EXHIBIT 10.17
YEAR 2002
ANNUAL
MANAGEMENT INCENTIVE
PROGRAM
USG CORPORATION
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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, 2002 through December 31, 2002.
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 2002 Annual Management Incentive Program, Consolidated EBITDAR
(Consolidated Net Earnings Before Interest, Taxes, Depreciation,
Amortization, Reorganization Expenses and other income and expense items),
business unit operating profit, 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 USG Corporation and
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:
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POSITION TITLE OR POSITION TARGET
SALARY REFERENCE POINT INCENTIVE
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- - Chairman & CEO, USG Corporation 70%
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- - Senior Vice President, USG Corporation and President Building Systems 50%
- - Senior Vice President Marketing & Corporate Strategy, USG Corporation
and President International
- - Executive Vice President & Chief Financial Officer, USG Corporation
- - Senior Vice President & General Counsel, USG Corporation
- - Senior Vice President & Controller, USG Corporation
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- - Vice President Human Resources, USG Corporation 45%
- - Vice President Communications, USG Corporation
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- - Vice President, USG Corporation and President & COO, L & W Supply Corp. 40%
- - Vice President Research & Technology, USG Corporation
- - Vice President & Chief Information Officer, USG Corporation
- - Vice President Corporate Customer Relations, USG Corporation
- - Vice President International & Technology, USG Corporation
- - Vice President and Treasurer, USG Corporation
- - Vice President Comp., Benefits & Admin., USG Corporation
- - Corporate Secretary and Associate General Counsel, USG Corporation
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- - Position Reference Point: $169,140 and over 35%
- - Position Reference Point: $155,340 - $169,139 30%
- - Position Reference Point: $141,660 - $155,339 25%
- - Position Reference Point: $127,200 - $141,659 20%
- - Position Reference Point: $113,280 - $127,199 15%
- - Position Reference Point: $ 99,780 - $113,279 10%
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AWARDS
Incentive awards for all participants in the 2002 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 at the beginning of the calendar year (March 1, 2002 of
the calendar year for the sixteen most senior executives) multiplied by the
applicable position target incentive value percent. The individual maximum
total incentive award for all segments of this Program is 200% of the par
incentive opportunity.
Incentive awards for 2002 will be based on a combination of the following
elements:
I. CONSOLIDATED EBITDAR: 40% OF INCENTIVE
Consolidated EBITDAR will be based on the Corporation's year-end financial
statements. For the top senior executives this portion of the award is
based on Consolidated EBITDAR and represents 60% of the incentive par
(except for the Vice President International & Technology, USG Corporation,
the President and Chief Operating Officer, L&W Supply, the President CGC
and the President USG Mexico who will be based 30% on Consolidated EBITDAR
and 30% on business unit Operating Profit).
(OR)
OPERATING PROFIT:
Profit Center specific goals (net sales less cost of sales and selling and
administrative expenses) based on the Corporation's year-end financial
statements at half of the total weighting on financial goals, with the
other half on Consolidated EBITDAR. The top senior executives, except for
those listed above, will not have business unit Operating Profit goals.
Consolidated EBITDAR and business unit Operating Profit segment award
amounts will be adjusted by a factor of up to two times the amount that
actual results differ from goals according to the following schedule:
Consolidated EBITDAR/ Adjustment Factor for Consolidated
Business Unit Achievement or Business Unit
------------------------- ----------------
Below 75% 0%
75% 50%
80% 60%
90% 80%
100% 100%
110% 120%
120% 140%
140% 180%
150% 200%
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Consolidated EBITDAR or business unit Operating Profit Achievement results
and adjustment factors between the thresholds listed above are prorated.
Other appropriate performance measures may be assigned as approved by the
Committee.
II. STRATEGIC FOCUS TARGETS: 40% OF INCENTIVE
Strategic Focus Targets will be measurable, verifiable and derived from the
formal strategic planning process (e.g., Customer Satisfaction, Cost
Reduction, Overhead Reduction and Working Capital Reduction). The award
adjustment factor for this segment will range from 1.0 (after achieving
target performance levels) to 2.0 for maximum attainment. The participant's
manager will assign specific Strategic Focus Target assignments and
weightings to each participant. The weighting on an individual Strategic
Focus Target will not be less than 10%. The weighting of all assigned
Strategic Focus Targets will equal 40%.
III. PERSONAL PERFORMANCE: 20% OF INCENTIVE
Participants (except as noted below) will have a third segment comprising
20% of their incentive award based upon their individual Personal
Performance Rating according to the following schedule:
Personal Personal Performance
Performance Rating Adjustment Range
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Far Exceeded Expectations 1.7 -- 2.0
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Exceeded Expectations 1.2 -- 1.6
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Achieved Expectations 1.0 -- 1.1
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Partially Achieved Expectations 0.8 -- 0.9
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Did Not Meet Expectations No Award will be paid under any
segment of this plan if the
Personal Performance rating is
"Did Not Meet Expectations"
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- - The top sixteen senior executives, and the Presidents of CGC and USG Mexico
do not have Personal Performance as an element of their award. Awards for
these participants are weighted 60% on financial targets (Consolidated
EBITDAR or a combination of Consolidated EBITDAR and business unit
Operating Profit) and 40% on Strategic Focus Targets.
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- - To qualify for an award for Personal Performance, an award must be earned
from Consolidated EBITDAR, the participant's business unit Operating
Profit, or the participant's Strategic Focus Targets.
- - A Personal Performance Rating of DNM (Did Not Meet Expectations)
disqualifies the participant from any portion of an award under the
Program.
WEIGHTINGS OF PROGRAM ELEMENTS
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BASIS FOR FINANCIAL MEASURES BASIS FOR
AND STRATEGIC FOCUS TARGET AWARDS PERSONAL PERFORMANCE
PARTICIPANTS (40% TO 60% OF TARGET INCENTIVE) INCENTIVE AWARD
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USG CORPORATION
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- Senior Executive Management 60% Consolidated EBITDAR; 0%
(Sixteen Most Senior Executives) 40% Strategic Focus Targets
- USG Corporation Staff 40% Consolidated EBITDAR, 20%
40% Strategic Focus Targets
BUILDING SYSTEMS
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- Building Systems Staff; 40% Consolidated EBITDAR, 20%
40% Strategic Focus Targets
- Industrial Products Participants 20% Consolidated EBITDAR, 20%
20% Operating Profit, Industrial Products
40% Strategic Focus Targets
- President, CGC 30% Consolidated EBITDAR, 0%
30% Operating Profit, CGC
40% Strategic Focus Targets
- CGC Staff 20% Consolidated EBITDAR, 20%
20% Operating Profit, CGC
40% Strategic Focus Targets
- Pres. & Gen. Mgr, USG Mexico 30% Consolidated EBITDAR, 0%
30% Operating Profit, USG Mexico
40% Strategic Focus Targets
USG INTERNATIONAL
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- Vice President International & Technology 30% Consolidated EBITDAR, 0%
30% Operating Profit/loss, USG International
40% Strategic Focus Targets
- International Staff 20% Consolidated EBITDAR, 20%
20% Operating Profit/loss, USG International
40% Strategic Focus Targets
L&W SUPPLY CORPORATION
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- President and Chief Operating Officer, 30% Consolidated EBITDAR, 0%
L&W Supply 30% Operating Profit, L&W Supply
40% Strategic Focus Targets
- L&W Supply Corporation Staff 20% Consolidated EBITDAR, 20%
20% Operating Profit, L&W Supply
40% Strategic Focus Targets
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Target incentive award opportunities and calculations of awards for
participants will be based on the achievement of specific Consolidated
EBITDAR, business unit Operating Profit and Personal Performance as
displayed above, or as otherwise may be established subject to approval of
the Chairman.
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 2002
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.
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6. The awards made to employees shall become a liability of the
Corporation or the appropriate subsidiary as of December 31, 2002 and
all payments to be made hereunder will be made as soon as practicable
after said awards have been approved by the Committee.
ADMINISTRATIVE GUIDELINES
1. Award values will be based on annualized salary in effect for each
qualifying participant at the beginning of the year (March 1, 2002 for
the sixteen most senior executives). 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 any participant who
is not a regular full-time employee, (or a part time employee as
approved by the Vice President Human Resource, USG Corporation) 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, 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.
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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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