8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 9, 2004

USG Corporation

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation) 1-8864
(Commission File Number) 36-3329400
(IRS Employer Identification No.)

125 South Franklin Street, Chicago, Illinois 60606-4678

(Address of Principal executive offices, including Zip Code)

(312) 606-4000

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

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:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 1.01 Entry Into a Material Definitive Agreement.
	Item 8.01. Other Events.
	Item 9.01 Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
2005 Annual Management Incentive Program
Fourth Amendment to Retirement Plan
Sixth Amendment to Supplemental Retirement Plan

Item 1.01 Entry Into a Material Definitive Agreement.

     On November 9, 2004, the Compensation Committee of the Board of Directors of USG Corporation (the Corporation) approved the Corporation’s 2005 Annual Management Incentive Program. No awards have been granted under the 2005 Annual Management Incentive Program, and the program remains subject to review and change by the Compensation Committee and/or the Board of Directors of the Corporation.

     The Corporation’s executive officers and managers with position values above a specified threshold are eligible for annual incentive cash awards under the provisions of the 2005 Annual Management Incentive Program. Approximately 270 officers and managers are eligible to participate in the Corporation’s annual management incentive program in 2004.

     Fifty percent of the participant’s target award is based on strategic focus targets, with an award adjustment factor ranging from 0.5 (after achieving the minimum threshold performance level) to 2.0 for maximum attainment. Fifty percent of the target award is based on corporate net earnings, subject to potential adjustments for certain significant non-operational charges. A percentage of earnings fund a pool from which awards based on corporate net earnings awards are paid. As earnings increase, the percent of earnings allocated to the pool decreases. Participants receive a share of earnings proportionate to their par award. There is no maximum award for this segment of the program. The Compensation Committee reviews strategic focus targets and corporate earnings attainments. In addition, a special award may be recommended for any participant or non-participant, other than an officer of the Corporation, who has made an extraordinary contribution to the Corporation’s welfare or earnings.

     A copy of the 2005 Annual Management Incentive Program is filed as exhibit 10.1 hereto and is incorporated herein by reference.

Item 8.01. Other Events.

     On November 4, 2004, the Corporation amended each of the USG Corporation Retirement Plan and the USG Corporation Supplemental Retirement Plan to conform these plans to the terms of the Corporation’s new Key Employee Retention Plan (adopted in May 2004) that removes post-December 31, 2004 Key Employee Retention Plan awards from the respective earnings calculation and determination of benefits under such plans. The amendments to the USG Corporation Retirement Plan and the USG Corporation Supplemental Retirement Plan are filed as exhibits 10.2 and 10.3, respectively, and are incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

     (c) Exhibits

Exhibit No.	Description
10.1	2005 Annual Management Incentive Program
10.2	Fourth Amendment to USG Corporation Retirement Plan
10.3	Sixth Amendment to USG Corporation Supplemental Retirement Plan

SIGNATURES

     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
	/s/ Peter K. Maitland
Date: November 17, 2004	Peter K. Maitland,
	Vice President, Compensation, Benefits, & Administration

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EXHIBIT INDEX

Exhibit No.	Description
10.1	2005 Annual Management Incentive Program
10.2	Fourth Amendment to USG Corporation Retirement Plan
10.3	Sixth Amendment to USG Corporation Supplemental Retirement Plan

EX-10.1

Exhibit 10.1

Year 2005

Annual
Management Incentive
Program

USG Corporation

PURPOSE

To enhance USG Corporation’s ability to attract, motivate, reward and retain key employees of the Corporation and its operating subsidiaries and to align management’s interests with those of the Corporation’s stockholders by providing incentive award opportunities to managers who make a measurable contribution to the Corporation’s business objectives.

INTRODUCTION

This Annual Management Incentive Program (the “Program”) is in effect from January 1, 2005 through December 31, 2005.

ELIGIBILITY

Individuals eligible for participation in this Program are those officers and other key employees occupying management positions in Broadband 11 or higher. Employees who participate in any other annual incentive program of the Corporation or any of its subsidiaries are not eligible to participate in this Program but could be considered for special awards.

GOALS

For the 2005 Annual Management Incentive Program, Consolidated Net Earnings and consolidated, subsidiary and profit center Strategic Focus Targets will be determined by the Compensation and Organization Committee of the USG Board of Directors (the “Committee”) after considering recommendations submitted from management of USG Corporation and the Operating Subsidiaries.

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AWARD VALUES

For the Annual Management Incentive Program, position target incentive values are based on level of accountability and are expressed as a percent of approved annualized salary. Resulting award opportunities represent a fully competitive incentive opportunity for 100% (target) achievement of goals:

Position Title or	Position Target
Salary Reference Point	Incentive
• Chairman & CEO, USG Corporation		90	%
• Executive Vice President & Chief Financial Officer, USG Corporation		60	%
• Executive Vice President, USG Corporation & President Building Systems
• Executive Vice President Marketing & Corporate Strategy, USG Corporation and President International
• Executive Vice President & General Counsel, USG Corporation
• Vice President Human Resources, USG Corporation		45	%
• Vice President Communications, USG Corporation
• Vice President, USG Corporation & President & COO, L & W Supply Corp.		40	%
• Vice President & Chief Technology Officer
• Vice President & Controller, USG Corporation
• Vice President & Treasurer, USG Corporation
• Vice President Research & Technology, USG Corporation
• Vice President Compensation, Benefits & Administration, USG Corporation
• Corporate Secretary & Associate General Counsel, USG Corporation
• Position Reference Point: $177,660 and over		35	%
• Position Reference Point: $163,200 — $177,659		30	%
• Position Reference Point: $148,800 — $163,199		25	%
• Position Reference Point: $133,620 — $148,799		20	%
• Position Reference Point: $119,040 — $133,619		15	%
• Position Reference Point: $104,820 — $119,039		10	%

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AWARDS

Incentive awards for all participants in the 2005 Annual Management Incentive Program will be reviewed and approved by the Committee. For all participants, the annual incentive award par opportunity is the annualized salary in effect on April 1, 2005 multiplied by the applicable position target incentive value percent.

Incentive awards for 2005 will be based on a combination of the following elements:

I. CONSOLIDATED NET EARNINGS 50% OF INCENTIVE

Consolidated Net Earnings will be as reported on the Corporation’s year-end financial statements with adjustments for significant non-operational charges. Such adjustments have in the past been for Fresh Start Accounting, asbestos, restructuring charges, bankruptcy expenses and the cumulative impact of new accounting pronouncements (goodwill impairment). For 2005, likely adjustments would include bankruptcy expenses. For all participants, this portion of the award represents 50% of the incentive par. This portion of the award will be paid from a pool funded by Consolidated Net Earnings results according to the following schedule:

$0 to $50 Million Net Earnings	2.50% of this tier will fund the pool
$51 to $150 Million Net Earnings	2.25% of this tier will fund the pool
$151 to $400 Million Net Earnings	1.75% of this tier will fund the pool
$401 Million and above	1.00% of this tier will fund the pool

Each tier of earnings is calculated separately and added together to determine the total pool. This amount is then divided by the total plan par (sum of each individual participant’s Net Earnings par, which is 50% of each participant’s total par). The factor derived from this method is then applied to each participant’s Net Earnings par to determine the individual award for this segment. There is no maximum award in this segment.

II. STRATEGIC FOCUS TARGETS: 50% OF INCENTIVE

Strategic Focus Targets will be measurable, verifiable and derived from the formal strategic planning process. For 2005, Strategic Focus Targets will generally include Overhead Reduction, Working Capital Reduction, Cost Reduction, and Business Unit Operating Profit. The award adjustment factor for this segment will range from 0.5 (after achieving a minimum threshold performance level) to 2.0 for maximum attainment. The weighting on any individual Strategic Focus Target will be in 5% increments and not be less than 10%. The weighting of all assigned Strategic Focus Targets will equal 50% of the individual’s total par.

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WEIGHTINGS OF PROGRAM ELEMENTS

All participants in this Program, including the fourteen most senior executives, will have the same overall weightings, 50% on Consolidated Net Earnings and 50% on Strategic Focus Targets.

SPECIAL AWARDS

In addition to the incentive opportunity provided by this Program, a special award may be recommended for any participant or non-participant, other than a Corporation Officer, who has made an extraordinary contribution to the Corporation’s welfare or earnings.

GENERAL PROVISIONS

1.	The Compensation and Organization Committee of the USG Board of Directors reserves the right to adjust award amounts either up or down based on its assessment of the Corporation’s overall performance relative to market conditions.
2.	The Committee shall review and approve the awards recommended for officers and other employees who are eligible participants in the 2005 Annual Management Incentive Program. The Committee shall submit to the Board of Directors, for their ratification, a report of the awards for all eligible participants including corporate officers approved by the Committee in accordance with the provisions of the Program.
3.	The Committee shall have full power to make the rules and regulations with respect to the determination of achievement of goals and the distribution of awards. No awards will be made until the Committee has certified financial achievements and applicable awards in writing.
4.	The judgement of the Committee in construing this Program or any provisions thereof, or in making any decision hereunder, shall be final and conclusive and binding upon all employees of the Corporation and its subsidiaries whether or not selected as beneficiaries hereunder, and their heirs, executors, personal representatives and assignees.
5.	Nothing herein contained shall limit or affect in any manner or degree the normal and usual powers of management, exercised by the officers and the Board of Directors or committees thereof, to change the duties or the character of employment of any employee of the Corporation or to remove the individual from the employment of the Corporation at any time, all of which rights and powers are expressly reserved.
6.	The awards made to employees shall become a liability of the Corporation or the appropriate subsidiary as of December 31, 2005 and all payments to be made hereunder will be made as soon as practicable after said awards have been approved by the Committee.

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ADMINISTRATIVE GUIDELINES

1.	Award values will be based on annualized salary in effect on April 1, 2005 for each qualifying participant. Any change in duties, dimensions or responsibilities of a current position resulting in an increase or decrease in salary range reference point or market rate will result in pro-rata incentive award. Respective reference points, target incentive values or goals will be applied based on the actual number of full months of service at each position.
2.	As provided by the Program, no award is to be paid to any participant who is not a regular full-time employee, (or a part time employee as approved by the Vice President Human Resources, USG Corporation) in good standing at the end of the calendar year to which the award applies. However, if an eligible participant with three (3) or more months of active service in the Program year subsequently retires, becomes disabled, dies, is discharged from the employment of the Company without cause, or is on an approved unpaid leave, the participant (or beneficiary) may be recommended for an award which would otherwise be payable based on goal achievement, prorated for the actual months of active service during the year.
3.	Employees participating in any other incentive or bonus program of the Corporation or a Subsidiary who are transferred during the year to a position covered by the Annual Management Incentive Program will be eligible to receive a potential award prorated for actual full months of service in the two positions with the respective incentive program and target incentive values to apply. For example, a Marketing Manager promoted to Director, Marketing on August 1, will be eligible to receive a pro-rata award for seven months based on the Marketing Manager Plan provisions and values, and for five months under the Annual Management Incentive Program provisions and target incentive values.
4.	In the event of transfer of an employee from an assignment which does not qualify for participation in any incentive or bonus plan to a position covered by the Annual Management Incentive Program, the employee is eligible to participate in the Annual Management Incentive Program with any potential award prorated for the actual months of service in the position covered by the Program during the year. A minimum of three months of service in the eligible position is required.
5.	Participation during the current Program year for individuals employed from outside the Corporation is possible with any award to be prorated for actual full months of service in the eligible position. A minimum of three full months of eligible service is required for award consideration.
6.	Exceptions to established administrative guidelines can only be made by the Committee.

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EX-10.2

EXHIBIT 10.2

FOURTH AMENDMENT
OF
USG CORPORATION RETIREMENT PLAN

(As Amended and Restated Effective as of January 1, 1999)

          WHEREAS, USG Corporation Retirement Plan (the “plan”) is maintained by USG Corporation (the “company”), which plan was amended and restated on December 29, 1999, effective as of January 1, 1999; and

          WHEREAS, it now is deemed desirable and in the best interests of the employers under the plan and their employees to further amend the plan;

          NOW, THEREFORE, pursuant to the amending power reserved to the company under subsection 14.1 of the plan, the plan is further amended, effective as indicated, in the following particulars:

          1. Effective January 1, 2005, by substituting the following for that portion of subsection 4.5 of the Plan that follows subparagraph 4.5(d):

“(e)	any SELECTBENEFITS credits realized as a result of the exchange of vacation time or medical plan coverage for compensation under USG SelectBenefits; and
(f)	any payments made under USG Corporation Key Employee Retention Plan (and any similar or successor plan) after December 31, 2004.

Compensation paid to a participant by a USG Company or a predecessor company for a period of service before the participant became a participant that is designated as benefit service pursuant to subparagraph 4.4(b) or (d) shall be considered as compensation paid by the employers in determining the participant’s “earnings”. Except as otherwise provided in the next preceding sentence, any compensation paid to an employee or participant by a USG Company that is not an employer under the plan or by a predecessor company (or that would have been paid but for the employee’s or participant’s salary reduction authorization in effect under a defined contribution plan or cafeteria plan by any such corporation) shall not be considered as “earnings” for purposes of the plan. Any lump sum payment payable to a participant as a “hiring bonus” or cash incentive to become employed by a USG Company (even if such payment is contingent on the participant remaining employed by a USG Company for a specified period of time) shall be considered earnings for purposes of the plan.”

          2. Effective January 1, 2004, by adding the following subparagraph 5.8(c) to the plan:

“(c) The provisions of subparagraph 7.8(c) shall apply to the payment of disability retirement income (except any portion thereof payable in a lump sum) to the extent described therein.”

          3. Effective as of January 1, 2004, by substituting the following for subparagraph 7.4(c) of the plan:

“(c) Level Payment Option. If a participant retires on an early retirement date and payment of the participant’s monthly retirement income begins on his retirement date and before the earliest date the participant is eligible to receive Old Age Insurance Benefits under the Social Security Act, a larger monthly retirement income payable to the participant until the first to occur of the date of the participant’s death or the earliest date on which the participant becomes eligible to apply for and to receive Old Age Insurance Benefits under the Social Security Act, and, where the full actuarial equivalent of the normal form and amount of the participant’s retirement income has not been provided under the option, with a

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continuance of a smaller amount of retirement income benefit after the earliest date on which the participant becomes eligible to apply for and to receive Old Age Insurance Benefits under the Social Security Act and until the participant’s death.”

          4. Effective January 1, 2004, by adding the following new subparagraph 7.8(c) to the plan:

“(c) Retroactive Annuity Starting Date. In accordance with rules established by the committee and under such circumstances as the committee may determine, a participant may elect that his retirement benefits commence as of a retroactive annuity starting date that is prior to the date the participant receives the explanation described in subparagraph 7.7(a) above, provided (A) the participant was otherwise entitled to commence his retirement benefits as of such annuity starting date under the terms of the plan, (B) the participant shall not actually receive a distribution until at least 30 days after the participant has received the written explanation described above (or has waived the 30-day period), and (c) the participant’s spouse consents to such commencement in the manner described in Section 7.7. A participant may not elect such a retroactive annuity starting date with respect to any benefits that are payable in a lump sum. If a participant elects a retroactive annuity starting date, the amount of the participant’s benefit payments shall be determined as of the retroactive annuity starting date elected by the participant, and the participant shall receive a one-time lump sum payment equal to the sum of the payments attributable to the period between the retroactive annuity starting date and the date benefits actually commence (increased by interest at the rate determined in Paragraph A-4 as of the date such payment is made).”

          5. Effective July 1, 2004, by substituting the following for Paragraphs A-5 and A-6 of Supplement A to the Plan:

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     “A-5. Other Forms.

(a)	For purposes of determining actuarial equivalence between forms of benefit payment under the plan (other than calculation of lump sum actuarially equivalent values in accordance with paragraph A-4 and the calculation of the level payment option actuarially equivalent values in accordance with subparagraph (b) below), the interest rate used under the plan is 7 percent.
(b)	For purposes of determining actuarial equivalence of the level payment option under subparagraph 7.4(c), the interest rate shall be the average of the annual rates of interest on 30-year Treasury securities, as announced by the Treasury Department pursuant to Section 417(e)(3)(A)(ii)(II), for the November prior to the calendar year in which the participant’s benefits are to commence.

     A-6. Mortality. The mortality factors under the plan shall be taken from the 1994 Uninsured Pensioner Mortality Table projected to 2002 (UP94@2002) with weighted annuity factors assuming a population of 90 percent males and 10 percent females. Notwithstanding the above, for purposes of determining the lump sum actuarially equivalent value and the level payment option of a participant’s benefit, the mortality factors shall be those set forth in the unisex table (50% male/50% female) described in Revenue Ruling 2001-62.”

          IN WITNESS WHEREOF, the company has caused these presents to be signed by its officer thereunto duly authorized this 4th day of November, 2004.

USG CORPORATION
By:	/s/ PETER K. MAITLAND
	Vice President, Compensation,
	Benefits And Administration

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EX-10.3

EXHIBIT 10.3

SIXTH AMENDMENT
OF
USG CORPORATION SUPPLEMENTAL RETIREMENT PLAN

(As Amended and Restated Effective as of July 1, 1997)

     WHEREAS, USG Corporation Supplemental Retirement Plan (the “Plan”), established effective January 1, 1976 and amended from time to time, was last amended and restated in its entirety effective as of July 1, 1997; and

     WHEREAS, amendment of the Plan now is considered desirable;

     NOW, THEREFORE, pursuant to the amending power reserved to USG Corporation as the “Company” under Section 7 of the Plan, as amended, the Plan be and is further amended, effective January 1, 2005, by deleting the last sentence of subsection 3.2 of the Plan.

     IN WITNESS WHEREOF, the Company has caused these presents to be signed on its behalf by an officer thereunto duly authorized this 2nd day of November, 2004.

USG CORPORATION
By:	/s/ PETER K. MAITLAND
	Its: Vice President, Compensation,
	Benefits And Administration