NONQUALIFIED
STOCK OPTION AGREEMENT
WHEREAS,
the “Optionee” is an employee of USG Corporation (the
“Company”) or a Subsidiary;
WHEREAS,
the Board of Directors of the Company (the “Board”) has
granted to the Optionee, as set forth in the Grant Summary on the
Smith Barney website the “Date of Grant”, an Option
Right (the “Option”) pursuant to the Company’s
Long-Term Incentive Plan, as amended (the “Plan”) to
purchase Common Shares of the Company at a price per share, which
represents the Market Value per Share on the Date of Grant (the
“Option Price”), subject to the terms and conditions of
the Plan and the terms and conditions hereinafter set
forth;
WHEREAS,
the execution of a Nonqualified Stock Option Agreement
substantially in the form hereof to evidence the Option has been
authorized by a resolution of the Board; and
WHEREAS,
the Option is intended as a nonqualified stock option and shall not
be treated as an “incentive stock option” within the
meaning of that term under Section 422 of the Internal Revenue
Code of 1986, as amended.
NOW,
THEREFORE, the Company and the Optionee agree as
follows:
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(a)
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Subject to Sections 1(b) and (c), Section 3 and Section 5
below, the Option will become exercisable as set forth in the Grant
Summary if the Optionee remains continuously employed until such
time. To the extent the Option is exercisable, it may be exercised
in whole or in part.
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(b)
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Notwithstanding Section 1(a) above, the Option shall become
immediately exercisable in full, if at any time prior to the
termination of the Option, a Change in Control shall
occur.
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(c)
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Notwithstanding Section 1(a) above, if the Optionee should die or
become permanently and totally disabled while in the employ of the
Company or any Subsidiary, or the Optionee should Retire (as
hereinafter defined) (“Retirement”), this Option shall
immediately become exercisable in full and shall remain exercisable
until terminated in accordance with Section 3 below. The
Grantee shall be considered to have become permanently and totally
disabled if the Grantee has suffered a total disability within the
meaning of the Company’s Long-Term Disability Plan for
Salaried Employees. “Retire” shall mean the
Optionee’s retirement under a retirement plan (including,
without limitation, any
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supplemental retirement plan) of the Company or any Subsidiary, or
the Optionee’s retirement from employment with the Company or
any Subsidiary after completing at least three years of continuous
service with the Company or any Subsidiary and attaining the age of
62.
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2.
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Payment.
The Option Price shall be payable (a) in cash or by check
acceptable to the Company, (b) by actual or constructive
transfer to the Company of nonforfeitable, unrestricted Common
Shares that have been owned by the Optionee for more than six
(6) months prior to the date of exercise, or (c) by a
combination of such methods of payment; provided however, that
clauses (b) and (c) shall not apply if the Optionee is
residing in Canada. The requirement of payment in cash shall be
deemed satisfied if the Optionee shall have made arrangements
satisfactory to the Company with a bank or a broker who is a member
of the National Association of Securities Dealers, Inc. to sell on
the exercise date a sufficient number of the shares being purchased
so that the net proceeds of the sale transaction will at least
equal the Option Price plus payment of any applicable withholding
taxes and pursuant to which the bank or broker undertakes to
deliver the full Option Price plus payment of any applicable
withholding taxes to the Company on a date satisfactory to the
Company, but not later than the date on which the sale transaction
will settle in the ordinary course of business.
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3.
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Termination.
This Option shall terminate on the earliest of the following
dates:
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(a)
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The date on which the Optionee ceases to be an employee of the
Company or any Subsidiary, if the Optionee’s employment with
the Company or a Subsidiary is terminated for Cause (for purposes
of this Agreement and regardless of the meaning of such term under
labor laws of the place where the Optionee resides,
“Cause” being defined as (i) failure by the Optionee to
substantially perform the Optionee’s duties, or (ii)
misconduct by the Optionee in violation of the Company’s or
any Subsidiary’s established business rules and procedures,
or (iii) breach of any confidentiality, non-competition or
non-solicitation agreement entered into between the Optionee and
the Company);
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(b)
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Six (6) months after the Optionee ceases to be an employee of
the Company or a Subsidiary, unless the Optionee ceases to be such
employee by reason of death, permanent and total disability,
Retirement or termination for Cause;
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(c)
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One (1) year after the death of the Optionee if the Optionee
dies while an employee of the Company or a Subsidiary (in which
case the Option becomes immediately exercisable in full pursuant to
Section 1(c) herein);
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(d)
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Three (3) years after the permanent and total disability of
the Optionee if the Optionee becomes permanently and totally
disabled (as described in Section 1(c) above) while an employee of
the Company or a Subsidiary (in which case the Option becomes
immediately exercisable in full pursuant to Section 1(c)
herein);
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(e)
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Five (5) years after the date that the Optionee shall
Retire;
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(f)
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Ten (10) years from the Date of Grant; and
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(g)
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Immediately upon a finding by the Board (or a committee of the
Board) that the Optionee has engaged in any fraud or intentional
misconduct as described in Section 17 hereof.
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4.
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Option Nontransferable.
This Option is not transferable by the Optionee otherwise than by
will or the laws of descent and distribution.
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5.
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Compliance with Law.
This Option shall not be exercisable if such exercise would involve
a violation of any applicable federal, state or other securities
law.
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6.
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Adjustments.
The Board (or a committee of the Board) shall make such adjustments
in the Option Price and in the number or kind of Common Shares or
other securities covered by this Option as the Board (or a
committee of the Board) in its sole discretion, exercised in good
faith, may determine is equitably required to prevent dilution or
enlargement of the rights of the Optionee that otherwise would
result from (a) any stock dividend, extraordinary dividend,
stock split, combination of shares, recapitalization or other
change in the capital structure of the Company, or (b) any
Change in Control, merger, consolidation, spin-off, split-off,
spin-out, split-up, reorganization or partial or complete
liquidation, or other distribution of assets, issuance of rights or
warrants to purchase securities, or (c) any other corporate
transaction or event having an effect similar to an
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