Document:

Hexion Specialty Chemicals, Inc. 2007 Incentive Compensation Plan

 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% 
  

 1 

 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   =	  	%

  

 2 

 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. 
  

 3 

 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. 
  

 4Terms of employment for Richard L. Monty

 Exhibit 10.31 
 November 14, 2003 
 Mr. Richard L. Monty 
 3910 Woodhollow Court 
 Sugar Land, TX 77479 
 Dear
Rick, 
 We thoroughly enjoyed our recent meeting with you and hope our discussions were positive for you as well. It is a pleasure to confirm our offer for
the position of Vice President – EH&S, in Borden Chemical, Inc. (BCI). This position will be based in Columbus. 
 Your starting salary will be
$225,000 effective on the first day of employment. Your next increase would occur March 1, 2005. It is anticipated you will commence your employment on or before January 5, 2004. 
 To assist you in your transition to BCl, we are offering you a $25,000 sign-on bonus, which you are eligible to receive after 90 days of employment. 
 Based on your position and salary, as an active employee, you will be eligible to participate in the 2004 BCI
Management Incentive Plan prorated to your first month of employment. You must have joined the company by the 15th
of that month to be eligible to receive incentive for that month. The terms of this plan and eligibility for participation are reviewed annually. During 2004, the plan provides a target incentive award of 40% of your salary, based on achieving
financial objectives as well as team and individual project goals. 
 You will be given the opportunity to participate in the Borden Chemical Holdings
Management Equity Purchase Program. We anticipate that your offering will be in mid 2004. We have attractive financing arrangements through a Columbus bank, based on either a personal or home equity loan. So that you may begin participating sooner
as an owner in the company, BCI will offer you an advance of 131,250 of your Equity options with no investment required. These options will be extended to you within the first 90 days of employment. 
 You are eligible to receive up to four weeks vacation per year, prorated to your start date during your first year of employment. 
 You will also be eligible to participate in the Management perquisite program which is approved by our board annually. The program offers you a $25,000 cash payment and
other executive benefits, upon completion of the first 30 days of employment. The cash payment is intended to help toward the financing of a car, country club, or financial planning. You have the freedom to determine the best use of the perquisite
payment. This is considered income to you and therefore requires the necessary deductions. 

 We will share with you the cost of life, health care, pension and other benefit programs sponsored by BCI as in effect
from time to time. Upon enrollment, your health care and your life coverage will be in effect on the first day of your employment. We have enclosed a summary of Benefits so that you can decide which programs best fit your needs. You will complete
the appropriate enrollment documents during your New Hire Orientation Program. 
 You will be covered under the Homeowner Buyout Relocation policy, which we
will be happy to discuss with you either before or after your first day with us. In addition, we will provide 90 days of temporary housing expenses. Before initiating any action with your move you are encouraged to contact Brad Hamelin at Executive
Relocation, phone 313-963-8010. He has been retained by BCI to assist you with all phases of your move and can help you with any questions you may have. 
 Your employment is contingent upon a complete reference check and successfully passing a drug screen. Please complete and return the Employment Application and authorization to obtain background information as soon as possible to enable us
to initiate the background check. 
 As part of the consideration for initial employment, you are required to execute a Security and Invention, Ethics,
Conflicts of Interest and Non-Compete Agreement. A copy of this agreement along with our Code of Business Ethics is also enclosed. 
 We are genuinely
excited about you joining Borden Chemical. I believe your personal leadership and experience will bring many benefits to both the business and EH&S team. This letter confirms our discussions concerning your offer package. You acknowledge that
there are no other terms outstanding. 
 Please acknowledge receipt and acceptance of this offer by signing and dating, and then returning the original of
this letter to me. 
 If you have questions please feel free to contact me in the office or at home. 
  

	
	Sincerely,
	
	 /s/ Craig O. Morrison

	Craig O. Morrison
	President and CEO

  

							
	Offer accepted:	 	 /s/ Richard L. Monty
	 	Date: 13 Jan. 2004
		 	 Rick Monty

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