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Material Modification to Rights of Security

Since 2013, USG Corporation (the

Company

) has had a Rights Agreement and Protective Amendment (each defined below) in place to protect the value of the Companys $1.9 billion of net operating loss carryforwards (

NOLs

) and related tax benefits. These protections are scheduled to expire on March 22, 2016 and May 9, 2016, respectively, subject to other earlier termination events as described in the documents. In connection with the Companys required triennial review of the Rights Agreement, the Board of Directors (the

Board

) of the Company approved, and on November 16, 2015 the Company entered into, Amendment No. 4 (the

Rights Agreement Amendment

) to the Rights Agreement to, among other items, extend the expiration date to May 31, 2019, subject to other earlier termi nation events as described therein.

The Companys ability to use its NOLs could be substantially reduced if the Company experiences an ownership change, as defined under Section 382 of the Internal Revenue Code of 1986, as amended, and the Rights Agreement and Protective Amendment have been designed to prevent such an ownership change. Ownership changes generally relate to the cumulative change in ownership among stockholders with an ownership interest of 5% or more (as determined under Section 382s rules) over a rolling three-year period. Under the Rights Agreement, if any person or group acquires 4.9% or more of the outstanding shares of common stock, there would be a triggering event causing significant dilution in the ownership interest of such person or group, subject to certain exempt transactions. The Rights Agreement Amendment extends the 4.9% beneficial ownership threshold under the Rights Agreement until May 31, 2019, subject to other earlier termination events as described therein. The Company expects to submit the Rights Agreement Amendment to an advisory vote at the Companys 2016 annual meeting of stockholders.

In connection with the Rights Agreement Amendment, the Board also recommended that at the Companys 2016 annual meeting, stockholders vote to extend the Protective Amendment to the Companys Restated Certificate of Incorporation...


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