EXHIBIT 10(n)
1997
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 strengthen
the existing mutual interest between such key employees and the Corporation's
stockholders by providing incentive award opportunities to such key employees
who discharge their accountabilities in a manner which makes a measurable
contribution to the Corporation's earnings.
INTRODUCTION
This Annual Management Incentive Program is in effect from January 1, 1997
through December 31, 1997.
ELIGIBILITY
Individuals eligible for participation in this Program are those officers and
other key employees occupying management positions in Broadband 16 or higher
(775 or more points). 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.
GOALS
For the 1997 Annual Management Incentive Program, Adjusted Net Earnings, Goal
Income and Strategic Targets for USG Corporation, Subsidiaries and Profit
Centers will be determined by the Grants and Awards Subcommittee of the
Compensation and Organization Committee of the USG Board of Directors (the
"Subcommittee") after considering recommendations submitted from USG Corporation
and Operating Subsidiaries. Except in the case of a Named Executive Officer (as
defined in the Administrative Guidelines below), Profit Center goals may be
adjusted by the Chairman of USG Corporation if business conditions or other
significant unforeseen circumstances beyond the control of the Profit Center
have a major impact on opportunity.
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. (EXCEPTION: For the transition year of 1997, the
target incentive value will be expressed as a percent of approved annualized
salary or annualized reference point, whichever is higher.) Resulting award
opportunities represent a fully competitive incentive opportunity for 100%
(target) achievement of Corporate, Operating Subsidiary and/or Profit Center
goals:
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Position Target Incentive Value
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Chairman, President & CEO - USG Corporation 65%
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Executive Vice President-Operations, USG Corporation; 60%
President & CEO, U.S. Gypsum Company;
President & CEO, USG Interiors, Inc.
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Executive Vice President International Development 55%
and Distribution, USG Corporation
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USG CORPORATION
Senior Vice President & General Counsel 50%
Senior Vice President & Chief Administrative Officer
Senior Vice President & Chief Financial Officer
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USG CORPORATION & OPERATING SUBSIDIARIES
OFFICERS AND MANAGERS
President & CEO, L&W Supply Corporation 40%
Executive Vice President, USG Interiors, Inc; President & CEO, CGC, Inc.
Executive Vice President - Operations, U.S. Gypsum Company
Executive Vice President Marketing, U.S. Gypsum Company
Executive Vice President, USG International, Ltd.
Vice President & Controller, USG Corporation;
Vice President Financial Services,
North American Gypsum and Worldwide Ceilings
Vice President Research & Technology, USG Corporation
Vice President & Treasurer, USG Corporation
Vice President Human Resources - Operations, USG Corporation
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GENERAL MANAGERS (PROFIT CENTER HEADS)
Sales of $50 Million and over 30%
Sales Under $50 Million 25%
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USG CORPORATION, OPERATING SUBSIDIARIES & PROFIT CENTERS
OFFICERS AND MANAGERS
Position Reference Point: $174,000 and over 35%
Position Reference Point: $154,005 - $173,999 30%
Position Reference Point: $125,085 - $154,004 25%
Position Reference Point: $111,600 - $125,084 20%
Position Reference Point: $ 89,400 - $111,599 15%
Position Reference Point: Below $89,400 10%
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AWARDS
Incentive awards for all participants in the 1997 Annual Management Incentive
Program will be reviewed and approved by the Subcommittee.
The total of all incentive awards paid under this program will not exceed 4.0%
of USG Corporation's 1997 consolidated goal income. In the event that awards
otherwise payable pursuant to the Annual Management Incentive Program exceed
such amount, all awards will be reduced prorata to an aggregate amount equal to
4.0%.
For all participants, the annual incentive award opportunity is the annualized
salary in effect at the beginning of the calendar year (March 1 of the calendar
year for the twenty most senior executives) multiplied by the applicable
position target incentive value percent.
Incentive awards for 1997 will be based on:
o ADJUSTED NET EARNINGS: 20% - 60% OF INCENTIVE
(net earnings plus amortization of excess reorganization value plus reorganization debt discount, net of taxes)
based on the Corporation's year-end financial statements.
o GOAL INCOME: 20% - 60% OF INCENTIVE
(net sales less cost of sales and selling and administrative expenses) based on the Corporation's year-end
financial statements.
o STRATEGIC FOCUS TARGET: 20% OF INCENTIVE
o PERSONAL PERFORMANCE: 20% OF INCENTIVE
[except in the case of the twenty (20) most senior executives whose awards are based solely on degree of
achievement of Adjusted Net Earnings and/or Goal Income (60%) and Strategic Focus Target (40%) results].
o Except in the case of a Named Executive Officer, other appropriate performance measures as approved by the
Subcommittee.
1. For participants to qualify for the ADJUSTED NET EARNINGS and/or GOAL
INCOME segment comprising 60% of their award, their respective
organization (e.g. Corporation/Group/ Subsidiary, etc. as described on
page 6) must achieve 75% or higher of its adjusted net earnings or goal
income target.
2. ADJUSTED NET EARNINGS and GOAL INCOME segment award amounts will be
determined according to the following schedule:
Adjusted Net Earnings/ Adjustment Factor for Corporate, Group,
Goal Income Achievement Subsidiary or Profit Center Performance
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Below 75% 0%
75% 50%
80% 60%
90% 80%
100% 100%
110% 120%
120% 140%
140% 180%
150% 200%
3. For participants to qualify for the STRATEGIC FOCUS TARGET segment
comprising 20% (40% for the twenty most senior executives) of their
incentive award, their respective organization must achieve a minimum
level of performance related to the specified strategic focus. The
Strategic Focus Targets will be measurable, verifiable and derived from
the formal strategic planning process (e.g., cost reduction, sales
growth, market share gain, margins, etc.). The award adjustment factor
for this segment will range from 0.5 (after achieving minimum
performance levels) to 2.0 for maximum attainment. Participants will
receive schedules of Strategic Focus Targets upon approval by the
Subcommittee.
4. Except with respect to the twenty (20) most senior executives
(including the Named Executive Officers) whose awards are based solely
on achievement of Adjusted Net Earnings, Goal Income and Strategic
Focus Targets, participants will have a third segment comprising 20% of
their incentive award based upon their individual Personal Performance
Rating according to the following schedule:
Personal
Performance Rating Personal Performance
Adjustment Range
Far Exceeded Expectations 1.70 - 2.00
Exceeded Expectations 1.20 - 1.50
Achieved Expectations 0.80 - 1.10
The maximum incentive award including all segments of this Program is
200% of the target incentive opportunity.
The Subcommittee may eliminate awards to any participant who fails to
receive a Personal Performance Rating of "Achieved Expectations" or
better under the Corporation's Performance Planning and Review (PPR)
system.
5. Target incentive award opportunities and calculations of awards for
participants will be based on the achievement of specific Corporate,
Group, Subsidiary and/or Profit Center adjusted net earnings, goal
income and strategic focus targets as displayed on the following page
or as otherwise may be established subject to approval of the Chairman:
Basis for
Financial Measures Basis for
Incentive Award Strategic Focus
Participants (60% of Target Incentive) Incentive Award
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USG Corporation
USG Corporation Senior Executive 60% Adjusted Net Earnings, USG Corporation 40%
Management
USG Corporation Staff 60% Adjusted Net Earnings, USG Corporation 20%
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North American Gypsum
Executive VP - Operations, 20% Adjusted Net Earnings, USG Corporation 40% NAG
U.S. Gypsum Company
Executive VP - Marketing, 40% Goal Income, North American Gypsum
U.S. Gypsum Company
General Mgr - IGD 20% Goal Income, Subsidiary 20% Profit Center
General Mgr - Materials Division 40% Goal Income, Profit Center/Division
Profit Center Staff
Executive VP, CGC, Inc 20% Adjusted Net Earnings, USG Corporation 40% NAG
20% Goal Income, North American Gypsum
20% Goal Income, CGC, Inc
President & General Mgr, YPSA 20% Goal Income, North American Gypsum 20% YPSA
40% Goal Income, YPSA
U.S. Gypsum Staff 25% Goal Income, North American Gypsum 20% NAG
35% Goal Income, U.S. Gypsum Company
CGC, Inc Staff 20% Goal Income, North American Gypsum 20% CGC
40% Goal Income, CGC, Inc
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Worldwide Ceilings
Executive VP, USG Interiors, Inc 20% Adjusted Net Earnings, USG Corporation 40% WWC
Executive VP, USG International, Ltd 40% Goal Income, Worldwide Ceilings
USG Interiors, Inc Staff 25% Goal Income, Worldwide Ceilings 20% WWC
35% Goal Income, USG Interiors, Inc
USG International, Ltd Staff 25% Goal Income, Worldwide Ceilings 20% WWC
35% Goal Income, USG International, Ltd
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L&W Supply Corporation
President & CEO 20% Adjusted Net Earnings, USG Corporation 40% L&W
20% Goal Income, North American Gypsum
20% Goal Income, L&W Supply
L&W Supply Corporation Staff 20% Goal Income, North American Gypsum 20% L&W
40% Goal Income, L&W Supply
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6. 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 Named Executive Officer, who has made an
extraordinary contribution to the Corporation's welfare or earnings.
GENERAL PROVISIONS
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1. The Subcommittee shall review and approve the awards recommended for
officers and other employees who are eligible participants in the 1997
Annual Management Incentive Program. The Subcommittee 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 Subcommittee in accordance with the provisions of the Program.
2. The Subcommittee 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
Subcommittee has certified goal achievement and applicable awards in
writing.
3. The judgement of the Subcommittee 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 assigns.
4. 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.
5. No award will be paid to a Program participant who is not a regular
full-time employee in good standing at the end of the calendar year to
which the award applies; except an award which would otherwise be
payable based on goal achievement may be recommended in the event of
retirement, disability or death or in the event the participant is
discharged without cause from the employment of the company during the
year.
6. The awards made to employees shall become a liability of the
Corporation or the appropriate subsidiary as of December 31, 1997 and
all payments to be made hereunder will be made as soon as practicable
after said awards have been approved.
ADMINISTRATIVE GUIDELINES
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1. Award values will be based on annualized salary in effect for each
qualifying participant at the beginning of the year (March 1 for the
twenty most senior executives). Any change in duties, dimensions or
responsibilities of a current position resulting in a new evaluation
and an increase or decrease in reference points will be applied for
Incentive Program purposes on a prorata basis with the respective
reference point and target incentive value to apply for the actual
number of full months of service at each evaluation except for such a
change with respect to a Named Executive Officer, in which case any
change in reference points and target incentive value, for any reason,
shall not become effective until January 1 of the following year.
2. As provided by the Program, no award is to be paid any participant who
is not a regular full-time employee in good standing at the end of the
calendar year to which the award applies. However, in the event an
eligible participant with three (3) or more months of active service in
the Program year subsequently retires, becomes disabled or dies, or is
discharged from the employment of the Company without cause, the
participant (or beneficiary) may receive 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
parent Corporation or a Subsidiary who are transferred during the year
to a position covered by the Annual Management Incentive Program (other
than a Named Executive Officer) 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 prorata 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 (other than a Named Executive
Officer) from an assignment which does not qualify for participation in
any incentive or bonus plan to a position covered by the 1997 Annual
Management Incentive Program, the employee is eligible to participate
in the Annual 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 service is required for award consideration.
6. Exceptions to established administrative guidelines can only be made by
the Subcommittee and only with respect to participants other than Named
Executive Officers.
7. For purposes of this Program, a "NAMED EXECUTIVE OFFICER" will include
any executive officer who is deemed a "named executive officer" for
1997 under Item 402 (a)(3) of Regulation S-K under the Securities
Exchange Act of 1934 and was employed by the Corporation or a
Subsidiary on the last day of the year.