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): February 15, 2005

USG Corporation

(Exact name of registrant as specified in its charter)

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

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
SIGNATURES
EXHIBIT INDEX
2005 Annual Management Incentive Program

Item 1.01 Entry Into a Material Definitive Agreement

     On February 9, 2005, the USG Corporation Board of Directors ratified prior year bonus awards (to be reported in its 2005 proxy statement) and approved current salary levels for the Named Executives (as well as for other executive officers) as follows:

Named Executive	2005 Salary Level		2004 Bonus Award
William C. Foote, Chairman, President and Chief Executive Officer	$	995,000	$	884,272
Richard H. Fleming, Executive Vice President and Chief Financial Officer	$	485,000	$	231,914
Edward M. Bosowski, Executive Vice President, Marketing and Corporate Strategy; President, USG International	$	410,000	$	193,686
James S. Metcalf, Executive Vice President; President, Building Systems	$	455,000	$	206,429
Stanley L. Ferguson, Executive Vice President and General Counsel	$	385,000	$	180,944

     On the same date the USG Corporation Board of Directors approved strategic focus targets (which represent 50% of the target earned for each participant) under the 2005 Management Incentive Program applicable to the Named Executives, as follows: wallboard cost 10%, Auratone gross margin 10%, L&W Supply Corporation sales 10%, total overhead 10%, and working capital 10%. The Compensation and Organization Committee of the Board of Directors contemporaneously amended the Corporation’s 2005 Annual Management Incentive Program (as filed with the Securities and Exchange Commission on November 17, 2004) to reflect increases of position reference points of two and one-half percent (2.5%) under the section titled “Award Values” and modifying Item six under “General Provisions” to preclude application of deferred compensation regulations adopted by the Internal Revenue Service.

     A copy of the 2005 Annual Management Incentive Plan, as amended, is filed as exhibit 10.1 hereto and is incorporated herein by reference

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: February 15, 2005	Peter K. Maitland, Vice President,
	Compensation, Benefits, and Administration

EXHIBIT INDEX

Exhibit Numer	Description
10.1	2005 Annual Management Incentive Program, as amended.

 2

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.

1

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 Incentive
Salary Reference Point
•      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: $182,160 and over		35	%
•      Position Reference Point: $167,280 — $182,159		30	%
•      Position Reference Point: $152,520 — $167,279		25	%
•      Position Reference Point: $137,040 — $152,519		20	%
•      Position Reference Point: $122,040 — $137,039		15	%
•      Position Reference Point: $107,520 — $122,039		10	%

2

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, Business Unit Operating Profit and other operational priorities. 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.

3

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, but in any event before two and one half months after December 31, 2005, after said awards have been approved by the Committee.

4

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.

5