Document:

exv10w1

 

Exhibit 10.1

Year 2005

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, 2005 through December 31, 2005.

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 2005 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	 	Position Target
	Salary Reference Point
	 	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

	 	 	 	 
	

	• Vice President Human Resources, USG Corporation
	 	 	45	%
	• Vice President Communications, USG Corporation

	 	 	 	 
	

	• 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 & Technology, USG Corporation
	 	 	 	 
	• Vice President Compensation, Benefits & Administration, USG Corporation
	 	 	 	 
	• Corporate Secretary & Associate General Counsel, USG Corporation

	 	 	 	 
	

	• Position Reference Point: $177,660 and over

	 	 	35	%
	• Position Reference Point: $163,200 — $177,659

	 	 	30	%
	• Position Reference Point: $148,800 — $163,199

	 	 	25	%
	• Position Reference Point: $133,620 — $148,799

	 	 	20	%
	• Position Reference Point: $119,040 — $133,619

	 	 	15	%
	• Position Reference Point: $104,820 — $119,039

	 	 	10	%
	

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AWARDS

Incentive awards for all participants in the 2005 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, 2005 multiplied by the applicable position target incentive value
percent.

Incentive awards for 2005 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 2005, 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 2005, Strategic Focus Targets will
generally include Overhead Reduction, Working Capital Reduction, Cost
Reduction, and Business Unit Operating Profit. 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 2005
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, 2005 and all payments to
be made hereunder will be made as soon as practicable 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,
2005 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 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.

5exv10w2

 

EXHIBIT 10.2

FOURTH AMENDMENT

OF

USG CORPORATION RETIREMENT PLAN

(As Amended and Restated Effective as of January 1, 1999)

          WHEREAS, USG Corporation Retirement Plan (the “plan”) is maintained by USG
Corporation (the “company”), which plan was amended and restated on December
29, 1999, effective as of January 1, 1999; and

          WHEREAS, it now is deemed desirable and in the best interests of the
employers under the plan and their employees to further amend the plan;

          NOW, THEREFORE, pursuant to the amending power reserved to the company
under subsection 14.1 of the plan, the plan is further amended, effective as
indicated, in the following particulars:

          1. Effective January 1, 2005, by substituting the following for that
portion of subsection 4.5 of the Plan that follows subparagraph 4.5(d):

	 	“(e)	 	any SELECTBENEFITS credits realized
as a result of the exchange of vacation time or
medical plan coverage for compensation under USG
SelectBenefits; and
	 
	 	(f)	 	any payments made under USG
Corporation Key Employee Retention Plan (and any
similar or successor plan) after December 31,
2004.

 

 

Compensation paid to a participant by a USG Company or a
predecessor company for a period of service before the participant
became a participant that is designated as benefit service
pursuant to subparagraph 4.4(b) or (d) shall be considered as
compensation paid by the employers in determining the
participant’s “earnings”. Except as otherwise provided in the
next preceding sentence, any compensation paid to an employee or
participant by a USG Company that is not an employer under the
plan or by a predecessor company (or that would have been paid but
for the employee’s or participant’s salary reduction authorization
in effect under a defined contribution plan or cafeteria plan by
any such corporation) shall not be considered as “earnings” for
purposes of the plan. Any lump sum payment payable to a
participant as a “hiring bonus” or cash incentive to become
employed by a USG Company (even if such payment is contingent on
the participant remaining employed by a USG Company for a
specified period of time) shall be considered earnings for
purposes of the plan.”

          2. Effective January 1, 2004, by adding the following subparagraph 5.8(c)
to the plan:

	 	“(c)	 	The provisions of subparagraph
7.8(c) shall apply to the payment of disability
retirement income (except any portion thereof
payable in a lump sum) to the extent described
therein.”

          3. Effective as of January 1, 2004, by substituting the following for
subparagraph 7.4(c) of the plan:

	 	“(c)	 	Level Payment Option. If a participant
retires on an early retirement date and payment of
the participant’s monthly retirement income begins
on his retirement date and before the earliest date
the participant is eligible to receive Old Age
Insurance Benefits under the Social Security Act, a
larger monthly retirement income payable to the
participant until the first to occur of the date of
the participant’s death or the earliest date on
which the participant becomes eligible to apply for
and to receive Old Age Insurance Benefits under the
Social Security Act, and, where the full actuarial
equivalent of the normal form and amount of the
participant’s retirement income has not been
provided under the option, with a

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	 	 	 	continuance of a smaller amount of retirement
income benefit after the earliest date on which
the participant becomes eligible to apply for and
to receive Old Age Insurance Benefits under the
Social Security Act and until the participant’s
death.”

          4. Effective January 1, 2004, by adding the following new subparagraph
7.8(c) to the plan:

	 	“(c)	 	Retroactive Annuity Starting Date.
In accordance with rules established by the
committee and under such circumstances as the
committee may determine, a participant may elect
that his retirement benefits commence as of a
retroactive annuity starting date that is prior
to the date the participant receives the
explanation described in subparagraph 7.7(a)
above, provided (A) the participant was otherwise
entitled to commence his retirement benefits as
of such annuity starting date under the terms of
the plan, (B) the participant shall not actually
receive a distribution until at least 30 days
after the participant has received the written
explanation described above (or has waived the
30-day period), and (c) the participant’s spouse
consents to such commencement in the manner
described in Section 7.7. A participant may not
elect such a retroactive annuity starting date
with respect to any benefits that are payable in
a lump sum. If a participant elects a
retroactive annuity starting date, the amount of
the participant’s benefit payments shall be
determined as of the retroactive annuity starting
date elected by the participant, and the
participant shall receive a one-time lump sum
payment equal to the sum of the payments
attributable to the period between the
retroactive annuity starting date and the date
benefits actually commence (increased by interest
at the rate determined in Paragraph A-4 as of the
date such payment is made).”

          5. Effective July 1, 2004, by substituting the following for Paragraphs
A-5 and A-6 of Supplement A to the Plan:

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     “A-5. Other Forms.

	 	(a)	 	For purposes of determining
actuarial equivalence between forms of benefit
payment under the plan (other than calculation of
lump sum actuarially equivalent values in
accordance with paragraph A-4 and the calculation
of the level payment option actuarially
equivalent values in accordance with subparagraph
(b) below), the interest rate used under the plan
is 7 percent.
	 
	 	(b)	 	For purposes of determining
actuarial equivalence of the level payment option
under subparagraph 7.4(c), the interest rate
shall be the average of the annual rates of
interest on 30-year Treasury securities, as
announced by the Treasury Department pursuant to
Section 417(e)(3)(A)(ii)(II), for the November
prior to the calendar year in which the
participant’s benefits are to commence.

     A-6. Mortality. The mortality factors under the plan shall
be taken from the 1994 Uninsured Pensioner Mortality Table
projected to 2002 (UP94@2002) with weighted annuity factors
assuming a population of 90 percent males and 10 percent females.
Notwithstanding the above, for purposes of determining the lump
sum actuarially equivalent value and the level payment option of a
participant’s benefit, the mortality factors shall be those set
forth in the unisex table (50% male/50% female) described in
Revenue Ruling 2001-62.”

          IN WITNESS WHEREOF, the company has caused these presents to be signed by
its officer thereunto duly authorized this 4th day of November, 2004.

	 	 	 	 	 
	 	USG CORPORATION

 	 
	 	By:  	/s/ PETER K. MAITLAND
 	 
	 	 	Vice President, Compensation, 	 
	 	 	Benefits And Administration 	 
	 

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