EXHIBIT 10.6
YEAR 2007
ANNUAL
MANAGEMENT INCENTIVE
PROGRAM
(CORPORATE OFFICERS ONLY)
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, 2007 through December 31, 2007.
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 2007 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 SALARY REFERENCE POINT POSITION TARGET INCENTIVE
- ---------------------------------------- -------------------------
- - Chairman & CEO, USG Corporation 125%
- - President and Chief Operating Officer, USG Corporation 90%
- - Executive Vice President & Chief Financial Officer, USG Corporation 65%
- - Executive Vice President & General Counsel, USG Corporation
- - Executive Vice President and Chief Strategy Officer, USG Corporation and
President International
- - Vice President, USG Corporation & President & COO, L & W Supply Corp. 50%
- - Senior Vice President Human Resources, USG Corporation 45%
- - Senior Vice President Communications, USG Corporation
- - Vice President & Chief Technology Officer
- - Vice President & Controller, USG Corporation 40%
- - Vice President & Treasurer, USG Corporation
- - Vice President Research & Technology Innovation, USG Corporation
- - Vice President Compensation, Benefits & Administration, USG Corporation
- - Corporate Secretary & Associate General Counsel, USG Corporation
- - Vice President, USG Corporation
- - Salary Broadband 16 and over 35%
- - Salary Broadband 15 30%
- - Salary Broadband 14 25%
- - Salary Broadband 13 20%
- - Salary Broadband 12 15%
- - Salary Broadband 11 10%
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AWARDS
Incentive awards for all participants in the 2007 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 approved by March 31, 2007 that is in effect on April 1, 2007
multiplied by the applicable position target incentive value percent.
Incentive awards for 2007 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 will be defined by March 31, 2007 and 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 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 $75 Million Net Earnings 2.06% of this tier will fund the pool
$75+ to $150 Million Net Earnings 1.94% of this tier will fund the pool
$150+ to $400 Million Net Earnings 1.60% of this tier will fund the pool
$400+ to $800 Million 1.10% 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. For each corporate officer, (i) their individual
Net Earnings par shall be determined by March 31, 2007, and (ii) their
individual factor shall be determined by taking into account the Net
Earnings par of all participants eligible to participate in the Program as
of March 31, 2007 and based on the sum of all such participants' Net
Earnings par as determined by March 31, 2007. Notwithstanding the prior
sentence nor any other provision in this program, each corporate officer's
factor may be decreased, but not increased, due to changes in the total
plan par after March 31 including, but not limited to, changes triggered by
the addition or removal of a participant from the program or changes in any
participant's Net Earnings par.
II. STRATEGIC FOCUS TARGETS: 50% OF INCENTIVE
Strategic Focus Targets will be measurable, verifiable and derived from the
formal strategic planning process. For 2007, Strategic Focus Targets will
generally include Overhead Reduction, Customer Satisfaction, Working
Capital Reduction, Cost Reduction, Business Unit Operating Profit and other
operational priorities. The method for calculating this portion of the
award will be determined by March 31, 2007. 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.
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The weighting on any individual Strategic Focus Target generally 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.
WEIGHTINGS OF PROGRAM ELEMENTS
All participants in this Program, including the sixteen 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, provided, however, pursuant to the
plan, that in no event may the Compensation and Organization Committee
adjust an award upward for any officer.
2. The Committee shall review and approve the awards recommended for
officers and other employees who are eligible participants in the 2007
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, 2007 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,
2007, after said awards have been approved by the Committee.
ADMINISTRATIVE GUIDELINES
1. Award values will be based on annualized salary in effect on April 1,
2007 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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