exv10w1



 






Exhibit 10.1







Year 2006




Annual

Management Incentive

Program




USG Corporation







 









 








PURPOSE





To enhance USG Corporation’s ability to attract, motivate, reward and retain key employees of
the Corporation and its operating subsidiaries and to align management’s interests with those of
the Corporation’s stockholders by providing incentive award opportunities to managers who make a
measurable contribution to the Corporation’s business objectives.



INTRODUCTION





This Annual Management Incentive Program (the “Program”) is in effect from January 1, 2006
through December 31, 2006.



ELIGIBILITY





Individuals eligible for participation in this Program are those officers and other key
employees occupying management positions in Broadband 11 or higher. Employees who participate in
any other annual incentive program of the Corporation or any of its subsidiaries are not eligible
to participate in this Program but could be considered for special awards.



GOALS





For the 2006 Annual Management Incentive Program, Consolidated Net Earnings and consolidated,
subsidiary and profit center Strategic Focus Targets will be determined by the Compensation and
Organization Committee of the USG Board of Directors (the “Committee”) after considering
recommendations submitted from management of USG Corporation and the Operating Subsidiaries.



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AWARD VALUES



For the Annual Management Incentive Program, position target incentive values are based on
level of accountability and are expressed as a percent of approved annualized salary. Resulting
award opportunities represent a fully competitive incentive opportunity for 100% (target)
achievement of goals:




	 	 	 	 	 	 	 
	 	 	Position Title or	 	 
	 	 	Proposed Salary Reference Point	 	Position Target Incentive
	•

	 	Chairman & CEO, USG Corporation
	 	 	90	%
	 
	 	 	 	 	 	 
	•

	 	Executive Vice President & Chief Financial Officer, USG Corporation
	 	 	60	%
	•

	 	Executive Vice President, USG Corporation & President Building Systems	 	 	 	 
	•

	 	Executive Vice President Marketing & Corporate Strategy, USG
Corporation and President International	 	 	 	 
	•

	 	Executive Vice President & General Counsel, USG Corporation	 	 	 	 
	 
	 	 	 	 	 	 
	•

	 	Senior Vice President Human Resources, USG Corporation	 	 	 	 
	•

	 	Senior Vice President Communications, USG Corporation
	 	 	45	%
	 
	 	 	 	 	 	 
	•

	 	Vice President, USG Corporation & President & COO, L & W Supply Corp.
	 	 	40	%
	•

	 	Vice President & Chief Technology Officer	 	 	 	 
	•

	 	Vice President & Controller, USG Corporation	 	 	 	 
	•

	 	Vice President & Treasurer, USG Corporation	 	 	 	 
	•

	 	Vice President Research & Development, USG Corporation	 	 	 	 
	•

	 	Vice President Compensation, Benefits & Administration, USG Corporation	 	 	 	 
	•

	 	Corporate Secretary & Associate General Counsel, USG Corporation	 	 	 	 
	 
	 	 	 	 	 	 
	•

	 	Position Reference Point: $185,800 and over
	 	 	35	%
	•

	 	Position Reference Point: $170,630 — $185,799
	 	 	30	%
	•

	 	Position Reference Point: $155,570 — $170,629
	 	 	25	%
	•

	 	Position Reference Point: $139,780 — $155,569
	 	 	20	%
	•

	 	Position Reference Point: $124,480 — $139,779
	 	 	15	%
	•

	 	Position Reference Point: $109,670 — $124,479
	 	 	10	%






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AWARDS





Incentive awards for all participants in the 2006 Annual Management Incentive Program will be
reviewed and approved by the Committee. For all participants, the annual incentive award par
opportunity is the annualized salary in effect on April 1, 2006 multiplied by the applicable
position target incentive value percent.




Incentive awards for 2006 will be based on a combination of the following elements:




	I.	 	CONSOLIDATED NET EARNINGS                                                                                 50% OF INCENTIVE






Consolidated Net Earnings will be as reported on the Corporation’s year-end financial statements
with adjustments for significant non-operational charges. Such adjustments have in the past been
for Fresh Start Accounting, asbestos, restructuring charges, bankruptcy expenses and the cumulative
impact of new accounting pronouncements (goodwill impairment). For 2006, likely adjustments would
include bankruptcy expenses. For all participants, this portion of the award represents 50% of the
incentive par. This portion of the award will be paid from a pool funded by Consolidated Net
Earnings results according to the following schedule:



	 	 	 	 	 	 	 
	 

	 	$0 to $50 Million Net Earnings
	 	 	 	2.50% of this tier will fund the pool
	 

	 	$51 to $150 Million Net Earnings
	 	 	 	2.25% of this tier will fund the pool
	 

	 	$151 to $400 Million Net Earnings
	 	 	 	1.75% of this tier will fund the pool
	 

	 	$401 Million and above
	 	 	 	1.00% of this tier will fund the pool







Each tier of earnings is calculated separately and added together to determine the total pool.
This amount is then divided by the total plan par (sum of each individual participant’s Net
Earnings par, which is 50% of each participant’s total par). The factor derived from this method
is then applied to each participant’s Net Earnings par to determine the individual award for this
segment. There is no maximum award in this segment.




	II.	 	STRATEGIC FOCUS TARGETS:                                                                                50% OF INCENTIVE






Strategic Focus Targets will be measurable, verifiable and derived from the formal strategic
planning process. For 2006, Strategic Focus Targets will generally include Overhead Reduction,
Working Capital Reduction, Cost Reduction, Business Unit Operating Profit and other operational
priorities. The award adjustment factor for this segment will range from 0.5 (after achieving a
minimum threshold performance level) to 2.0 for maximum attainment. The weighting on any
individual Strategic Focus Target will be in 5% increments and not be less than 10%. The weighting
of all assigned Strategic Focus Targets will equal 50% of the individual’s total par.



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WEIGHTINGS OF PROGRAM ELEMENTS



All participants in this Program, including the fourteen most senior executives, will have the
same overall weightings, 50% on Consolidated Net Earnings and 50% on Strategic Focus Targets.




SPECIAL AWARDS



In addition to the incentive opportunity provided by this Program, a special award may be
recommended for any participant or non-participant, other than a Corporation Officer, who has made
an extraordinary contribution to the Corporation’s welfare or earnings.




GENERAL PROVISIONS





	1.	 	The Compensation and Organization Committee of the USG Board of Directors reserves the
right to adjust award amounts either up or down based on its assessment of the Corporation’s
overall performance relative to market conditions.
	 
	2.	 	The Committee shall review and approve the awards recommended for officers and other
employees who are eligible participants in the 2006 Annual Management Incentive Program. The
Committee shall submit to the Board of Directors, for their ratification, a report of the
awards for all eligible participants including corporate officers approved by the Committee in
accordance with the provisions of the Program.
	 
	3.	 	The Committee shall have full power to make the rules and regulations with respect to the
determination of achievement of goals and the distribution of awards. No awards will be made
until the Committee has certified financial achievements and applicable awards in writing.
	 
	4.	 	The judgement of the Committee in construing this Program or any provisions thereof, or in
making any decision hereunder, shall be final and conclusive and binding upon all employees of
the Corporation and its subsidiaries whether or not selected as beneficiaries hereunder, and
their heirs, executors, personal representatives and assignees.
	 
	5.	 	Nothing herein contained shall limit or affect in any manner or degree the normal and usual
powers of management, exercised by the officers and the Board of Directors or committees
thereof, to change the duties or the character of employment of any employee of the
Corporation or to remove the individual from the employment of the Corporation at any time,
all of which rights and powers are expressly reserved.
	 
	6.	 	The awards made to employees shall become a liability of the Corporation or the appropriate
subsidiary as of December 31, 2006 and all payments to be made hereunder will be made as soon
as practicable, but in any event before two and one half months after December 31, 2006, after
said awards have been approved by the Committee.




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ADMINISTRATIVE GUIDELINES





	1.	 	Award values will be based on annualized salary in effect on April 1, 2006 for each
qualifying participant. Any change in duties, dimensions or responsibilities of a current
position resulting in an increase or decrease in salary range reference point or market rate
will result in pro-rata incentive award. Respective reference points, target incentive values
or goals will be applied based on the actual number of full months of service at each
position.
	 
	2.	 	As provided by the Program, no award is to be paid to any participant who is not a regular
full-time employee, (or a part time employee as approved by the Senior Vice President Human
Resources, USG Corporation) in good standing at the end of the calendar year to which the
award applies. However, if an eligible participant with three (3) or more months of active
service in the Program year subsequently retires, becomes disabled, dies, is discharged from
the employment of the Company without cause, or is on an approved unpaid leave, the
participant (or beneficiary) may be recommended for an award which would otherwise be payable
based on goal achievement, prorated for the actual months of active service during the year.
	 
	3.	 	Employees participating in any other incentive or bonus program of the Corporation or a
Subsidiary who are transferred during the year to a position covered by the Annual Management
Incentive Program will be eligible to receive a potential award prorated for actual full
months of service in the two positions with the respective incentive program and target
incentive values to apply. For example, a Marketing Manager promoted to Director, Marketing
on August 1, will be eligible to receive a pro-rata award for seven months based on the
Marketing Manager Plan provisions and values, and for five months under the Annual Management
Incentive Program provisions and target incentive values.
	 
	4.	 	In the event of transfer of an employee from an assignment which does not qualify for
participation in any incentive or bonus plan to a position covered by the Annual Management
Incentive Program, the employee is eligible to participate in the Annual Management Incentive
Program with any potential award prorated for the actual months of service in the position
covered by the Program during the year. A minimum of three months of service in the eligible
position is required.
	 
	5.	 	Participation during the current Program year for individuals employed from outside the
Corporation is possible with any award to be prorated for actual full months of service in the
eligible position. A minimum of three full months of eligible service is required for award
consideration.
	 
	6.	 	Exceptions to established administrative guidelines can only be made by the Committee.






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