This statement constitutes Amendment No. 2 ("Amendment
No. 2") to the Statement on Schedule 13D, dated May 6, 1993, as
amended by Amendment No. 1, dated January 7, 1994 (collectively,
the "Schedule 13D"), filed by Water Street Corporate Recovery
Fund I, L.P. ("Water Street"), Goldman, Sachs & Co. ("Goldman
Sachs") and The Goldman Sachs Group, L.P. ("GS Group" and
together with Water Street and Goldman Sachs, the "Reporting
Persons") in respect of the beneficial ownership by the
Reporting Persons of shares of the common stock, par value $.10
per share (the "Common Stock"), of USG Corporation, a Delaware
corporation (the "Company"). Capitalized terms used but
otherwise not defined herein shall have the meaning ascribed to
them in the Schedule 13D.
Item 4 is hereby amended as follows:
Item 4. Purpose of the Transaction.
On February 16, 1994, the Company filed
Amendment No. 1 to its registration statement for an
underwritten public offering of Common Stock (the "Offering").
The registration statement was originally filed on January 7,
1994. Amendment No. 1 covers the sale in the Offering of
4,000,000 shares of Common Stock by Water Street (4,750,000
shares if the underwriters' overallotment options are exercised
in full).
Item 5 is hereby amended as follows:
Item 5. Interest in Securities of the Issuer.
As described in Item 4 above, on February 16,
1994, the Company filed Amendment No. 1 to its registration
statement for an underwritten public offering of Common Stock
of 6,000,000 shares of Common Stock by the Company (6,750,000
shares if the underwriters' overallotment options are exercised
in full) and 4,000,000 shares of Common Stock by Water Street
(4,750,000 shares if the underwriters' overallotment options
are exercised in full). Assuming consummation of the Offering,
(i) Water Street would beneficially own 11,893,231 shares of
Common Stock (11,143,231 shares if the underwriters'
overallotment options are exercised in full) and Warrants to
purchase 116,070 shares of Common Stock and (ii) Goldman Sachs
and GS Group would beneficially own 11,989,770 shares of Common
Stock (11,239,770 shares if the underwriters' overallotment
options are exercised in full) and Warrants to purchase 116,070
shares of Common Stock. Based on the foregoing, Water Street
would beneficially own (without giving effect to the Warrants
owned by Water Street) 28% (25% if the underwriters'
overallotment options are exercised in full) and Goldman Sachs
and GS Group would beneficially own (without giving effect to
the Warrants owned by Water Street) 28% (26% if the
<PAGE>
underwriters' overallotment options are exercised in full), in
each case, of the outstanding shares of Common Stock after the
Offering. Assuming that Water Street exercises all of its
Warrants, but that no other Warrants are exercised, Water
Street would beneficially own 28% (26% if the underwriters'
overallotment options are exercised in full) and Goldman Sachs
and GS Group would beneficially own 28% (26% if the
underwriters' overallotment options are exercised in full), in
each case, of the outstanding shares of Common Stock after the
Offering.
Item 6 is hereby amended as follows:
Item 6. Contracts, Arrangements, Understandings
or Relationships with Respect to Securities of
the Issuer.
In connection with the Offering, the Reporting
Persons entered into a letter agreement, dated February 22, 1994
(the "Letter Agreement"), with the Company, a copy of which is
filed as Exhibit F to this Amendment No. 2 and incorporated by
reference.
Water Street and the Company have agreed that if
the number of shares of Common Stock to be registered and
included in the Offering is equal to 10,000,000 shares
(11,500,000 shares if the underwriters' overallottment options
are exercised), the Company and Water Street will include
6,000,000 shares and 4,000,000 shares, respectively (6,750,000
shares and 4,750,000 shares, respectively, if the underwriters'
overallotment options are exercised in full).
Under the Letter Agreement, Water Street (and,
if it distributes Common Stock to the partners of Water Street,
those partners) may not request a demand registration of Common
Stock until a period of 120 days after the effective date of
the Offering. The Letter Agreement also contemplates that (i)
Water Street would enter into an underwriting agreement
containing customary terms and conditions and (ii) Water Street
and Goldman Sachs would enter into an agreement with the
underwriters to the effect that, during the 120-day period
after the effective date of the Offering, Water Street and
Goldman Sachs will not sell or otherwise dispose of any shares
of Common Stock or Warrants, except that, at any time after 90
days after the effective date of the Offering, Water Street may
distribute all or any portion of its shares of Common Stock or
Warrants to its partners in accordance with its governing
partnership agreement and, except that, Water Street and
Goldman Sachs may exercise their Warrants. In the event of any
such distribution by Water Street, the partners (other than
<PAGE>
Goldman Sachs) would not be subject to the restriction on
selling shares of Common Stock during the remainder of the 120-
day period. The shares distributed to the partners (other than
the partners, if any, who are "affiliates" of the Company (as
such term is defined under the Securities Act of 1933, as
amended (the "Securities Act"))) would be freely tradeable
without registration under the Securities Act and without
regard to the requirements of Rule 144 under the Securities
Act, and the shares distributed to any partner which is an
affiliate of the Company would be freely tradeable pursuant to
Rule 144.
The holdback and lock-up arrangements described
above would terminate if the effective date of the Offering does
not occur by April 30, 1994. If Water Street withdraws its
request to include shares of Common Stock in the Offering or
otherwise does not sell any shares of Common Stock in the
Offering, Water Street may, by written notice to the Company,
elect to terminate the Letter Agreement.
The foregoing description is qualified in its
entirety by reference to the Letter Agreement a copy of which
is filed as Exhibit F and is incorporated by reference.
Item 7. Material to be Filed as Exhibits
(F) Letter Agreement, dated February 22, 1994,
between the Company and the Reporting
Persons.
<PAGE>
SIGNATURE
Each of the undersigned certifies, after reasonable
inquiry and to the best of its knowledge and belief, that the
information set forth in this statement is true, complete and
correct.
WATER STREET CORPORATE RECOVERY
FUND I, L.P.
By: GOLDMAN, SACHS & CO.
General Partner
By: /s/ Richard A. Friedman
Name: Richard A. Friedman
Title: General Partner
GOLDMAN, SACHS & CO.
By: /s/ Richard A. Friedman
Name: Richard A. Friedman
Title: General Partner
THE GOLDMAN SACHS GROUP, L.P.
By: /s/ Richard A. Friedman
Name: Richard A. Friedman
Title: General Partner
Dated: February 22, 1994
<PAGE>
Index to Exhibits
Exhibit
Description
Page
(F)
Letter Agreement,
dated February 22,
1994 between the
Company and the
Reporting Persons.
7
<PAGE>
Exhibit F
LETTER AGREEMENT
February 22, 1994
USG Corporation
125 South Franklin Street
Chicago, Illinois 60606
Gentlemen:
Reference is made to the letter agreement, dated
February 25, 1993 (the "Original Letter Agreement"), among USG
Corporation, a Delaware corporation ("USG"), Water Street
Corporate Recovery Fund I, L.P., a Delaware limited partnership
("Water Street"), The Goldman Sachs Group, L.P., a Delaware
limited partnership ("GS Group"), and Goldman, Sachs & Co., a New
York limited partnership ("Goldman Sachs"). Capitalized terms
used but not otherwise defined herein shall have the meanings
ascribed to them in the Original Letter Agreement.
On January 7, 1994, USG filed a registration statement
on Form S-1 (No. 33-51845) under the Securities Act of 1933, as
amended (the "Securities Act"), in connection with the proposed
underwritten public offering (the "Proposed Offering") of shares
of common stock, par value $.10 per share, of USG ("Common
Stock").
This letter agreement (the "Agreement") confirms the
following agreements and understandings between us:
1. Number of Shares.
(a) USG currently intends to register for sale in
the Proposed Offering 10,000,000 shares of Common Stock
(11,500,000 shares if the underwriters' overallotment option or
options are exercised in full). If that number of shares of
Common Stock is included in the Proposed Offering, USG and Water
Street will include 6,000,000 shares and 4,000,000 shares,
respectively (6,750,000 shares and 4,750,000 shares,
respectively, if the underwriters' overallotment option or
options are exercised in full).
<PAGE>
(b) For purposes of this Section 1, "Primary
Shares" shall mean the number of shares of Common Stock included
in the Proposed Offering that are not subject to the
underwriters' overallotment option or options; and "Option
Shares" shall mean the number of shares of Common Stock included
in the Proposed Offering that are subject to the underwriters'
overallotment option or options and equal to 15% of the total
number of Primary Shares.
(c) If the number of Primary Shares to be
registered and included in the Proposed Offering is greater than
10,000,000 and is equal to or less than 12,000,000 shares, (x)
USG shall be entitled to include in the Proposed Offering a
number of Primary Shares equal to the sum of (A) 6,000,000 plus
(B) 50% of the excess of the number of Primary Shares to be
registered over 10,000,000; (y) Water Street shall be entitled to
include in the Proposed Offering a number of Primary Shares equal
to the sum of (A) 4,000,000 plus (B) 50% of the excess of the
number of Primary Shares to be registered over 10,000,000; and
(z) each of USG and Water Street shall be entitled to include 50%
of the Option Shares.
(d) If the number of Primary Shares to be
registered and included in the Proposed Offering exceeds
12,000,000 shares, (x) USG shall be entitled to include 7,000,000
Primary Shares and 900,000 Option Shares in the Proposed
Offering; and (y) Water Street shall be entitled to include in
the Proposed Offering a number of Primary Shares equal to the
total number of Primary Shares less 7,000,000 and a number of
Option Shares equal to the total number of Option Shares less
900,000.
(e) Water Street may elect to include in the
Proposed Offering a lesser number of shares of Common Stock than
it is entitled to include in the Proposed Offering under
Section 1(c) or 1(d). If Water Street so elects, USG shall be
entitled to include additional shares of Common Stock in the
Proposed Offering up to the difference between the number of
shares that Water Street includes in the Proposed Offering and
the number of shares that Water Street is entitled to include in
the Proposed Offering.
(f) If the underwriters' overallotment option or
options are exercised, in whole or in part, in the Proposed
Offering, the underwriters shall purchase an equal number of
Option Shares from each of USG and Water Street until the
underwriters have purchased the total number of Option Shares to
be issued and sold by exercise of such option or options.USG
upon
<PAGE>
2. Limitation on Requests for Registration. Water
Street (and any assignees of Water Street's rights under Section
4.1 of the Original Letter Agreement) shall not request any
registration of shares of Common Stock pursuant to Section 4.1 of
the Original Letter Agreement until a period of 120 days shall
have elapsed from the effective date (the "Effective Date") of
the registration statement for the Proposed Offering.
3. Limitation on Sale of Securities. (a) Unless
Water Street withdraws its request to include shares of Common
Stock in the Proposed Offering pursuant to the Original Letter
Agreement or otherwise does not include any shares of Common
Stock in the Proposed Offering, Water Street shall enter into an
underwriting agreement substantially in the form attached hereto
as Exhibit A, when and if USG enters into such underwriting
agreement.
(b) Water Street and Goldman Sachs shall enter
into an agreement (the "Lock-Up Agreement") with the underwriters
for the Proposed Offering at the time (i) Water Street enters
into an underwriting agreement for the Proposed Offering, or (ii)
Water Street withdraws its request to include shares of Common
Stock in the Proposed Offering pursuant to the Original Letter
Agreement or otherwise does not include any shares of Common
Stock in the Proposed Offering, unless it elects to terminate
this Agreement pursuant to Section 6.1(b) (in which event the
provisions of the Original Letter Agreement shall apply).
Pursuant to the Lock-Up Agreement, Water Street and Goldman Sachs
shall agree not to offer, sell or contract to sell, or otherwise
dispose of, directly or indirectly, or announce the offering of,
any other shares of Common Stock or any securities convertible
into, or exercisable or exchangeable for, shares of Common Stock
for a period of 120 days from the Effective Date, without the
consent of such underwriters, except that Water Street may
distribute such shares or securities held by it to its partners
at any time after 90 days following the Effective Date, which
partners (other than Goldman Sachs) shall not be bound by the
limitations contemplated by this Section 3(b), and except that
any Goldman/Water Entity may exercise its Warrants to purchase
Common Stock.
4. Stock Certificates. As promptly as practicable, and in
any event within two days, after consummation of the Proposed
Offering, USG shall instruct any transfer agent and registrar of
the Common Stock to prepare and deliver, as promptly as
practicable, and in any event within 10 days after consummation
of the Proposed Offering, to Water Street (or a nominee as Water
Street directs), certificates representing, in the aggregate, the
number of shares of Common Stock equal to the number of shares of
Common Stock represented by the certificate or certificates
<PAGE>
surrendered by Water Street in connection with the Proposed
Offering, less the number of shares of Common Stock sold by Water
Street in the Proposed Offering; and USG shall facilitate such
preparation and delivery and shall use its reasonable best
efforts to cause such transfer agent and registrar to prepare and
deliver such certificates. Such certificates shall be in such
denominations and registered in the name of Water Street or such
other name or names as Water Street requests. Water Street shall
certify to USG its best estimate, based on the then current
market price of the Common Stock, of the number of shares of
Common Stock attributable to the limited partners in Water Street
(other than Goldman Sachs and its affiliates); based on
Sections 5(a) and 5(b), the certificate or certificates
evidencing such number of shares of Common Stock shall not be
imprinted with or otherwise bear any legend; and the certificate
or certificates evidencing the remaining shares of Common Stock
shall be imprinted with the legend set forth in Section 6.5 of
the Original Letter Agreement and no other legend. USG shall not
impose, and shall instruct any transfer agent and registrar of
the Common Stock to release, any stop transfer orders covering
the shares of Common Stock represented by the unlegended
certificates. The Common Stock represented by such unlegended
certificates may not be sold, transferred, pledged or otherwise
disposed of, except pursuant to a distribution to any of Water
Street's partners in accordance with the terms of Water Street's
limited partnership agreement and not in violation of the Lock-up
Agreement.
5. Distributions by Water Street; Stock Certificates.
(a) USG acknowledges receipt of the opinion of Fried, Frank,
Harris, Shriver & Jacobson, special counsel to Water Street, in
the form attached hereto as Exhibit B and the certificate of
Water Street, in the form attached hereto as Exhibit C (the
"Water Street Certificate"). After, but on the same day that,
Water Street distributes shares of Common Stock or Warrants or
both to its partners, Water Street shall furnish to USG (i) an
opinion of counsel to Water Street, substantially in the form of
Exhibit B (but with appropriate changes to reflect the number of
shares sold in the Proposed Offering, the number of shares of
Common Stock then outstanding and other relevant factual
differences), to the effect that (A) if a limited partner in
Water Street is not an affiliate of USG, such limited partner
(other than Goldman Sachs and its affiliates as to which counsel
need express no opinion) may sell the Common Stock and Warrants
received by it in such distribution without registration under
the Securities Act in reliance on Section 4(1) thereof and (B) if
a limited partner in Water Street is an affiliate of USG, such
limited partner may sell the Common Stock and Warrants received
by it in such distribution in accordance with Rule 144 under the
Securities Act; and (ii) a certificate of Water Street, to
substantially the same effect and substantially in the form of
<PAGE>
Exhibit C, except that (A) such certificate may identify
exceptions to the certifications in paragraphs 2(b), 6(b), 7, 8,
9, and 10 of the Water Street Certificate and (B) paragraph 3 of
the Water Street Certificate may be revised to reflect the then
current market price of the Common Stock, the number of shares of
Common Stock sold in the Proposed Offering and the number of
shares of Common Stock then outstanding.
(b) The parties agree that, based on paragraphs 4
and 5 of the Water Street Certificate, if Water Street
distributes any shares of Common Stock or Warrants or both to its
partners:
(i) such partners (other than any
Goldman/Water Entity) shall not be subject to any restrictions
under the Original Letter Agreement on the sale, transfer or
other disposition of the shares of Common Stock and Warrants
distributed to them; provided, however, that partners to which
rights under Article 4 of the Original Letter Agreement are
assigned shall be subject to the obligations under such Article
4;
(ii) each Goldman/Water Entity shall be bound
by the provisions of the Original Letter Agreement (and such
provisions shall terminate) in accordance with their terms (it
being understood that the Original Letter Agreement provides that
none of the Goldman/Water Entities will, directly or indirectly,
sell, transfer, pledge or otherwise dispose of any shares of
Common Stock, except for any sale, transfer, pledge or
disposition set forth in Section 1.3 thereof); and
(iii) (A) if such partner is not an affiliate
of USG, such partner (other than Goldman Sachs and its
affiliates) may sell the shares of Common Stock and Warrants
distributed to it without registration under the Securities Act
in reliance on Section 4(1) thereof and (B) if such partner is an
affiliate of USG, such partner may sell the shares of Common
Stock and Warrants distributed to it in accordance with Rule 144
under the Securities Act.
If the certifications in paragraphs 4 or 5 of the Water
Street Certificate with respect to any limited partner are not
correct, either when made or in the future due to a change in the
facts with respect to such limited partner, then the agreements
by USG pursuant to this Section 5(b) with respect to such limited
partner shall terminate, and the agreements by USG pursuant to
this Section 5(b) with respect to all of the other limited
partners shall continue in full force and effect.
<PAGE>
(c) Upon written request by Water Street in
connection with any distribution of shares of Common Stock,
Warrants or both to its partners, USG shall instruct any transfer
agent and registrar of the Common Stock and of the Warrants to
prepare and deliver to Water Street (or a nominee as Water Street
directs), as promptly as practicable, and in any event within 10
days after such written request, and upon surrender to the
transfer agent of outstanding certificates representing shares of
Common Stock or Warrants being distributed to such partners in
Water Street, new certificates representing, in the aggregate,
such number of shares of Common Stock and Warrants, in such
denominations and registered in such names as Water Street
requests; and USG shall facilitate such preparation and delivery
and shall use its reasonable best efforts to cause such transfer
agent and registrar to prepare and deliver such certificates.
Subject to Section 5(d), none of the certificates evidencing the
shares of Common Stock and Warrants being distributed by Water
Street to the partners in Water Street shall be imprinted with or
otherwise bear any legend.
(d) The certificates evidencing shares of Common
Stock and Warrants being distributed by Water Street to the
Goldman/Water Entities and their affiliates shall be imprinted
with the legend set forth in Section 6.5 of the Original Letter
Agreement and no other legend. If, immediately after such
distribution, any certificates representing shares of Common
Stock or Warrants owned by any Goldman/Water Entity or their
affiliates are not imprinted with the legend set forth in Section
6.5 of the Letter Agreement, then (i) such Goldman/Water Entity
and affiliate shall surrender such certificates to the transfer
agent of the Common Stock or the Warrants, as the case may be;
and (ii) such transfer agent shall prepare and deliver to such
Goldman/Water Entity or affiliate, as the case may be (or a
nominee as directed by them), as promptly as practicable, and in
any event within 10 days after such surrender, new certificates
representing the number of shares of Common Stock and Warrants
represented by the surrendered certificates, in such
denominations and registered in such names as such Goldman/Water
Entity or such affiliate shall request. Such new certificates
shall be imprinted with the legend set forth in Section 6.5 of
the Original Letter Agreement and no other legend. USG shall
facilitate such preparation and delivery and shall use its
reasonable best efforts to cause such transfer agent and
registrar to prepare and deliver such certificates.
(e) At any time the Goldman/Water Entities
beneficially own (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) less than 5% of the then
outstanding shares of Common Stock, upon written request by the
Goldman/Water Entities and delivery to the transfer agent of the
Common Stock of an opinion of counsel to the Goldman/Water
Entities to the effect that the Goldman/Water Entities may sell
the Common Stock or Warrants represented by the unlegended
<PAGE>
certificates delivered to them under this Section 5(e) without
registration under the Securities Act in reliance on Section 4(1)
thereof, USG shall instruct any transfer agent and registrar of
the Common Stock to prepare and deliver to the Goldman/Water
Entities and their affiliates (or a nominee as directed by them),
as promptly as practicable, and in any event within 10 days after
such written request, and upon surrender of any outstanding
certificates representing shares of Common Stock and Warrants,
new unlegended certificates representing such shares of Common
Stock and Warrants, in such denominations and registered in such
names as the Goldman/Water Entities and their affiliates shall
request; and USG shall facilitate such preparation and delivery
and shall use its reasonable best efforts to cause such transfer
agent and registrar to prepare and deliver such certificates.
USG shall not impose, and shall instruct any transfer agent and
registrar of the Common Stock and of the Warrants to release, any
stop transfer orders covering the shares of Common Stock and
Warrants being distributed to persons whose certificates will be
unlegended.
6. Miscellaneous.
6.1 Termination. (a) Sections 1, 2 and 3 of
this Agreement shall terminate and be of no further force and
effect if the Effective Date does not occur by April 30, 1994.
The remainder of this Agreement shall survive such termination.
(b) If Water Street withdraws its request to
include shares of Common Stock in the Proposed Offering or
otherwise does not sell any shares of Common Stock in the
Proposed Offering, Water Street may, by written notice to the
Company, elect to terminate this Agreement, in which case this
Agreement shall terminate and be of no further force and effect.
If Water Street withdraws such request or otherwise does not sell
any shares of Common Stock in the Proposed Offering and Water
Street does not elect to terminate this Agreement, this Agreement
shall remain in full force and effect.
6.2 Entire Agreement. This Agreement and the
Original Letter Agreement embody the entire agreement and all
understandings between the parties hereto and supersede all prior
agreements and understandings relating to the subject matter
hereof.
6.3 Full Force and Effect. Except to the extent
amended hereby, all of the provisions of the Original Letter
Agreement shall remain in full force and effect.
<PAGE>
6.4 Governing Law. This Agreement shall be
governed by and construed in accordance with the domestic laws of
the State of New York, without giving effect to any choice of law
or conflict of laws provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State
of New York.
6.5 Further Assurances. Each party hereto shall
do and perform or cause to be done and performed all such further
acts and things and shall execute and deliver all such other
agreements, certificates, instruments and documents as any other
party may request in order to carry out the intent and accomplish
the purpose of this Agreement and the consummation of the
transactions contemplated hereby.
6.6 Amendments and Waivers. This Agreement may
not be changed, modified or discharged orally, nor may any
waivers or consents be given orally hereunder, and every such
change, modification, discharge, waiver or consent shall be in
writing and signed by the party against which enforcement thereof
is sought. No such amendment or waiver shall extend to or affect
any obligation not expressly amended or waived or impair any
right consequent thereon.
6.7 Binding Effect. This Agreement shall inure
to the benefit of and shall be binding upon the parties hereto
and their respective legal representatives, successors and
assigns.
6.8 Headings. Article, section and other
headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this
Agreement.
6.9 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to be
an original, but all of which shall constitute one and the same
agreement.
6.10 Notices. All notices and other communications
which are required to be or may be given or furnished under this
Agreement shall be given in accordance with Section 8.9 of the
Original Letter Agreement.
6.11 Affiliates. Imprinting the certificate or
certificates evidencing the shares of Common Stock or Warrants
owned by any affiliate of the Goldman/Water Entities with the
legend set forth in Section 6.5 of the Original Letter Agreement
<PAGE>
shall not be deemed an agreement or admission on the part of the
Goldman/Water Entities or such affiliate that such affiliate or
the shares of Common Stock or Warrants owned by such affiliate
are bound by or otherwise subject to the Original Letter
Agreement (other than, if such affiliate is assigned rights under
Article 4 of the Original Letter Agreement, for obligations under
such Article 4).
<PAGE
If the foregoing accurately reflects our agreement,
please so indicate by signing and returning to the undersigned a
copy of this letter, whereupon this letter shall constitute the
binding obligations of the parties hereto.
Very truly yours,
WATER STREET CORPORATE RECOVERY FUND I,
L.P.
By: Goldman, Sachs & Co.
General Partner
By: ________________________________
Title: General Partner
THE GOLDMAN SACHS GROUP, L.P.
By: ________________________________
Title: General Partner
GOLDMAN, SACHS & CO.
By: ________________________________
Title: General Partner
Executed and agreed to
this 22nd day of February, 1994
USG CORPORATION
By: ________________________________
Title:
<PAGE>
