Document

0000757011-16-000219.txt : 20161101 0000757011-16-000219.hdr.sgml : 20161101 20161101164749 ACCESSION NUMBER: 0000757011-16-000219 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20161031 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20161101 DATE AS OF CHANGE: 20161101 FILER: COMPANY DATA: COMPANY CONFORMED NAME: USG CORP CENTRAL INDEX KEY: 0000757011 STANDARD INDUSTRIAL CLASSIFICATION: CONCRETE GYPSUM PLASTER PRODUCTS [3270] IRS NUMBER: 363329400 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08864 FILM NUMBER: 161965307 BUSINESS ADDRESS: STREET 1: 550 WEST ADAMS STREET STREET 2: DEPARTMENT 188 CITY: CHICAGO STATE: IL ZIP: 60661 BUSINESS PHONE: 312-606-4000 MAIL ADDRESS: STREET 1: DEPARTMENT #188 STREET 2: 550 WEST ADAMS STREET CITY: CHICAGO STATE: IL ZIP: 60661 8-K 1 usg8-kx1112016.htm FORM 8-K Document



UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): November 1, 2016 (October 31, 2016) USG Corporation
(Exact name of registrant as specified in its charter) Commission File Number: 1-8864
Delaware		36-3329400
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
550 West Adams Street, Chicago, Illinois		60661-3676
(Address of principal executive offices)		(Zip Code)
	(312) 436-4000
	Registrant’s telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: □ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) □ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) □ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) □ Pre-commencement communications pursuant to Rule 13c-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Introductory Note

On October 31, 2016 (the “Effective Date”), USG Corporation (“USG” or the “Company”) completed the sale of all of the outstanding capital stock of USG’s former subsidiary L&W Supply Corporation (“L&W”) to American Builders & Contractors Supply Co., Inc. (the “Purchaser”) for a purchase price of approximately $670 million in cash (the “Transaction”), pursuant to the Sale and Purchase Agreement, dated August 27, 2016 (the “Purchase Agreement”), by and between USG and the Purchaser. USG also made a cash payment to Purchaser of $2 million based on an initial estimate of L&W's working capital.

The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, which was filed as Exhibit 2.1 to USG’s Current Report on Form 8-K/A on August 29, 2016, and is incorporated by reference herein.

Section 1 – Registrant’s Business and Operations

Item 1.01 Entry into a Material Definitive Agreement.

On the Effective Date, L&W and the Purchaser (as a guarantor under certain provisions of the Supply Agreement (as defined below)) entered into a supply agreement (the “Supply Agreement”) with the Company’s subsidiaries United States Gypsum Company and USG Interiors, LLC (collectively, the “Subsidiaries”) and the Company (as a guarantor under certain provisions of the Supply Agreement). The Supply Agreement governs sales of the Subsidiaries’ wallboard, ceiling tile, glass mat and surfaces and substrate products (collectively, the “Products”) to L&W. Pursuant to the Supply Agreement, L&W agreed to be a distributor of Products and to market, promote, sell and distribute Products pursuant to the terms of the Supply Agreement.

Under the terms of the Supply Agreement, L&W will purchase Products from the Subsidiaries, subject to minimum purchase requirements or sales targets, as applicable. Except as to ceiling tile, L&W’s appointment to distribute Products is non-exclusive. Pursuant to the terms of the Supply Agreement, the Purchaser has irrevocably guaranteed L&W’s obligations, covenants, undertakings and liabilities under the Supply Agreement, and the Company has irrevocably guaranteed the Subsidiaries’ obligations, covenants, undertakings and liabilities under the Supply Agreement.

Subject to certain exceptions, limitations and other provisions, the Subsidiaries and L&W have agreed to indemnify each other for breaches of representations and warranties and certain other matters.

Among other customary termination rights granted under the Supply Agreement, the Supply Agreement can be terminated by the Subsidiaries upon written notice if L&W breaches or is in default of any obligation under the Supply Agreement and such breach or default has not been cured within a specified time period from the giving of written notice. Among other customary termination rights granted under the Supply Agreement, the Supply Agreement can be terminated by L&W upon written notice if the Subsidiaries materially breach or are in default of any obligation under the Supply Agreement and such breach or default has not been cured within a specified time period from the giving of written notice.

The foregoing description of the Supply Agreement does not purport to be a complete description of the terms of such agreement, which are qualified in all respects by reference to the complete text of the Supply Agreement, a copy of which is being filed as Exhibit 10.1 hereto and is incorporated by reference herein.

The Purchase Agreement and Supply Agreement have been included as exhibits to this Current Report on Form 8-K to provide investors and security holders with information regarding their respective terms. They are not intended to provide any other financial information about the parties thereto or their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Purchase Agreement and the Supply Agreement are made only for purposes of those agreements and as of specific dates; are solely for the benefit of the parties thereto; may be subject to limitations agreed upon by such parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties thereto instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of the parties to the Purchase Agreement or the Supply Agreement or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and

covenants may change after the dates of the Purchase Agreement or the Supply Agreement, which subsequent information may or may not be fully reflected in public disclosures by the parties thereto.

Section 2 – Financial Information

Item 2.01 Completion of Acquisition or Disposition of Assets.

On the Effective Date, USG completed the sale of all of the outstanding capital stock of L&W to the Purchaser for a purchase price of approximately $670 million in cash. USG also made a cash payment to Purchaser of $2 million based on an initial estimate of L&W's working capital.

As a result, L&W and its subsidiaries are no longer subsidiaries of the Company. In this regard, L&W is no longer a guarantor under the Company’s outstanding senior notes or credit agreement.

The foregoing description of the Transaction does not purport to be complete and is qualified in its entirety by reference to Item 1.01 of USG’s Current Report on Form 8-K filed with the SEC on August 29, 2016 and USG’s Current Report on Form 8-K/A, which includes the Purchase Agreement as Exhibit 2.1 thereto, filed with the SEC on August 29, 2016.

Section 7 - Regulation FD

Item 7.01 Regulation FD Disclosure.

As USG previously disclosed, in the third quarter of fiscal year 2016, the Company has reflected the results of L&W as discontinued operations. Attached as Exhibit 99.1 are additional recast historical unaudited financial information for the quarterly and annual periods of the year ended December 31, 2015 and the nine months ended September 30, 2016, reflecting the discontinued operations.

The information contained in this Item 7.01, including Exhibit 99.1 hereto, shall not be deemed to be filed for purposes of the Securities Exchange Act of 1934 and it shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933 except as expressly set forth by specific reference in such filing.

Section 8 – Other Events

Item 8.01 Other Events.

In connection with the completion of the Transaction and in accordance with the indentures governing the Notes (as defined below), USG is issuing irrevocable notices of redemption with respect to (1) all $250 million aggregate principal amount of the Company’s 7.875% senior notes due 2020 (the “2020 Notes”) and (2) all $350 million aggregate principal amount of the Company’s 5.875% senior notes due 2021 (the “2021 Notes” and, together with the 2020 Notes, the “Notes”). The redemption date for both series of Notes is December 2, 2016. USG will redeem such 2020 Notes at a redemption price equal to $1,039.38 per $1,000 principal amount and such 2021 Notes at a redemption price equal to $1,044.06 per $1,000 principal amount, plus in each case accrued and unpaid interest to, but not including, the redemption date of December 2, 2016.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(b) Pro Forma Financial Information

The following unaudited pro forma condensed consolidated financial statements of the Company, reflecting the characterization of the sale of all of the outstanding capital stock of L&W as a disposition by the Company, are filed as Exhibit 99.2 to this Current Report on Form 8-K and are incorporated by reference herein:


•	Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2016;


•	Unaudited Pro Forma Condensed Consolidated Statements of Income for the nine months ended September 30, 2016 and for each of the years ended December 31, 2015, 2014 and 2013;


•	Explanatory notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.

(d) Exhibits



Exhibit No.	Exhibit
2.1	Sale and Purchase Agreement, by and between USG Corporation and American Builders & Contractors Supply Co., Inc., dated August 27, 2016 (filed as Exhibit 2.1 to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on August 29, 2016 and incorporated herein by reference). *
10.1	Supply Agreement, by and among United States Gypsum Company and USG Interiors, LLC and USG Corporation, as guarantor, and L&W Supply Corporation and American Builders & Contractors Supply Co., Inc., as guarantor, dated October 31, 2016. †
99.1	Recast unaudited financial statements for the quarterly and annual periods of the year ended December 31, 2015 and the nine months ended September 30, 2016.
99.2	Unaudited Pro Forma Condensed Consolidated Financial Information.

Schedules and other similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby undertakes to furnish supplementally copies of any of the omitted schedules and other similar attachments upon request by the Securities and Exchange Commission, provided that the registrant may request confidential treatment for any schedule or other similar attachment so furnished.


†	Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to the Securities Exchange Act of 1934.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



	USG CORPORATION
	Registrant

Date: November 1, 2016	By:	/s/ Matthew F. Hilzinger
		Matthew F. Hilzinger
		Executive Vice President and Chief Financial Officer

EXHIBIT INDEX



Exhibit No.	Exhibit
2.1	Sale and Purchase Agreement, by and between USG Corporation and American Builders & Contractors Supply Co., Inc., dated August 27, 2016 (filed as Exhibit 2.1 to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on August 29, 2016 and incorporated herein by reference). *
10.1	Supply Agreement, by and among United States Gypsum Company and USG Interiors, LLC and USG Corporation, as guarantor, and L&W Supply Corporation and American Builders & Contractors Supply Co., Inc., as guarantor, dated October 31, 2016. †
99.1	Recast unaudited financial statements for the quarterly and annual periods of the year ended December 31, 2015 and the nine months ended September 30, 2016.
99.2	Unaudited Pro Forma Condensed Consolidated Financial Information.


†	Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to the Securities Exchange Act of 1934.

EX-10.1 2 ex_101x1112016x8-k.htm EXHIBIT 10.1 Exhibit

EXHIBIT 10.1

CONFIDENTIAL TREATMENT REQUESTED BY USG CORPORATION – CONFIDENTIAL PORTIONS OF THIS DOCUMENT, MARKED BY *****, HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934.

EXECUTION VERSION

SUPPLY AGREEMENT

This Supply Agreement (“Agreement”), dated as of October 31, 2016 (the “Effective Date”), is by and among United States Gypsum Company, a Delaware corporation (“US Gypsum”), USG Interiors, LLC, a Delaware limited liability company (“USG Interiors”), L&W Supply Corporation, a Delaware corporation (together with its subsidiaries, “Distributor” or “L&W”), American Builders & Contractors Supply Co., Inc., a Delaware corporation (the “Parent Guarantor”) (for the limited purpose of Section 21), and USG Corporation, a Delaware corporation (the “Seller Guarantor”) (for the limited purpose of Sections 11, 13, and 22). The Distributor and the Seller are referred herein individually as a “Party” and together as the “Parties”. For purposes of this Agreement, references to “Seller” will mean USG Interiors and US Gypsum, jointly; provided that where provisions in this Agreement apply to one or more specific Products (including, for example, provisions related to submitting and accepting Orders pursuant to Section 7.4 and 7.5), references to “Seller” will mean (i) USG Interiors, as such provisions relate to the Products set forth on Schedule A-2, and (ii) US Gypsum, as such provisions relate to the Products set forth on Schedules A-1, A-3, A-4 and A-5 . Capitalized terms used, but not defined, herein will have the meanings ascribed to them in the Sale and Purchase Agreement (defined below).

A. The Seller Guarantor and the Parent Guarantor have entered into that certain Sale and Purchase Agreement, dated as of August 27, 2016 (as amended from time to time, the “Sale and Purchase Agreement”), pursuant to which the Parent Guarantor will purchase and assume from the Seller Guarantor all of the capital stock of L&W (the “Contemplated Transactions”); and

B. This Agreement is being delivered by the Parties, the Parent Guarantor and the Seller Guarantor pursuant to the Sale and Purchase Agreement.

NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, the Parent Guarantor and the Seller Guarantor, intending to be legally bound hereby, agree as follows:

1.Background.

1.1

The Seller Guarantor carries out the business of manufacturing and selling the building construction products (the “Products”) through USG Interiors, with respect to the Products set forth on Schedule A-2, and US Gypsum, with respect to the Products set forth on Schedules A-1, A-3, A-4 and A-5 (Schedules A-1 through A-5, collectively, “Schedule A”). L&W is a leading specialty distributor of gypsum wallboard, ceilings materials, and other building materials and, in connection with its business, buys and sells the Products from various locations throughout the United States of America listed on Schedule B (“Locations”).


1.2	In connection with the Contemplated Transactions, the Distributor hereby accepts its appointment as a distributor of the Products in the “MSAs”, “Census Divisions”

and “Territories”, and at the “Locations”, identified on Schedules A and B (collectively, the “Product Territories”), and the Distributor agrees to market, promote, sell and distribute the Products within the Product Territories, in accordance with this Agreement (“Distribute” or “Distribution”).

2. Term.


2.1	This Agreement commences on the Effective Date and continues until ***** (the “Initial Term”) unless: (a) terminated earlier by the Parties as provided herein or (b) extended pursuant to Section 2.2.


2.2	The Initial Term of this Agreement may be extended for additional ***** terms by mutual written agreement of the Parties prior to the expiration of the Initial Term or then-current term (each additional term, a “Renewal Term”, and, together with the Initial Term, the “Term”).


2.3	Notwithstanding anything to the contrary in this Agreement, if any of Schedules A-1 through A-5 sets forth a term that is longer or shorter than the Term set forth in Section 2.1, then the Term of this Agreement will be as indicated in such Schedule solely with respect to the Products applicable to such Schedule.

3. Appointment and Relationship.

3.1

If Schedule A indicates that the Distributor’s appointment is exclusive with respect to any Product or “Product Category” identified on such Schedules in one or more Product Territories, then the Distributor may not market, promote, sell and distribute any products that are identical or similar to, or competitive with, such Product or Product Category within such Product Territories. Except as set forth in Schedule A-2 with regard to Ceiling System Products, the Distributor’s appointment to Distribute the Products is non-exclusive.


3.2	The Distributor will not Distribute the Products (whether directly or indirectly) outside the United States of America or to any Third Parties who the Distributor knows or has a good faith reason to believe will distribute or use the Products outside the United States of America.

3.3

As of the Effective Date, the Distributor is, and will remain, at all times independent of the Seller and its Affiliates. In all matters relating to this Agreement, each Party will be solely responsible for the acts of its employees and agents, and the employees or agents of one Party will not be considered employees or agents of the other. Neither Party will (a) have any right, power or authority to create any obligation, express or implied, on behalf of the other Party, (b) act or represent or hold itself out as having authority to act as an agent or partner of the other Party, or (c) in any way bind or commit the other Party to any obligations. Nothing in this Agreement is intended to create or constitute a joint venture, partnership, agency or trust of any kind between the Parties.

4. Competing Products. Except for any Products for which the Distributor’s Distribution is exclusive as stated on Schedule A, the Distributor may purchase, market and sell any products that are competitive with the Products within the Product Territories. Nothing in this Section 4 will affect the Distributor’s obligation to meet the Minimum Purchase Requirements set forth in Schedule A.

5. Other Distributor Obligations. In addition to each of its other obligations contained in this Agreement (including the Schedules), the Distributor will:

5.1

comply with all applicable Laws, including obtaining and maintaining, at its own expense, required certifications, credentials, licenses and permits necessary to satisfy its obligations under this Agreement, and use reasonable commercial efforts to comply with all guidelines and product literature made available (including through the Seller’s or its Affiliate’s website) to the Distributor by the Seller with regard to the Products;


5.2	take all reasonable steps, and reasonably cooperate with the Seller, to:


(a)	distribute the Products and to expand the market for the Products within the Product Territory;


(b)	promote Product sales and advertising; and


(c)	establish, expand and maintain the reputation of the Products, Seller’s and its Affiliates’ brands, and the Seller;


5.3	take reasonable steps to:


(a)	maintain professional distribution facilities for the Products;


(b)	maintain adequate Product inventory; and


(c)	employ an adequate number of qualified professional representatives to promote, sell and deliver the Products and satisfy its obligations under this Agreement.


5.4	The continuation of the past practices of Distributor prior to the date of this Agreement will constitute conclusive evidence that Distributor has met its obligations under Sections 5.2 and 5.3.

5.5

During the Term of this Agreement, Seller may request in writing that Distributor make available to Seller, at Distributor’s corporate offices, financial information reasonably sufficient to allow Seller to accurately determine Distributor’s financial position for credit purposes; provided that Seller may not make such request more than once annually unless Seller has reasonable basis to believe that Distributor’s financial condition or creditworthiness may be inadequate or unsatisfactory in light of its obligations under this Agreement and the quantity of Products being purchased. Credit personnel from Seller will be permitted to review all such materials and take

notes, but will not take photos or retain a copy of such materials. Seller will keep all such financial information strictly confidential and will sign a Confidentiality and Non-Disclosure Agreement reflecting this obligation in a form acceptable to both Seller and Distributor.

6. Seller Obligations. In addition to each of its other obligations contained in this Agreement (including the Schedules), the Seller will:


6.1	comply with all applicable Laws, including obtaining and maintaining, at its own expense, required certifications, credentials, licenses and permits necessary to satisfy its obligations under this Agreement;


6.2	take all reasonable steps, and reasonably cooperate with the Distributor, to:


(a)	enable the Distributor to distribute the Products and to expand the market for the Products within the Product Territory;


(b)	assist the Distributor in promoting Product sales and advertising;


6.3	take reasonable steps to:


(a)	maintain professional manufacturing and storage facilities for the Products;


(b)	maintain adequate Product inventory; and


6.4	manufacture Products in accordance with Seller’s published specifications, relevant law and industry standards.


6.5	The continuation of the past practices of Seller prior to the date of this Agreement will constitute conclusive evidence that Seller has met its obligations under Sections 6.2 and 6.3.

7. Forecasts, Ordering and Supply.

7.1

During the Term, the Distributor will give the Seller a good faith rolling 90‑day forecast of its supply requirements for the Products for each Product Territory set forth in ***** (each forecast, a “Forecast”). The Forecasts will constitute a good faith estimate (based on information then-available to the Distributor) of the Orders the Distributor will place during such period. The first Forecast will be provided on the Effective Date, and subsequent Forecasts will, thereafter, be provided on the first Business Day of each month during the Term. The Forecasts are for informational purposes only and do not create any binding obligations on behalf of either Party, except as explicitly stated herein.


7.2	***** the Distributor will purchase from the Seller the “Minimum Purchase Requirements” (or make Shortfall Payments) during the Measurement Periods (defined below) and in the Product Territories as set forth in, and subject to the terms

of, ***** (the “Minimum Purchase Requirements”), and subject to Section 7.5, and Section 19. For the avoidance of doubt, the time periods set forth in Schedule A relating to any Minimum Purchase Requirements, will be referred to herein as a “Measurement Period” and collectively as the “Measurement Periods”. *****.


7.3	Subject to the other provisions of this Agreement, the Seller agrees to provide the Distributor with quantities of Products sufficient to meet the Minimum Purchase Requirements and Annual Sales Targets set forth in Schedule A.


7.4	The Distributor will order Products from the Seller by sending a purchase order (“Order”), specifying:


(a)	the Products to be supplied and the volume of each Product to be supplied;


(b)	location and delivery information, if applicable;


(c)	the requested delivery date, if applicable; and


(d)	the Order number.

7.5

The Seller may accept an Order by acknowledging the Order through a written response in a manner consistent with its general practices or by performing under the Order (“Accepted Order”). An Order is binding on the Seller unless rejected by the Seller within two Business Days, and the Seller may accept or reject any Order in its reasonable discretion; provided, however, that the quantities in an Order that was rejected without a good reason will be credited toward Distributor’s Minimum Purchase Requirements or Sales Targets during that Measurement Period. Notwithstanding Section 7.3 or any Minimum Purchase Requirements, Sales Targets, or minimum supply requirements set forth in Schedule A or the Forecasts provided pursuant to Section 7.1, the Seller has the right, in its sole discretion, to refuse to accept an Order or fill an Accepted Order, in whole or in part, if there is a manufacturing or supply disruption that impacts Seller’s ability to supply the Product(s) or in the occurrence of a Force Majeure Event, as defined in Section 19. *****.

7.6

If the Seller discontinues the sale of any Product in the applicable Product Territory, the Seller is not obligated to continue supplying the discontinued Product to the Distributor (including with respect to any Accepted Orders) after providing the Distributor with not less than ***** prior written notice of the Seller’s discontinuance of such Product. In such case, the Minimum Purchase Requirements will be adjusted based on the percentage of the Minimum Purchase Requirements attributable to the discontinued Product in the immediately preceding Measurement Period, unless and to the extent the Seller makes available to the Distributor a substitute product that is substantially similar to the discontinued Product.


7.7	Notwithstanding anything in this Agreement to the contrary, Distributor will not be deemed to have failed to reach its Minimum Purchase Requirements or Sales Targets

in a Measurement Period to the extent such failure arises out (i) Seller’s breach of its obligations hereunder, including but not limited to its pricing obligations; (ii) Seller Guarantor’s violation of the non-compete provisions of the Sale and Purchase Agreement; or (iii) with respect only to Products listed in *****, significant changes in Seller’s distribution strategy, in each case during such Measurement Period. In such circumstances, the Minimum Purchase Requirements and Sales Targets will be equitably reduced to reflect the impact of such actions.

7.8

Unless otherwise expressly set forth in writing by the Seller, all Products will be Delivered at Place (as defined in Incoterms 2010 revision). Seller’s Prices include freight and fees which are to be paid by Distributor. Seller’s stated dates of shipment are guaranteed, plus or minus two Business Days. Title and risk of loss to Products will transfer to the Distributor when the Products are tendered to the Distributor at the delivery destination. Any handling of the Products after transfer of risk of loss will be at the Distributor’s sole risk.

7.9

This Agreement is expressly limited to the terms of: (a) this Agreement, and (b) the terms contained in the applicable Accepted Order issued by Distributor, to the extent they do not conflict with this Agreement. The terms of this Agreement will prevail over any terms and conditions contained in any Accepted Order, and any other documentation related to the subject matter of this Agreement. Changes to the terms and conditions of Distributor’s Purchase Order shall be only upon Seller’s written agreement.

8. Inspection.

8.1

Distributor shall inspect the Products promptly following delivery to Distributor and will be required to notify Seller within two Business Days after delivery of any visible physical damage to the Products or non-conformity with the Accepted Order. Failure to notify the Seller of any such visible physical damage or non-conformity within such two-day period shall constitute a waiver of any damage or non-conformity that was or should have been detected. Distributor will have no obligation to “break bulk” for purposes of its inspection.

8.2

Except as provided under Section 8.1 or in the case of any Products that do not comply with the warranties provided by Seller, Products cannot be returned, and any Order for Products cannot be cancelled by the Distributor without the Seller’s prior written consent, which may be granted or withheld in the Seller’s reasonable discretion. All Products accepted by the Seller for return and refund (other than those returned by the Distributor in accordance with this Section 8.2 or pursuant to the terms of any warranty provided by Seller) are subject to a restocking fee of 20% of the price of cancelled or returned Products plus all shipping costs. If the Seller consents as provided in this Section 8.2 to the cancellation of Orders for special or non-stock Products, the Distributor’s cancellation may be conditioned upon the Distributor’s payment in full of the price of finished Products, and, for other Products

in the process of manufacture, the payment of a cancellation charge may be based on the percentage of completion as applied to the price.

9. Prices and Payment.


9.1	The prices to be paid by the Distributor for the Products are described on Schedule A, and references to Price or Prices refer to the invoice price(s). (the “Prices”).The Prices from Seller to Distributor are inclusive of freight and fees to be paid by Distributor.


9.2	*****.

9.3

Except as otherwise set forth in the Schedules, the Distributor will pay in full all undisputed amounts due pursuant to this Agreement ***** after the Seller’s invoice date; provided, that (a) invoices will be issued upon shipment by the Seller to the destination specified by Distributor, and (b) the Seller will give the Distributor a discount on any invoiced amounts that are paid by the Distributor ***** after Seller’s invoice date in an *****. Late payments will bear interest at *****. To the extent the Distributor disputes any charge on such invoice, the Distributor will, ***** of the Distributor’s receipt of such invoice, issue to the Seller a written dispute notice (along with substantiating documentation and a reasonably detailed description of the dispute), and the Distributor will be deemed to have accepted all invoices for which the Seller does not receive a written dispute notice *****. To the extent the Seller does not agree to a reduction in such invoice, such dispute will be resolved in accordance with the dispute resolution provisions set forth in Section 20, below. Notwithstanding anything to the contrary in this Agreement, the Parties will continue performing their obligations under this Agreement during any dispute, including its obligation to pay due any undisputed invoice amounts in accordance with the terms and conditions of this Agreement. Unless otherwise specifically agreed in writing by the Parties, all payments due to the Seller under this Section 9.3 will be made by wire transfer of immediately available funds to the account set forth in the applicable invoice.

9.4

Any credits the Distributor believes are owed to it pursuant to *****, and any amounts owed or potentially owed by the Seller Guarantor pursuant to any of the Transaction Agreements (as defined in the Purchase Agreement), will not be set off or deducted from invoice or other payments owed to Seller until and to the extent that such credits or amounts are awarded to the Distributor pursuant to the terms of such sections or provisions or the Transaction Agreements (as defined in the Purchase Agreement). Regardless of any statement appearing on a check, wire transfer documentation or otherwise, the Seller’s acceptance of a payment in an amount less than that due will in no way be an accord and satisfaction or prejudice the Seller’s rights and remedies to collect the full amount due.


9.5	All Prices are exclusive of all sales, use or excise taxes and any other similar taxes, duties and charges of any kind imposed by any federal, state or local Governmental

Entity on any amounts payable by the Distributor under this Agreement, including charges imposed on the sale, use or transportation of the Products (“Taxes”). The Distributor will pay, or reimburse the Seller for, all Taxes properly identified by the Seller in an invoice.

9.6

If the Distributor fails to pay any amount due under this Agreement except for those amounts that are disputed pursuant to the provisions of Section 9.3 (a “Payment Failure”) or fails to materially comply with any terms of this Agreement (other than with respect to a Payment Failure), after notice of such failure and expiration of the opportunity to cure set forth in Section 17, then the Seller may, at its option, suspend delivery of any undelivered portion of any Accepted Order, without liability to the Seller, and the Distributor will remain liable for all unpaid amounts with respect to shipped or delivered Products.

9.7

Notwithstanding anything in this Section 9, if the Seller at any time determines, in its reasonable discretion, that the Distributor’s financial condition or creditworthiness is inadequate or unsatisfactory, or that the Distributor may be unable to pay for any Products upon issuance of an invoice by the Seller in accordance with Section 9.3, the Seller may, upon prior written notice to the Distributor, require the Distributor to pay, by cash, check or wire transfer of immediately available funds, for any Products upon delivery of such Products, including any undelivered portion of any Accepted Order. No action (or failure to act) by the Seller pursuant to this Section 9.7 will constitute a waiver by the Seller of any other rights and remedies available to the Seller under this Agreement (including under Section 17).

10. *****.


10.1	*****.


10.2	*****.

11. Trademarks.

11.1

The Products will bear trademarks, trade names, trade dress, service marks, slogans, labels, logos and other trade identifying symbols (whether or not registered with local, state or national authorities) used, owned, or developed by the Seller, the Seller Guarantor, or one of their respective Affiliates (“Trademarks”). The Seller, in consultation with the Seller Guarantor, will determine the Trademarks to be used on and in connection with the Products. The term “Affiliate” as used in this Section 11 does not include the Distributor or any of its Affiliates (including any other Acquired Company, as such term is defined in the Sale and Purchase Agreement).


11.2	Subject to the terms and conditions of this Agreement, the Seller and the Seller Guarantor, each on behalf of itself and its Affiliates, grants the Distributor a non-exclusive, non-transferrable, non-sublicenseable, royalty-free license to use and display the Trademarks. All such use of the Trademarks by the Distributor in any

form (including, without limitation, literature, displays, websites, URLs and social media) will be subject to the approval by the Seller or the Seller Guarantor, and all such use will inure exclusively to the benefit of the Seller, the Seller Guarantor and their respective Affiliates owning the Trademarks. The Distributor will comply with the reasonable directions, instructions and restrictions issued in writing by the Seller to the Distributor regarding the use of the Trademarks.


11.3	The Distributor may, with the prior written consent of the Seller, use the Distributor’s own trademarks in connection with the Distribution of the Products, provided that such use is in accordance with Section 11.5 and any written instructions provided by the Seller.

11.4

Subject to the terms and conditions of this Agreement, the Seller and the Seller Guarantor, each on behalf of itself and its Affiliates, also grants the Distributor a non-exclusive, non-transferable, non-sublicenseable, royalty-free license under the Seller’s, Seller Guarantor’s, and their respective Affiliates’ copyrights to distribute, reproduce, use and display product information, product literature, product packaging, promotional materials, advertising, images or other copyright protected materials furnished to the Distributor during the Term (collectively, the “Seller Content”) solely in connection with Distributing the Products in the United States of America. Any reproduction of all or part of Seller Content in any publication, literature, website, social media outlet or other materials used for marketing by the Distributor will be subject to the Seller’s or the Seller Guarantor’s approval. The Distributor will comply with the reasonable directions, instructions and restrictions issued in writing by the Seller or the Seller Guarantor to the Distributor regarding the use of the Seller Content. The Distributor may not grant any sublicense to use the Seller Content without the Seller’s or the Seller Guarantor’s prior written approval.

11.5

The Distributor has no rights in the Trademarks or the Seller Content and will not assert any rights in the Trademarks or the Seller Content, except as specifically granted to the Distributor in this Agreement. Other than the express licenses granted by Sections 11.2 and 11.4, the Seller and Seller Guarantor grant no right or license to the Distributor, by implication, estoppel or otherwise, to the Products or any intellectual property rights of the Seller, Seller Guarantor, or their respective Affiliates. This Section 11.5 will survive the termination or expiration of this Agreement.

12. *****.


12.1	***. ***.


12.2	***. ***.

13. Insurance.

13.1

During the Term, the Distributor will, at its sole cost and expense, obtain, maintain and carry in full force and effect commercial general liability insurance (including product liability coverage) in a sum no less than $5,000,000, with financially sound and reputable insurers, reasonably acceptable to the Seller. The Distributor will require its insurer(s) to waive all rights of subrogation against the Seller and its insurers, and the insurance policy(ies) will name the Seller as an additional insured. The Distributor will provide evidence of such insurance required to be maintained pursuant to this Section 13.1 to the Seller upon the Seller’s request and will provide the Seller with 30 days’ advance written notice in the event of a cancellation or material change in any such insurance policy.

13.2

During the Term, the Seller Guarantor will, at its sole cost and expense, obtain, maintain and carry in full force and effect, on behalf of Seller, commercial general liability insurance (including product liability coverage) in a sum no less than $5,000,000, with financially sound and reputable insurers, reasonably acceptable to the Distributor. The Seller Guarantor will require its insurer(s) to waive all rights of subrogation against the Distributor and its insurers, and the insurance policy(ies) will name the Distributor as an additional insured. The Seller Guarantor will provide evidence of such insurance required to be maintained pursuant to this Section 13.2 to the Distributor upon the Distributor’s request and will provide the Distributor with 30 days’ advance written notice in the event of a cancellation or material change in any such insurance policy.

14. Warranties; Disclaimer.

14.1

The Products are covered by either a product-specific warranty or, if there is no product-specific warranty, by USG’s standard limited warranty, in effect at the time of the Accepted Order. In addition, as between Seller and Distributor only, and not subject to assignment to any party other than an Affiliate, Seller warrants (i) that the Products sold to Distributor will be covered by Seller’s standard warranty terms and conditions; (ii) that the Products will substantially conform with Seller’s published specifications for the Products; and (iii) that the Products comply with all Applicable Laws (as defined below) as applicable to the customary uses of the Products. Final determination of the suitability of the material for the use contemplated by the Distributor or its customer shall be the sole responsibility of Distributor or its customer, as the case may be, and the Seller shall have no responsibility in connection with such suitability. For purposes of this Agreement, “Applicable Laws” shall mean all applicable federal, state, and local laws, codes, ordinances, regulations, treaties, orders, decisions, directives and/or requirements of the United States of America.


14.2	Seller warrants that the Products supplied have been produced in compliance with laws regarding slavery, child labor or other human trafficking in the countries where those products were produced or originated and none of the products were produced

using slavery or human trafficking. This warranty applies to both Products supplied to Distributor and the materials incorporated into those Products.

14.3

Seller shall report with any proposal to Distributor, and in connection with the delivery of any Products or parts to Distributor, the existence of any “conflict minerals” (tantalum, tin, tungsten and gold) in any products to be provided. Seller must identify the country of origin of any conflict minerals, whether the conflict minerals came from scrap or recycled sources, and whether the conflict minerals came from a “Covered Country”, which is Angola, Burundi, Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda and Zambia. If the conflict minerals originate from the Covered Countries, they must not directly or indirectly finance armed groups, and Seller must explain its process for determining and verifying this information. If there are any changes to Seller’s supply base in regard to the Products that affect Seller’s certification, Seller is required to send an amended certification to Distributor. Distributor reserves the right to request any additional information on conflict minerals associated with the Products and Seller will make good faith efforts to provide the requested information. In addition, Seller agrees to maintain records reviewable by Distributor to support its certifications and acknowledges that Distributor may utilize and disclose the information in this certification in order to satisfy its disclosure obligations.


14.4	Seller certifies that all of the Products meet OSHA’s amended hazard communication regulations known as Globally Harmonized System (GHS) for Classification and Labeling of Chemicals, in each case applicable at the time of sale.

14.5

EXCEPT AS EXPLICITLY SET FORTH ABOVE, NEITHER THE SELLER, NOR ANY PERSON ON THE SELLER’S BEHALF, HAS MADE OR MAKES FOR THE DISTRIBUTOR’S BENEFIT ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER, INCLUDING ANY WARRANTIES OF (i) MERCHANTABILITY OR (ii) FITNESS FOR A PARTICULAR PURPOSE; WHETHER ARISING BY LAW, COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OF TRADE OR OTHERWISE, ALL OF WHICH ARE EXPRESSLY DISCLAIMED, THE DISTRIBUTOR ACKNOWLEDGES THAT IT HAS NOT RELIED ON ANY REPRESENTATION OR WARRANTY MADE BY THE SELLER, OR ANY OTHER PERSON ON THE SELLER’S BEHALF, EXCEPT WHERE PURCHASE OF THE PRODUCT IS SUBJECT TO NON-WAIVABLE CONSUMER PRODUCT WARRANTY LAWS, IN WHICH INSTANCES ANY APPLICABLE IMPLIED WARRANTIES CREATED BY STATUTE ARE LIMITED TO THE PERIOD OF THE APPLICABLE STATUTORY WARRANTY. THE DISTRIBUTOR REPRESENTS THAT IT IS NOT A CONSUMER AS DEFINED BY ANY APPLICABLE CONSUMER PROTECTION LAWS.

15. Indemnification; Limitations of Liability.


15.1	Indemnification.

(a)

The Distributor will indemnify, hold harmless and defend the Seller and its Affiliates, and their respective directors, officers, employees and representatives (such directors, officers, employees and representatives, collectively, “Seller Personnel”), from and against any and all Losses to the extent arising out of, or related to, any Third Party Claims alleging or relating to the Distributor’s or its Affiliates’ or any Distributor Personnel’s: (i) fraudulent or criminal conduct, or failure to comply with any Law; (ii) willful or negligent acts or omissions causing bodily injury or death of any person, or damage to real or tangible property; or (iii) breach of any representation, warranty or other provision in this Agreement.

(b)

The Seller will indemnify, hold harmless and defend the Distributor and its Affiliates, and their respective directors, officers, employees and representatives (such directors, officers, employees and representatives, collectively “Distributor Personnel”), from and against any and all Losses to the extent arising out of, or related to, any Third Party Claims alleging or relating to: (i) the Seller’s or its Affiliates’ or any Seller Personnel’s fraudulent or criminal conduct, or failure to comply with any Law; (ii) the Seller’s or its Affiliates’ or any Seller Personnel’s willful or negligent acts or omissions causing bodily injury or death of any person, or damage to real or tangible property; (iii) the Seller’s or its Affiliates’ or any Seller Personnel’s breach of any representation, warranty or other provision in this Agreement; or (iv) any claim alleging a defect in a Product sold to any Acquired Company during the Term, which Product an Acquired Company Distributes to a Third Party either during the Term or (pursuant to Section 17.4(c)) after the Term.


(c)	For purposes of this Agreement:


(i)	“Losses” will mean any and all losses, damages, Liabilities, costs and expenses of any and every nature, including reasonable attorneys’ fees and disbursements, and costs of investigation, defense, and settlement.


(ii)	“Third Party Claim” will mean any and all claims, suits, audits or other proceedings asserted by any Third Party for which indemnification may be sought under this Section 15.


15.2	Limitations of Liability.


(a)	Notwithstanding anything to the contrary in this Agreement, neither Party will be liable to the other Party for any special, incidental, indirect, punitive or consequential damages (including lost profits, loss of revenue, lost sales

or damages measured as a multiple of profits, multiple of cash flow or any similar loss or damage valuation or calculation methodologies), except to the extent such damages have been awarded or paid in connection with a Third Party Claim for which indemnification is provided under Section 15.1.

(b)

Notwithstanding anything to the contrary in this Agreement, in no event will the Seller’s aggregate liability to the Distributor for Losses arising out of, or relating to, this Agreement, whether arising out of, or related to, breach of contract, tort (including negligence) or otherwise, but excluding the Seller’s indemnification obligations set forth in Section 15.1(b), exceed an amount equal to ***** (the “Liability Cap”). For the first 12 months of this Agreement, the Liability Cap will be *****.

16. Anti-Corruption; Compliance with Laws.

16.1

The Distributor represents, warrants and covenants to the Seller and its Affiliates that the Distributor, its subsidiaries, and their respective directors, officers or employees: (a) will not after the Effective Date, directly or indirectly, pay, offer, give, demand, accept, promise to pay or authorize the payment of any gift or payment, consideration, or benefit in kind that is an illegal or corrupt practice under the U.S. Foreign Corrupt Practices Act of 1977 or any other applicable anti-bribery Law; and (b) the Distributor will immediately notify the Seller in writing of any potential or actual non-compliance with this Section 16.1. For the purposes of this Section 16.1, a “Government Official” includes any employee, agent or official of a Governmental Entity, political party, or public international organization, as well as any employee, agent or official of a commercial entity in which a Governmental Entity has an ownership interest or exerts control over such entity.


16.2	The Seller may suspend performance under this Agreement immediately with notice to the Distributor if it reasonably believes that the Distributor has breached this Section 16, until the Seller is satisfied that no breach has occurred or is likely to occur.

16.3

Each Party will comply with all Laws, decrees and other directives applicable to the each of them, and each Party acknowledges that in no event will the other Party be obligated under this Agreement to take any action that it believes, in good faith, would cause it to be in violation of any Laws, decrees or directives applicable to the Seller, the Distributor or the Distributor’s Subsidiaries. Each Party will immediately notify the other Party in writing of any potential or actual non-compliance with this Section 16.3.

17. Termination


17.1	Seller’s Right to Terminate. The Seller may terminate this Agreement, with immediate effect, by providing written notice to the Distributor if:


(a)	the Distributor breaches or is in default of any obligation hereunder and such breach or default has not been cured within 30 days after the Seller’s delivery to the Distributor of notice of such a breach or default; provided, that if such breach relates to a Payment Failure, the cure period for such breach will be five Business Days;

(b)

the Distributor commences a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or will consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or will make a general assignment for the benefit of creditors, or will fail generally to pay its debts as they become due, or will take any corporate action to authorize any of the foregoing;

(c)

an involuntary case or other proceeding is commenced against the Distributor seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding will remain undismissed and unstayed for a period of 60 days, or an order for relief will be entered against the Distributor; or

(d)

without obtaining the Seller’s prior written consent, (i) the Distributor sells, leases or exchanges a material portion of the Distributor’s assets, (ii) the Distributor attempts to assign this Agreement, or any right or obligation under this Agreement, or (iii) a change in control of the Distributor occurs. For purposes of this Section 17.1(d), a “change in control” of the Distributor is defined as any transaction or series of related transactions, including a merger, consolidation or equity sale, transfer or exchange, in which one or more Third Parties acquire, directly or indirectly, 50% or more of the total combined voting power of any class or series of capital stock of the Distributor (or the parent of the Distributor) (or surviving entity in the case of a merger or consolidation). Change in control will not include any transaction or series of related transactions transferring the voting power of the direct or indirect parent of the Distributor to one or more of the lineal descendants of Diane M. Hendricks (or to entities which such persons control or trusts for the benefit of such persons).


17.2	Distributor’s Right to Terminate. The Distributor may terminate this Agreement, with immediate effect, by providing written notice to the Seller if:


(a)	the Seller breaches or is in default of any obligation hereunder and such material breach or default has not been cured within 30 days after the Seller’s receipt from the Distributor of notice of such a breach or default.

(b)

the Seller or Seller Guarantor commences a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or will consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or will make a general assignment for the benefit of creditors, or will fail generally to pay its debts as they become due, or will take any corporate action to authorize any of the foregoing;

(c)

an involuntary case or other proceeding is commenced against the Seller or Seller Guarantor seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding will remain undismissed and unstayed for a period of 60 days, or an order for relief will be entered against the Seller; or

(d)

it is either (i) determined, pursuant to a judgment by a court of competent jurisdiction in accordance with the terms of the Sale and Purchase Agreement, that the Seller Guarantor has breached its noncompetition obligations as set forth in Section 10.11 of the Sale and Purchase Agreement (“Non-Compete Obligations”); or (ii) Parent Guarantor or Distributor obtains an preliminary injunction enjoining Seller Guarantor or any of its Affiliates from violating the Non-Compete Obligations.


17.3	Expiration or termination of this Agreement for any reason will be without prejudice to the rights and remedies of a Party with respect to any breaches by the other Parties that occurred prior to such termination or expiration.


17.4	Upon expiration or termination of this Agreement:


(a)	the Seller will have no obligation to accept any Order from the Distributor;


(b)	subject to Sections 7.5, 7.6, 9.6 and 9.7, the Seller will fill all outstanding Accepted Orders issued prior to such termination or expiration;


(c)	the Distributor will have the right to Distribute, in accordance with the terms and conditions of this Agreement, any remaining Product inventory held by it as of such expiration or termination and any Product inventory received

by the Distributor in connection with any outstanding Accepted Orders issued prior to such date;


(d)	any moneys accrued, due and payable to a Party by another Party pursuant to this Agreement will remain due and payable in the ordinary course;

(e)

the Distributor will return or destroy all documents and materials containing Confidential Information of the Seller or that contains or reflects or incorporates any Confidential Information of the Seller and permanently erase all of the Seller’s Confidential Information from its active computer systems (except that Distributor may retain a copy of such information to the extent, if at all, required by applicable Law, or as needed in connection with pending or potential litigation);

(f)

the Seller will return or destroy all documents and materials containing Confidential Information of the Distributor or that contains or reflects or incorporates any Confidential Information of the Distributor and permanently erase all of the Seller’s Confidential Information from its active computer systems (except that Seller may retain a copy of such information to the extent, if at all, required by applicable Law, or as needed in connection with pending or potential litigation);

(g)

subject to continued use in connection with the activities set forth in Section 17.4(c), the Distributor will cease using the Trademarks and any Seller Content and will cease all display, advertising, promotion and use of all Seller Content or any trademark, trade name or product designation that is similar to or confusing with any such intellectual property of or associated with the Seller and/or the Products;


(h)	subject to Section 17.4(c), the Distributor will cease to represent itself as the Seller’s authorized representative regarding the Products and will otherwise cease from all conduct or representations that may appear to the public that it is an authorized representative of the Seller; and


(i)	the Distributor will certify in writing to the Seller that it has complied with the requirements of clauses (e), (g) and (h) of this Section 17.4; the Seller will certify in writing to the Distributor that it has complied with the requirements of clause (f) of this Section 17.4.


17.5	Any indemnity or obligation of confidentiality under this Agreement is independent and, together with any other term that by its nature or operation is intended to survive termination or expiry of this Agreement, including this Section 17, Section 11.5, and Sections 15, 18, 20 and 21, survives the termination or expiration of this Agreement.

18. Confidentiality.

18.1

Each Party will cause each of its Affiliates and each of their officers, directors, employees, agents, representatives (together, “Representatives”) to hold confidential (a) the terms and conditions of this Agreement, including all pricing terms and information relating to this Agreement and the Products and (b) all information relating to the business of the other Party (including its Affiliates) disclosed to it by reason of this Agreement (such information in (a) and (b), “Confidential Information”) and will not disclose any Confidential Information of such other Party to any Third Party unless legally compelled to do so; provided, however, that to the extent that any Party may become so legally compelled or required by applicable securities laws or securities listing standards (including the filing of this Agreement or any other Transaction Agreement with the SEC) to disclose any Confidential Information of such other Party, it may only disclose Confidential Information if it will first have used reasonable efforts to, and, if practicable, will have afforded the other Party the opportunity to obtain, an appropriate protective order or other satisfactory assurance of confidential treatment for the Confidential Information required to be so disclosed; provided, further, that in the case of the filing of this Agreement or any other Transaction Agreement with the SEC, the disclosing Party agrees to use reasonable efforts to (x) advise the other Party prior to making such disclosure and (y) seek to obtain confidential treatment for the Confidential Information required to be so disclosed. Notwithstanding the foregoing, “Confidential Information” will not include any information that (w) is available to the public on the Effective Date or thereafter becomes available to the public other than as a result of a breach of this Section 18; (x) has been rightfully received by the receiving Party completely independently from a Third Party without any obligation of confidence to the disclosing Party; (y) was in the possession of the receiving Party before any disclosure by the disclosing Party; or (z) was independently developed by the receiving Party.

18.2

Confidential Information will only be disclosed to those Representatives that have a need to know such information to effectuate the terms of this Agreement. Each party will be responsible for any violation of this Section 18 by its Representatives. Notwithstanding the foregoing, the Distributor will not disclose the terms of this Agreement to its sales representatives or branch personnel unless, and in such instance only to the extent, such disclosure is strictly necessary to effectuate the terms of this Agreement; *****.

18.3

Each Party will take commercially reasonable efforts to protect the secrecy of, and avoid disclosure or use of, the other Party’s Confidential Information in order to prevent it from falling into the public domain or the possession of persons other than those persons authorized hereunder to have any such information, which measures will include at least the same degree of care that each Party uses to protect its own Confidential Information of a similar nature.


18.4	Each Party will promptly notify the other Party of any misuse or misappropriation of the other Party’s Confidential Information that comes to its attention.

18.5

The obligations set forth in this Section 18 will continue for five years after the final termination or expiration of the Term, except that to the extent that any Confidential Information constitutes a trade secret, the receiving Party’s obligations with respect to that Confidential Information will continue for five years or for such period as the information remains trade secret, whichever is longer.

19. Force Majeure. If the Seller is delayed in or prevented from performing its obligations under this Agreement, in whole or in part, due to a cause beyond its reasonable control, including an act of God, fire, flood, explosion, civil disorder, strike, lockout or other labor trouble, material shortages of utilities, facilities, labor, materials or equipment, delay in transportation, breakdown or accident, any law, order, proclamation, regulation, ordinance, demand or requirement of any governmental authority, riot, war, or other cause beyond the reasonable control of the Seller (each a “Force Majeure Event”), then upon written notice to the Distributor, (a) the affected provisions or other requirements of this Agreement will be suspended to the extent necessary during the period of such disability, and (b) subject to the requirements of Section 7.5, above, the Seller will have the right to apportion its services in an equitable manner to all users (including themselves), as determined in the Seller’s reasonable discretion. The Seller will have no liability to the Distributor or any other party in connection with any non-performance or delay in performance of the terms of this Agreement due to a Force Majeure Event. The Seller will resume full performance of this Agreement as soon as reasonably practicable following the conclusion of the Force Majeure Event.

20. Governing Law; Dispute Resolution. This Agreement will be governed by the Laws of the State of Illinois, without regard to its choice of law provisions. Any controversy, claim, or dispute arising out of or in connection with this Agreement will be settled by final and binding arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules (“Rules”), and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction; provided, however, that this section will not apply to claims for indemnity arising out of or relating to claims of third parties or to requests for injunctive relief in connection with the obligations set forth in Section 18. The arbitration will be heard by a single arbitrator appointed in accordance with the Rules and will be conducted in English. The arbitration will be conducted in Cook County, Illinois. If a controversy or claim relates to or is the subject of a mechanic’s or construction lien, the Seller may proceed in accordance with applicable Law to preserve and enforce its lien rights. TO THE FULLEST EXTENT PERMITTED BY LAW, NOTWITHSTANDING ANY ARBITRATION RULE OR PROCEDURE, (A) NO CLASS ACTION OR REPRESENTATIVE ACTIONS WILL BE PERMITTED UNDER THIS AGREEMENT, AND (B) IF ANY CLASS OR REPRESENTATIVE ACTION CANNOT BE WAIVED UNDER APPLICABLE LAW, THE PARTIES AGREE THAT SUCH ACTION WILL BE ARBITRATED. In the event that either party is required to retain the services of an attorney to enforce this Agreement or to defend against any cause of action, claim, or counterclaim brought by the other party pursuant to this Agreement, then the prevailing party will be entitled to recover the reasonable attorneys’ fees and costs which it has incurred, in addition to other remedies to which

it is entitled under applicable law, unless the adjudicator specifically finds that neither party is the prevailing party.

21. Parent Guaranty. The Parent Guarantor hereby unconditionally, absolutely and irrevocably guarantees, as a principal and not as a surety, to Seller the prompt and full performance and payment of the Distributor’s obligations, covenants, undertakings, and liabilities pursuant to this Agreement (collectively, the “Distributor Obligations”), and Seller hereby agrees and acknowledges that Parent Guarantor is a signatory to this Agreement solely for such purpose. This guaranty is an irrevocable guaranty of payment (and not just of collection) and shall continue in effect notwithstanding any extension or modification of the terms of this Agreement, any assumption of any such guaranteed obligation by any other party or any other act or event that might otherwise operate as legal or equitable discharge of Parent Guarantor under this Section 21. Subject to receiving five Business Days written notice from Seller and an opportunity to cure, Parent Guarantor waives presentment, demand and any other notice with respect to any of the Distributor Obligations and any defenses that Parent Guarantor may have with respect to any of the Distributor Obligations other than as set forth in the immediately preceding sentence.

22. Seller Guaranty. Seller Guarantor hereby unconditionally, absolutely and irrevocably guarantees, as a principal and not as a surety, to Distributor the prompt and full performance and payment of the Seller’s obligations, covenants, undertakings, and liabilities pursuant to this Agreement (collectively, the “Seller Obligations”), and Distributor hereby agrees and acknowledges that Seller Guarantor is a signatory to this Agreement solely for such purpose. This guaranty is an irrevocable guaranty of payment (and not just of collection) and shall continue in effect notwithstanding any extension or modification of the terms of this Agreement, any assumption of any such guaranteed obligation by any other party or any other act or event that might otherwise operate as legal or equitable discharge of Seller Guarantor under this Section 22. Subject to receiving five Business Days written notice from Distributor and an opportunity to cure, Seller Guarantor waives presentment, demand and any other notice with respect to any of the Seller Obligations and any defenses that Seller Guarantor may have with respect to any of the Seller Obligations other than as set forth in the immediately preceding sentence.

23. Miscellaneous.


23.1	Binding Effect and Assignment. This Agreement binds and benefits the Parties and their respective successors and assignees. The Distributor may not assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the Seller.


23.2	No Third Party Beneficiary Rights. This Agreement is not intended to and will not be construed to give any Person other than the Parties any interest or rights (including any Third Party beneficiary rights) with respect to or in connection with this Agreement or provision contained herein or contemplated hereby.


23.3	Severability. If any term or provision of this Agreement is determined to be invalid, illegal or unenforceable, the remaining terms and provisions of this Agreement remain in full force, if the essential terms and conditions of this Agreement for each

Party remain valid, binding and enforceable. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the Parties will negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

23.4

Entire Agreement; Conflicting Provisions. This Agreement, together with any Accepted Orders and warranties incorporated by reference herein pursuant to Section 7.5, constitute the final, complete and exclusive statement of the Parties’ agreement on the matters contained herein. All prior and contemporaneous negotiations and agreements between the Parties on the matters contained in this Agreement are superseded by this Agreement. In the event of any conflict between any specific provision in the body of this Agreement and the terms of any schedule to this Agreement, the terms of such schedule will control.

23.5

Counterparts. The Parties may execute this Agreement in multiple counterparts, each of which constitutes an original as against the Party that signed it, and all of which together constitute one agreement. This Agreement is effective upon delivery of one executed counterpart from each Party to the other Party. The signatures of all parties need not appear on the same counterpart. The delivery of signed counterparts by facsimile or email transmission that includes a copy of the sending Party’s signature(s) is as effective as signing and delivering the counterpart in person.

23.6

Expenses. Except to the extent specified otherwise in this Agreement, each Party will pay its own costs, professional fees and other expenses (including all legal, accounting, broker, lender or investment banking) incurred by it in connection with the transactions contemplated by this Agreement; provided that if any Party institutes any Legal Proceeding against the other Party arising out of or relating to this Agreement, the prevailing Party in such Legal Proceeding shall be entitled to receive, in addition to all other Damages to which it may be entitled to reasonable attorneys’ fees and expenses and court costs incurred by the prevailing party.


23.7	Amendment. The Parties may amend this Agreement only by a written agreement signed by the Parties and that identifies itself as an amendment to this Agreement.

23.8

Waiver. The Parties may waive a provision of this Agreement only by a writing signed by the Party against whom enforcement of the waiver is sought. A Party is not prevented from enforcing any right, remedy or condition in the Party’s favor because of any failure or delay in exercising any right or remedy or in requiring satisfaction of any condition, except to the extent that the Party specifically waives the same in writing. A written waiver given for one matter or occasion is effective only in that instance and only for the purpose stated. A waiver once given is not to be construed as a waiver for any other matter or occasion.

23.9

Notices. Each Party giving any notice required or permitted under this Agreement will give the notice in writing, and will be deemed to have been duly given: (a) when received if delivered personally; (b) when transmitted if sent by facsimile or telecopy (with transmission confirmed); (c) the day after it is sent if sent by commercial overnight courier (with receipt confirmed); (d) upon receipt if sent by certified or registered mail (return receipt requested); or (e) when transmitted if sent by email (with receipt confirmed by recipient). Notice to a Party is effective for purposes of this Agreement only if given as provided in this Section 23.9 at the address of which the sending Party has been notified in accordance with this Section 23.9.



If to the Seller or Seller
Guarantor:	USG Corporation
	550 West Adams Street
	Chicago, Illinois 60661
	Facsimile: 312.672.6815
	Attention: Chief Financial Officer
	Email: mhilzinger@usg.com

With copies to:	USG Corporation
	550 West Adams Street
	Chicago, Illinois 60661
	Facsimile: 312.672.6815
	Attention: General Counsel
	Email: mwarner@usg.com

	and

	Jones Day
	150 West Jefferson Street
	Suite 2100
	Detroit, Michigan 48226
	Facsimile: +1.313.230.7997
	Attention: Timothy Melton
	Bryan Zair
	Email: tmelton@jonesday.com
	bzair@jonesday.com



If to the Distributor:	L&W Supply Corporation
	c/o
	ABC Supply Co., Inc.
	One ABC Parkway
	Beloit, Wisconsin 53511
	Facsimile: 608.363.2449
	Attention: Todd Buehl
	Email: tbuehl@abcsupply.com

With copies to:	ABC Supply Co., Inc.
	200 Randolph Avenue
	Huntsville, Alabama 35801
	Facsimile: +1.256.539.6024
	Attention: Karl W. Leo
	Email: kleo@leo-law.com

	and

	Kirkland & Ellis LLP
	300 North LaSalle Street
	Chicago, Illinois 60654
	Facsimile: +1.312.862.2200
	Attention: R. Henry Kleeman
	Joydeep Dasmunshi
	Email: hkleeman@kirkland.com
	joydeep.dasmunshi@kirkland.com



If to the Parent
Guarantor:	ABC Supply Co., Inc.
	200 Randolph Avenue
	Huntsville, Alabama 35801
	Facsimile: +1.256.539.6024
	Attention: Karl W. Leo
	Email: kleo@leo-law.com

With copies to:	Kirkland & Ellis LLP
	300 North LaSalle Street
	Chicago, Illinois 60654
	Facsimile: +1.312.862.2200
	Attention: R. Henry Kleeman
	Joydeep Dasmunshi
	Email: hkleeman@kirkland.com
	joydeep.dasmunshi@kirkland.com

23.10

Specific Performance. The Parties agree that irreparable damage for which monetary Damages, even if available, would not be an adequate remedy, would occur if the Parties do not perform the provisions of this Agreement in accordance with its specified terms or otherwise breach such provisions. Therefore, notwithstanding anything in this Agreement to the contrary, the Parties acknowledge and agree that the Parties will be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity. Each of the Parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that the other Party has an adequate remedy at law or an award of specific performance is not an appropriate remedy for any reason at law or equity. Any Party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement will not be required to provide any bond or other security in connection with any such Order or injunction.


23.11	Construction of Agreement.


(a)	Where this Agreement states that a Party “shall,” “will” or “must” perform in some manner or otherwise act or omit to act, it means that the Party is legally obligated to do so in accordance with this Agreement.


(b)	In the negotiation of this Agreement, each Party has received advice from its own attorney. This Agreement is not to be construed for or against any Party based on which Party drafted any of the provisions of this Agreement.


(c)	The captions, titles, headings, recitals and table of contents included in this Agreement are for convenience only, and do not affect the construction or interpretation of this Agreement.


(d)	This Agreement does not, and is not intended to, confer any rights or remedies in favor of any Person other than the Parties signing this Agreement, except as may be specifically set forth in other provisions of this Agreement.


(e)	The words “including,” “includes,” or “include” are to be read as listing non-exclusive examples of the matters referred to, whether or not words such as “without limitation” or “but not limited to” are used in each instance.


(f)	The words “hereof,” “herein”, “hereunder”, and words of similar import when used in this Agreement will refer to this Agreement as a whole (including any schedules to this Agreement) and not to any particular provision of this Agreement, and section and subsection references are to this Agreement unless otherwise specified.


(g)	Any reference in this Agreement to wire transfers or other payments requires payment in United States Dollars unless some other currency is expressly stated in that reference.


(h)	Any reference in this Agreement to the singular includes the plural where appropriate. Any reference in this Agreement to the masculine, feminine or neuter gender includes the other genders where appropriate.


(i)	All schedules attached hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.


(j)	Any capitalized terms used in any schedule but not otherwise defined therein will be defined as set forth in this Agreement.


(k)	Unless otherwise provided, references to any schedules, sections or subsections refer to schedules, sections or subsections of this Agreement.

23.12

No Joint Venture. Nothing in this Agreement creates a joint venture or partnership between the Parties. This Agreement does not authorize any Party (a) to bind or commit, or to act as an agent, employee or legal Representative of, another Party, except as may be specifically set forth in other provisions of this Agreement, or (b) to have the power to control the activities and operations of another Party. The Parties are independent contractors with respect to each other under this Agreement. Each Party agrees not to hold itself out as having any authority or relationship contrary to this Section 23.12.

[Remainder of Page Intentionally Left Blank – Signature Page Follows]

The Parties have executed this Agreement as of the date first set forth above.



	USG INTERIORS, LLC


	By:	/s/ Matthew F. Hilzinger
		Name: Matthew F. Hilzinger
		Title: Vice President and Assistant Treasurer


	UNITED STATES GYPSUM COMPANY


	By:	/s/ Matthew F. Hilzinger
		Name: Matthew F. Hilzinger
		Title: Vice President and Assistant Treasurer


	USG CORPORATION (as Seller Guarantor for the limited purpose of Sections 11, 13 and 22)


	By:	/s/ Matthew F. Hilzinger
		Name: Matthew F. Hilzinger
		Title: Executive Vice President and Chief Financial Officer

[SIGNATURE PAGE TO SUPPLY AGREEMENT]



	L&W SUPPLY CORPORATION


	By:	/s/ Todd M. Buehl
		Name: Todd M. Buehl
		Title: SVP and CFO


	AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. (as Parent Guarantor for the limited purpose of Section 21)


	By:	/s/ Keith Rozolis
		Name: Keith Rozolis
		Title: CEO

[SIGNATURE PAGE TO SUPPLY AGREEMENT]

*****

SCHEDULE A-1

Product Category: *****

(4 pages redacted)

*****

Schedule A-1 – Page 1

*****

SCHEDULE A-2

Product Category: *****

(7 pages redacted)

*****

Schedule A-2 – Page 1

*****

SCHEDULE A-3

Product Category: *****

(3 pages redacted)

*****

Schedule A-3 – Page 1

*****

SCHEDULE A-4

Product Category: *****

(3 pages redacted)

*****

Schedule A-4 – Page 1

*****

SCHEDULE A-5

Product Category: *****

(3 pages redacted)

*****

Schedule A-5 – Page 1

SCHEDULE B

Locations

(4 pages redacted)

*****

Schedule B – Page 1

*****

SCHEDULE C

*****

(2 pages redacted)

*****

Schedule C – Page 1

EX-99.1 3 ex_991x1112016x8-k.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1

As USG previously disclosed, in the third quarter of fiscal year 2016, the Company has reflected the results of L&W as a discontinued operation. This Exhibit 99.1 to Form 8-K provides recast historical quarterly and annual unaudited financial information for the year ended December 31, 2015 and the nine months ended September 30, 2016, reflecting the discontinued operations.



USG CORPORATION
RECASTED CONSOLIDATED STATEMENTS OF INCOME
(millions, except share and per-share data)
(Unaudited)

	Q1 2016			Q2 2016			Q3 2016			YTD Q3 2016
Net sales	$	747		$	769		$	767		$	2,283
Cost of products sold	566			576			586			1,728
Gross profit	181			193			181			555
Selling and administrative expenses	68			71			74			213
Long-lived asset impairment charges	—			—			10			10
Recovery of receivable	(3		)	—			—			(3		)
Operating profit	116			122			97			335
Income from equity method investments	7			16			14			37
Interest expense	(40		)	(38		)	(37		)	(115		)
Interest income	2			1			—			3
Loss on extinguishment of debt	(2		)	(2		)	(1		)	(5		)
Other income, net	3			2			1			6
Income from continuing operations before income taxes	86			101			74			261
Income tax expense	(26		)	(34		)	(18		)	(78		)
Income from continuing operations	60			67			56			183
Income from discontinued operations	7			7			6			20
Net income	$	67		$	74		$	62		$	203

Earnings per average common share - basic:
Income from continuing operations	$	0.41		$	0.46		$	0.39		$	1.26
Income from discontinued operations	0.05			0.04			0.04			0.13
Net income	$	0.46		$	0.50		$	0.43		$	1.39

Earnings per average common share - diluted:
Income from continuing operations	$	0.41		$	0.46		$	0.38		$	1.25
Income from discontinued operations	0.05			0.04			0.04			0.13
Net income	$	0.46		$	0.50		$	0.42		$	1.38

Average common shares	145,819,026			145,933,165			146,043,791			145,892,390
Average diluted common shares	146,986,392			147,994,032			148,387,637			147,520,891



USG CORPORATION
RECASTED CONSOLIDATED STATEMENTS OF INCOME
(millions, except share and per-share data)
(Unaudited)

	Q1 2015			Q2 2015			Q3 2015			Q4 2015			FY 2015
Net sales	$	708		$	740		$	747		$	718		$	2,913
Cost of products sold	562			570			578			553			2,263
Gross profit	146			170			169			165			650
Selling and administrative expenses	74			76			75			77			302
Recovery of receivable	—			—			—			(6		)	(6		)
Gain on disposal of shipping operations, net	—			(1		)	—			—			(1		)
Operating profit	72			95			94			94			355
Income from equity method investments	8			13			12			15			48
Interest expense	(43		)	(40		)	(40		)	(40		)	(163		)
Interest income	1			—			—			1			2
Income and gain from the sale of equity method investment to related party	—			1			1			11			13
Loss on extinguishment of debt	(19		)	—			—			—			(19		)
Other (expense) income, net	(1		)	1			—			—			—
Income from continuing operations before income taxes	18			70			67			81			236
Income tax benefit (expense)	2			(1		)	1			738			740
Income from continuing operations	20			69			68			819			976
Income (loss) from discontinued operations	4			10			8			(7		)	15
Net income	$	24		$	79		$	76		$	812		$	991

Earnings per average common share - basic:
Income from continuing operations	$	0.13		$	0.47		$	0.46		$	5.63		$	6.70
Income from discontinued operations	0.03			0.07			0.06			(0.05		)	0.11
Net income	$	0.16		$	0.54		$	0.52		$	5.58		$	6.81

Earnings per average common share - diluted:
Income from continuing operations	$	0.13		$	0.47		$	0.46		$	5.56		$	6.62
Income from discontinued operations	0.03			0.07			0.06			(0.05		)	0.11
Net income	$	0.16		$	0.54		$	0.52		$	5.51		$	6.73

Average common shares	145,381,269			145,424,853			145,569,692			145,672,636			145,457,208
Average diluted common shares	147,176,197			146,990,178			147,534,779			147,268,303			147,246,600

EX-99.2 4 ex_992x1112016x8-k.htm EXHIBIT 99.2 Exhibit

EXHIBIT 99.2

USG CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On October 31, 2016, USG Corporation, or USG or the Company, completed the previously announced sale of L&W Supply Corporation, or L&W, to American Builders & Contractors Supply Co., Inc., or ABC Supply, for $668 million, which includes $2 million for an estimated working capital adjustment. In the third quarter of 2016, L&W was reflected as discontinued operations in the financial statements of USG.

The following unaudited pro forma condensed consolidated statements of income of USG for the nine months ended September 30, 2016 and for each of the years ended December 31, 2015, 2014, and 2013 reflect the presentation of L&W as discontinued operations in USG’s results of operations. Additionally, the following unaudited pro forma condensed consolidated statements of income of USG for the nine months ended September 30, 2016 and for the year ended December 31, 2015 reflect incremental pro forma adjustments in USG’s results of operations as if the sale of L&W had occurred on January 1, 2015. The following unaudited pro forma condensed consolidated balance sheet of USG as of September 30, 2016 assumes that the sale of L&W occurred on that date.

The unaudited pro forma condensed consolidated financial statements of USG have been derived from its historical financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and the Company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2016 filed on February 10, 2016 and October 25, 2016, respectively.

The pro forma adjustments are based on available information and certain assumptions that the Company believes are reasonable, that reflects the impacts of events directly attributable to the sale of L&W and related transaction agreements that are factually supportable, and for the purposes of the statement of income, are expected to have a continuing impact on USG.

The unaudited pro forma condensed consolidated financial statements are presented for informational purposes and are not intended to represent what USG’s actual consolidated results of operations or consolidated financial condition would have been had the sale of L&W actually occurred on the dates indicated. Additionally, the unaudited pro forma condensed consolidated financial statements are not necessarily indicative of USG’s consolidated results of operations or consolidated financial condition for any future period or as of any future date.



USG CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Nine Months Ended September 30, 2016
(millions, except share and per-share data)	Historical		Pro Forma Adjustments			Pro Forma Continuing Operations
Net sales	2,283		—			2,283
Cost of products sold	1,728		—			1,728
Gross profit	555		—			555
Selling and administrative expenses	213		—			213
Long-lived asset impairment charges	10		—			10
Recovery of receivable	(3	)	—			(3	)
Operating profit	335		—			335
Income from equity method investments	37		—			37
Interest expense	(115	)	10		(a)	(105	)
Interest income	3		—			3
Loss on extinguishment of debt	(5	)	—			(5	)
Other income, net	6		—			6
Income from continuing operations before income taxes	261		10			271
Income tax expense	(78	)	(4	)	(b)	(82	)
Income from continuing operations	183		6			189

Basic earnings per share - continuing operations	1.26					1.30
Diluted earnings per share - continuing operations	1.25					1.28

Average common shares	145,892,390					145,892,390
Average diluted common shares	147,520,891					147,520,891



USG CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 2015
(millions, except share and per-share data)	Historical		Discontinued Operations (c)		Pro Forma Continuing Operations
Net sales	3,776		(863	)	2,913
Cost of products sold	3,085		(822	)	2,263
Gross profit	691		(41	)	650
Selling and administrative expenses	317		(15	)	302
Recovery of receivable	(6	)	—		(6	)
Gain on disposal of shipping operations, net	(1	)	—		(1	)
Operating profit	381		(26	)	355
Income from equity method investments	48		—		48
Interest expense	(163	)	—		(163	)
Interest income	2		—		2
Income and gain from the sale of equity method investment to related party	13		—		13
Loss on extinguishment of debt	(19	)	—		(19	)
Income from continuing operations before income taxes	262		(26	)	236
Income tax benefit	729		11		740
Income from continuing operations	991		(15	)	976

Basic earnings per share - continuing operations	6.81				6.70
Diluted earnings per share - continuing operations	6.73				6.62

Average common shares	145,457,208				145,457,208
Average diluted common shares	147,246,600				147,246,600



USG CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 2014
(millions, except share and per-share data)	Historical		Discontinued Operations (c)		Pro Forma Continuing Operations
Net sales	3,724		(820	)	2,904
Cost of products sold	3,070		(791	)	2,279
Gross profit	654		(29	)	625
Selling and administrative expenses	339		(16	)	323
Litigation settlement charge	48		—		48
Long-lived asset impairment charges	90		—		90
Contract termination charge and loss on receivable	15		—		15
Operating profit	162		(13	)	149
Income from equity method investments	33		—		33
Interest expense	(179	)	—		(179	)
Interest income	1		—		1
Income from equity method investment with related party	2		—		2
Gain on deconsolidation of subsidiaries and consolidated joint ventures	27		—		27
Income from continuing operations before income taxes	46		(13	)	33
Income tax expense	(7	)	—		(7	)
Income from continuing operations	39		(13	)	26

Basic earnings per share - continuing operations	0.27				0.18
Diluted earnings per share - continuing operations	0.26				0.17

Average common shares	141,722,616				141,722,616
Average diluted common shares	144,296,316				144,296,316



USG CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 2013
(millions, except share and per-share data)	Historical		Discontinued Operations (c)		Pro Forma Continuing Operations
Net sales	3,570		(778	)	2,792
Cost of products sold	2,989		(757	)	2,232
Gross profit	581		(21	)	560
Selling and administrative expenses	320		(18	)	302
Restructuring charges	3		1		4
Operating profit	258		(4	)	254
Loss from equity method investments	(1	)	—		(1	)
Interest expense	(203	)	—		(203	)
Interest income	3		—		3
Income from equity method investment with related party	2		—		2
Income from continuing operations before income taxes	59		(4	)	55
Income tax expense	(11	)	—		(11	)
Income from continuing operations	48		(4	)	44

Basic earnings per share - continuing operations	0.45				0.40
Diluted earnings per share - continuing operations	0.44				0.39

Average common shares	108,891,703				108,891,703
Average diluted common shares	111,434,543				111,434,543



USG CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 2016
			Discontinued Operations (c)		Pro Forma Adjustments			Pro Forma Continuing Operations
(in millions)	Historical		Discontinued Operations (c)		Pro Forma Adjustments			Pro Forma Continuing Operations
Assets
Cash and cash equivalents	634		—		398		(e)(f)	1,032
Short-term marketable securities	102		—		—			102
Receivables	197		—		30		(g)	227
Inventories	228		—		—			228
Income taxes receivable	4		—		—			4
Other current assets	37		—		—			37
Assets related to discontinued operations	385		(385	)	—			—
Total current assets	1,587		(385	)	428			1,630
Property, plant and equipment	1,700		—		—			1,700
Deferred income taxes	636		—		(151	)	(d)	485
Equity method investments	674		—		—			674
Other assets	64		—		—			64
Total assets	4,661		(385	)	277			4,553

Liabilities and Stockholders’ Equity			—
Accounts payable	222		—		—			222
Accrued expenses	165		—		—			165
Current portion of long-term debt	300		—		—			300
Income taxes payable	7		—		—			7
Liabilities related to discontinued operations	118		(118	)	—			—
Total current liabilities	812		(118	)	—			694
Long-term debt	1,677		—		(248	)	(f)	1,429
Deferred income taxes	3		—		—			3
Pension and other postretirement benefits	357		—		—			357
Other liabilities	183		—		—			183
Total liabilities	3,032		(118	)	(248	)		2,666
Common stock	15		—		—			15
Additional paid-in capital	3,034		—		—			3,034
Accumulated other comprehensive loss	(331	)	—		—			(331	)
Retained earnings (accumulated deficit)	(1,089	)	—		258		(d)(f)(g)	(831	)
Total stockholders’ equity	1,629		—		258			1,887
Total liabilities and stockholders’ equity	4,661		(118	)	10			4,553

Notes to the Unaudited Condensed Pro Forma Financial Statements


(a)	Reflects the estimated reduction in interest expense for the period of April 1, 2016 through September 30, 2016 related to the $250 million of 7.875% senior notes due 2020 that became callable on March 30, 2016.


(b)	Reflects the income tax effects of the pro forma adjustment at the Company's effective tax rate.


(c)	Reflects the adjustments to remove the historical balances and results of operations of L&W. Balances are net of intercompany transactions.


(d)	The following reflects the estimated gain on sale of our L&W business if we had completed the sale on September 30, 2016:



	Pro Forma Adjustment
Net cash proceeds from sale of L&W (e)	$	658
Less: Net assets sold	267
Less: Tax expense	151
Gain on sale, net	$	240

The gain on sale excludes additional estimated expenses and gains incurred as a result of the disposition of L&W including the curtailment gain of the U.S. postretirement medical plan.


(e)	Reflects the use of the net cash proceeds of a $670 million sale price less a $2 million working capital adjustment and $10 million in transaction fees:



	Pro Forma Adjustment
Net cash proceeds from sale of L&W	658
Less: Repayment of 7.875% senior notes and premiums (f)	260
Total pro forma adjustment to cash	398


(f)	Reflects the repayment of $250 million 7.875% senior notes due 2020 and the write-off of corresponding deferred financing fees of $2 million. The debt repayment assumes premiums paid of $10 million for aggregate consideration of $260 million.


(g)	Adjustment to reflect the L&W trade receivable owed to United States Gypsum Company and USG Interiors, LLC at the time of sale.