Exhibit 10.40
 
BUILDING MATERIALS HOLDING CORPORATION
2008 ANNUAL INCENTIVE PROGRAM
 
WHEREAS, the Company obtained shareholder approval of the Building Materials
Holding Corporation 2004 Incentive and Performance Plan (the "Plan"), which
authorizes the Committee under Section 4.6 to grant annual incentive awards
("Annual Incentive Awards") based on the performance of Building Materials
Holding Corporation ("BMHC" or the "Company);
 
WHEREAS, the Compensation Committee of the Board of Directors (the "Committee")
established this 2008 Annual Incentive Program (the "Incentive Program") for
certain employees of BMHC ("Participants") to increase the value of the Company
by aligning the interests of the Participants with those of the stockholders of
the Company through the granting of Annual Incentive Awards;
 
WHEREAS, the Committee on March 28, 2008 approved the final terms of 2008
Incentive Program; and
 
NOW, THEREFORE, the Company, through the foregoing actions of the Committee,
hereby adopts the following Incentive Program effective January 1, 2008.
 
1.   Calculation of Annual Incentive Award
 
a.   Financial Performance. The Annual Incentive Award for financial performance
achieved is based on (i) Return on Net Assets (RONA) and (ii) Earnings Before
Interest Taxes Depreciation & Amortization (EBITDA) performance by the Company
for fiscal year 2008 ("Fiscal Year 2008"). The RONA amount and EBITDA amount is
multiplied by a funding percentage to determine separate pools from which
Participants' Annual Incentive Awards will be paid based on each Participant's
designated individual share of such pool. Each participant’s percentage
allocation is determined by dividing the assigned shares by the total
department’s assigned shares. Shares are assigned based on experience and level
of responsibility. Allocation percentage may vary based on staffing levels and
the number of participants. Each Participant shall receive an Annual Incentive
Award Summary setting forth the following features applicable to the
Participant:
 

·  
Funding percentages for pools from RONA and EBITDA,

 

·  
The calculation of financial pool in which the Participant is granted shares,

 

·  
The Participant's number of shares in the financial pool, and

 

·  
Participant’s individual projected award

 
The financial performance of any business acquired by the Company shall be
included in the calculation of RONA and EBITDA on an as-incurred basis. Gains or
losses on the sale of real estate by the Company shall be included in the
calculation of RONA and EBITDA. Other extraordinary or non-recurring gains or
losses, including, without limitation, impairments due to an accounting rule
change or other factor outside of management's control and not related to the
ongoing operations of the Company, shall not be included in the calculation of
RONA and EBITDA unless specifically provided by the Committee. FAS 142
intangible impairments shall not be included in the calculation of RONA and
EBITDA unless specifically included by the Committee.
 
 
 

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b.   Strategic Goals. Upon completion of the following strategic goals, a
Participant shall receive a share of the strategic pool assigned to the
Participant based on the number of shares allocated to the Participant compared
to the total number of shares allocated to the assigned pool. Each Participant
shall receive an Annual Incentive Award Summary setting forth:
 

·  
The Participant's number of shares in the strategic pool, and

 

·  
Participant’s individual projected award.

 
The strategic goals for 2008 are:
 

1)   
integration of general ledgers of SelectBuild business units to the Boise Oracle
accounting system;

 

2)   
integration of SelectBuild payroll processing function into the BMHC/ADP payroll
system;

 

3)   
integration of NxTrend accounts payable systems of SelectBuild into the Boise
accounts payable system, and

 

4)   
integration of all accounts payable into the Boise accounts payable system.

 
In order for the strategic goals portion of the Annual Incentive Award to be
paid, all 4 goals must be accomplished in 2008.
 
2.   Calculation of Annual Incentive Awards.
 
Calculation of the financial performance award and determination if the
strategic goals have been achieved is performed by BMHC's Controller and Human
Resources Department, whose determination shall be final and binding on
Participants. The shares allocated to each pool may increase or decrease based
on changes in the number of Participants in a pool.
 
3.   Payment of Annual Incentive Award
 
a.    Financial Performance.
 
The Annual Incentive Award for financial performance shall not be deemed to be
earned by a Participant or payable to Participant until the end of Fiscal Year
2008 (December 31, 2008). Such final determination and payment of the financial
performance portion of the Annual Incentive Award (if any) shall be made within
the first quarter following the end of Fiscal Year 2008.
 
b.    Strategic Goals.
 
Payment of the strategic goals portion of the Annual Incentive Award shall be
made following a determination and announcement of completion of the strategic
goals.
 
c.    Method of Payment.
 
Payment of Annual Incentive Awards shall be made in the form of a cash lump sum,
unless deferred in accordance with BMHC's deferred compensation plan for
eligible employees. Payment will also be made in the same format as the
participant’s regular payroll, either direct deposit or live check. In no event
may the value of an Annual Incentive Award exceed $5,000,000.
 
3.    Terms
 
 
 

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a.    Participant must be an active employee of the Company as of the end of
Fiscal Year 2008 (December 31, 2008) in order to receive payment of the
financial performance portion of the Annual Incentive Award and must be an
active employee of the Company as of the date of announcement of achievement of
the strategic goals portion of the Annual Incentive Award.
 
b.    Payments made pursuant to this Incentive Program are subject to all
required federal, state and local withholding taxes.
 
c.    It is the intent of the parties that the provisions of this Incentive
Program conform to the requirements of Section 409A of the Internal Revenue Code
of 1986 (the "Code") and any final Treasury Regulations or other authoritative
guidance issued thereunder, if such Code section is applicable, and the
Incentive Program shall be so construed and interpreted. In the event that the
Company determines in good faith that any provision of this Incentive Program
does not comply with Section 409A of the Code, the Company may amend this
Incentive Program to the minimum extent necessary to cause the Incentive Program
to comply. In the event that the Company determines in good faith that payment
of an Annual Incentive Award pursuant to Section 2 hereof would violate Section
409A of the Code, then such award instead shall be paid on the date Participant
incurs a separation from service from the Company as defined in Section
409A(a)(2)(A)(i) of the Code (or six months after such date if Section
409A(a)(2)(B)(i) of the Code applies).
 
4.   Administration
 
The Incentive Program shall be administered by the Committee. Any determination
made by the Committee in interpreting or administering the Incentive Program
shall be final and binding upon Participant. Payments under the Incentive
Program are intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, and the Incentive Program shall be
administered consistently with those requirements.
 
5.   No Alienation, Assignment or Encumbrance of Payments
 
A Participant’s interest hereunder may not be alienated, assigned or encumbered,
except by will, beneficiary designation, or the laws of descent and
distribution, or as otherwise approved by the Company in writing.
 
6.   No Employment Contract; No Effect on other Plans
 
This Incentive Program shall not be deemed to be a contract of employment
between the Company and Participant. Nothing contained herein shall give
Participant the right to be retained in the employ of the Company or shall
interfere with the right of the Company to discharge Participant at any time,
with or without reason, for any reason or for no reason. This Incentive Program
does not affect Participant’s right to participate in any other plan or program
sponsored by the Company, including, without limitation, any discretionary bonus
that Participant may be eligible to receive from time to time.
 
7.   Definitions
 
a.    "RONA" Return on Net Assets as determined by the Company's Controller
based on the Company's audited financial statements.
 
b.    "EBITDA" Earnings before Interest, Taxes, Depreciation and Amortization as
determined by the Company's Controller based on the Company's audited financial
statements.
 
8.   Governing Law
 
 
 

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The Incentive Program shall be governed by, and construed in accordance with,
the laws of the State of Idaho without regard to its conflicts of law
principles.
 
9.   Captions
 
The captions of this Incentive Program are for convenience and reference only
and in no way define, describe, extend or limit the scope or intent of this
Incentive Program or the intent of any provision hereof.
 
10.       Severability
 
Any provision of this Incentive Program which is deemed invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction and subject to
this paragraph, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Incentive
Program invalid, illegal, or unenforceable in any other jurisdiction.
 
 
 
 

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