EXHIBIT 10-19
YEAR 2004
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, 2004 through December 31, 2004.
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 2004 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 70%
- - Executive Vice President & Chief Financial Officer, USG
Corporation 50%
- - Senior Vice President, USG Corporation & President
Building Systems
- - Senior Vice President Marketing & Corporate Strategy,
USG Corporation and President International
- - Senior Vice President & General Counsel, USG Corporation
- - Senior Vice President Financial Operations,
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 Research & Technology, USG Corporation
- - Vice President & Controller, USG Corporation
- - Vice President International & Technology,
USG Corporation
- - Vice President & Treasurer, USG Corporation
- - Vice President Compensation, Benefits & Administration,
USG Corporation
- - Corporate Secretary & Associate General Counsel,
USG Corporation
- - Position Reference Point: $177,675 and over 35%
- - Position Reference Point: $163,215 - $177,674 30%
- - Position Reference Point: $148,815 - $163,214 25%
- - Position Reference Point: $133,610 - $148,814 20%
- - Position Reference Point: $119,025 - $133,609 15%
- - Position Reference Point: $104,815 - $119,024 10%
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AWARDS
Incentive awards for all participants in the 2004 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, 2004 of
the calendar year for the fifteen most senior executives) multiplied by the
applicable position target incentive value percent.
Incentive awards for 2004 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 2004,
likely adjustments would include bankruptcy expenses and FAS #143. 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, or 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 2004, Strategic Focus Targets will
include Overhead Reduction, Working Capital Reduction, Cost Reduction,
Customer Satisfaction 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 fifteen 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 2004
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, 2004 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 for each
qualifying participant at the beginning of the year (March 1, 2004 for
the fifteen 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 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.
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