maximum
Less Minimum Threshold   =    %

 

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The EBITDA measure will have the following relationship between financial
performance and incentive award payout:

 

     

Minimum

EBITDA

  

Lower

Midpoint

  

Target

EBITDA

  

Upper

Midpoint

  

Maximum

EBITDA

% of EBITDA

Target

   92%    96%    100%    104%    108%

% of Financial

Award

   50%    75%    100%    137.5%    175%

For actual performance between the points above, a straight line calculation
will be made. There is no additional payment made for performance above the
maximum.

Personal Objectives Measure:

At the end of the year, the participant and the participant’s manager will meet
to discuss the participants’ performance against their Personal Objectives. The
manager will use the participant’s feedback, as well as input from peers to
determine the overall effectiveness of the participant’s performance. In
addition, leadership judgment will be applied to determine the degree to which
the participant’s efforts and initiative contributed to the Company’s overall
success. The participant may receive an incentive payment for goal performance
based on the relative individual contribution as to other participants.

When the 2007 audited financial performance results are available, the financial
award will be determined by first comparing the actual EBITDA with the plan.
When the actual results are between two of the numbers shown, the award
percentage is calculated using a proportional increase or decrease.

Basis for Award Payouts

Financial Results: Bonus payments will be based on audited and approved
financial results. No bonus payment will be made until formal results have been
approved by Hexion’s corporate officers.

Payment against the achievement of the financial measures will be as follows:

a. Payment of any financial element is contingent on its own merit.

b. If there is more than one financial measure, payment against each of the
measures will be independent of each other, for example, if Measure 1: “Business
Unit” is met it will payout regardless of whether Measure 2: “Site” is met.

c. Payment on achievement of Personal Objectives is contingent upon meeting the
financial measure for the participant’s direct reporting relationship.

Limitations: All incentive payments must be self-funded from profits generated
at the corporate, divisional or business unit level. The Compensation Committee
of the Board of Directors may elect to modify the annual EBITDA target, based on
acquisitions or divestitures which occur during the calendar year. Hexion
Specialty Chemicals has the right to amend or terminate this plan at any time.

Employment: Participants must be actively employed by Hexion Specialty
Chemicals, Inc. or a subsidiary company on December 31, 2007 and must have been
in an incentive eligible position for at least three full months during the
financial year.

 

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Performance Related Issues: Awards to participants who are subject to a
disciplinary review of performance, or are on a performance improvement plan,
need to be reviewed with the HR Divisional/Functional Leader to determine if the
associate is eligible for a partial award.

Incentive Payments: Payments are subject to applicable taxes and
garnishment/wage orders, and if the associate participates in the Hexion
Specialty Chemical retirement plans, all incentive payments are subject to
deferral and to plan provisions.

Pro-ration: A participant’s incentive payment will be prorated for any of the
following conditions:

 

 

a.

Base Salary and Incentive Group: Awards are normally based on the base salary as
of December 31st of the plan year. If an associate is promoted to a new
incentive group, prior to April 1st of the plan year, there is no pro-ration for
this promotion. The associate will be incentivized for the prior three months at
the new incentive level.

 

  b. New Hires: Awards to participants who commenced employment during the plan
year will be pro-rated on the basis of full month’s service during the year.
Employees who commence employment before the 15th of any month will be
considered to have a full month’s service for that month but must be employed
before October 1, 2007 to be eligible to receive any payout

 

 

c.

Promotions/Incentive Target Changes: Awards to participants whose base rate of
pay and/or incentive group changes after April 1st of the plan year will be
pro-rated on the basis of full month’s service at each job level during the
year. (Job changes on or before the 15th of any month will be considered as in
respect of the full month. Changes that take effect after the 15th of the month
will be counted as effective the 1st of the next month for incentive calculation
purposes.)

 

  d. Transfers: Awards to participants transferring between Divisions/Business
Units/Sites during the plan year will be pro-rated on the basis of full month’s
service in each Division/Business Unit/Site during the year. Business
performance against each applicable measure will be based on the full year
performance. The award will be funded based on the direct reporting relationship
of the associate. (Transfers on or before the 15th of any month will be
considered as in respect of the full month. Transfers that take effect after the
15th of the month will be counted as effective the 1st of the next month for
incentive calculation purposes.)

 

  e. Leaves of Absence/Disability: Approved leaves of absence for 12 weeks or
less in the plan year will not be excluded from the incentive payment, i.e. the
associate will be eligible to receive the full incentive payment. If an
associate is absent or on a leave that exceeds 12 cumulative weeks, then any
time not worked beyond the 12 weeks will be excluded for the plan year and the
associate will receive a prorated incentive.

Timing of Payments: Typically, financial results are announced in March
following the end of the Plan year and incentive payouts are made in April. In
no event shall payments be made prior to the approval of the final audited
financials results of Hexion Specialty Chemicals, Inc. by the Audit Committee of
the Board of Directors.

The Hexion Incentive Compensation Plan remains at the total discretion of the
Company. Hexion retains the right to amend or adapt the design and rules of the
plan. Local legislation will prevail where necessary.

 

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