|EXHIBIT 10.40


EMPLOYMENT
AGREEMENT


This
Employment Agreement (the Agreement) is made and entered into
as of this day of June 1, 2002, by and between Robert E. Mellor
(Executive), and Building Materials Holding Corporation, a
Delaware corporation (the Company).


WITNESSETH


WHEREAS,
Executive is currently employed by the Company as its Chairman, Chief Executive Officer
and President;


WHEREAS,
Executive and the Company are parties to an Amended and Restated Senior Management and
Key Employee Severance Agreement (the Severance Agreement); and


WHEREAS,
the Company wishes to extend the duration of Executives services and
further clarify the terms and conditions of his employment by entering into this
Agreement with Executive and Executive is willing to commit his services to the
Company, on the terms and conditions set forth below.


NOW,
THEREFORE, in consideration of the premises and the mutual covenants herein
contained, Executive and the Company hereto agree as follows:


1.    Term


This
Agreement shall commence on the date hereof, and shall continue in effect for an
initial 5-year period (the Initial Term). Upon completion of
the Initial Term, the term of this Agreement shall be automatically extended for
two additional one-year periods unless either party shall have provided written
notice to the other party, at least 60 days prior to the end of the Initial Term
or the first extended term, as the case may be, that it elects not to extend the
term of the Agreement. The Initial Term and any extended term are sometimes
referred to in this Agreement as the Employment Term.


2.    Employment


2.1
Engagement.The Company hereby employs Executive and Executive hereby
agrees to be employed by the Company, subject to the terms and conditions herein
set forth. During the Initial Term and any extended term, Executive shall be
employed as Chief Executive Officer and Chairman of the Company, and shall be
responsible for the duties normally and customarily attendant to such offices.
Executive shall render such other services and duties of an executive nature
consistent with the duties of a senior executive officer of the Company as may
from time to time be designated by the Board of Directors (the
Board).


2.2
Exclusive Employment. During the Employment Term, Executive shall devote
his full business time to his duties and responsibilities set forth in Section
2.1. Without limiting the generality of the foregoing, Executive shall not,
without the prior written approval of the Board, during the Employment Term,
render services of a business, professional or commercial nature
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|to any other person, firm or
corporation, whether for compensation or otherwise, except that Executive may engage in
civic, philanthropic and community service activities so long as such activities do not
materially interfere with Executives ability to comply with this Agreement and are
not otherwise in conflict with the policies or interest of the Company, and Executive may
serve on the board of directors of two companies without Company approval.


3.    
Compensation and General Benefits


3.1
Base Salary. During the term of this Agreement, the Company shall pay
Executive a base salary in an annualized amount equal to five hundred sixty
thousand dollars ($560,000) (Base Salary) payable pro rata on
the Companys regular payday, and subject to adjustment as hereinafter
provided.


3.2
Salary Reviews. Executives Base Salary shall be reviewed annually
by the Compensation Committee of the Board for the purpose of considering
increases thereof. In conducting this review, the Compensation Committee of the
Board shall consider appropriate factors, including, without limitation,
Executives performance, the Companys financial condition and
compensation afforded to senior executives of comparable corporations. The Base
Salary shall not be decreased without the written consent of Executive.


3.3
Bonus.


(a)
During the Employment Term, in addition to the Base Salary provided by Section
3.1, Executive will participate in the Companys Annual CEO Incentive Plan
(the Annual Bonus Plan), pursuant to which Executive shall be
eligible to receive additional incentive compensation on an annual basis based
upon meeting targeted objectives as determined annually by the Compensation
Committee of the Board. The range of the annual base bonus shall be 0% to 150%
of Base Salary with the base bonus set at 75% of Base Salary if Executive meets
the targeted objectives.


(b)
During the Employment Term, in addition to the Base Salary and Annual Bonus
Plan, Executive shall participate in the Companys Long-Term Incentive Plan
(the LTIP) pursuant to which Executive shall be eligible to
receive additional incentive compensation under the LTIP of from 0% to 160% of
Base Salary based upon meeting targeted objectives determined for each
three-year period in the LTIP and in accordance with its terms, with such
participation set at 80% of Base Salary if the targeted objectives under the
LTIP are met. Payments of awards under the LTIP shall be made in accordance with
the terms set forth in the LTIP as amended from time to time.


3.4
Vacation. Executive shall be entitled to four weeks paid vacation in any
fiscal year during the Employment Term in accordance with Company vacation and
leave policies. Vacation time shall be planned and taken consistent with
Executives duties and obligations hereunder.


3.5
Other Benefits. During the Employment Term, Executive (and his spouse and
dependents) shall be entitled to participate in the Companys executive
perquisite plan, supplemental retirement plan, liability insurance, life
insurance, disability insurance, dental
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|insurance, hospitalization
insurance, medical, accident, and other employee benefit plans from time to time adopted
by the Company. The Company shall have the right to change insurance carriers and benefit
plans as may be appropriate in light of future market conditions and shall have the right
to purchase individual policies covering Executive if necessary.


3.6
Stock Incentive Plans. Executive shall also be eligible to receive
additional incentive compensation in the form of stock option or restricted
stock grants. Review for any such grant shall be concurrent with
Executives annual salary review and shall be in the sole discretion of the
Compensation Committee of the Board.


3.7
Reimbursement of Expenses. Upon submission of appropriate documentation
in accordance with Company policy, the Company will promptly reimburse Executive
for all reasonable business expenses incurred by Executive in pursuing the
business of the Company, including, without limitation, expenditures for
entertainment and travel.


4.    
Confidential Information


During
the term of this Agreement and forever thereafter, Executive agrees to keep
confidential all information provided by the Company, excepting any such
information as is already known to the public, and including any such
information and material relating to any customer, vendor, licensor, licensee,
or other party transacting business with the Company, and not to release, use,
or disclose the same, except with the prior written permission of the Company.
Executive further covenants and agrees that every document, computer disk,
computer software program, notation, record, diary, memorandum, development,
investigation, or the like, and any method or manner of doing business, of the
Company (or containing any other secret or confidential information of the
Company) made or acquired by Executive during his employment, is and shall be
the sole and exclusive property of the Company.


5.    Covenants
of Executive.


5.1
Non-Compete. Executive agrees that, during the Employment Term and for a
period of one year following a termination of employment other than following a
Change of Control, he will not, directly or indirectly, engage in any business
or activity competitive with the business activities of the Company. The
foregoing shall not apply to passive investments by Executive of up to 5% of the
outstanding stock of any publicly traded company or to service by Executive on
boards of directors of companies as permitted under this Agreement, regardless
of whether such company competes with the Company.


5.2
Solicitation of Employees. During the Employment Term and for a period of
one year following a termination of employment other than following a Change of
Control, (i) he shall not, directly or indirectly, individually, or together
through any other person, firm, corporation or entity, hire any member of senior
management of the Company (defined as an officer with a title of vice president
or higher) who is then in the employ of the Company, or (ii) solicit for hire
any employee of the Company, provided, however, that general solicitations not
targeted to Company employees shall not be deemed to violate this clause (ii).
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|5.3
Solicitation of Customers and Suppliers. Executive agrees that, during
the Employment Term and for a period of one year following a termination of
employment other than following a Change of Control, he shall not, directly or
indirectly, individually, or together through any other person, firm,
corporation or entity, (i) solicit the business of any material customers of or
supplies to the Company, or (ii) discourage any person or entity which is a
customer of the Company from continuing its business relationship with the
Company.


5.4
Compliance with Company Policies. Executive agrees that, during the
Employment Term, he shall comply with the Companys employee manual and
other policies and procedures reasonably established by the Company from time to
time concerning matters such as management, supervision, recruiting, diversity,
and sexual harassment.


5.5
Cooperation. For a period of three years following his termination of
employment under this Agreement, he shall, upon Companys reasonable
request and in good faith and with his best efforts, subject to his reasonable
availability, cooperate and assist Company in any dispute, controversy, or
litigation in which Company may be involved and with respect to which Executive
obtained knowledge while employed by the Company or any of its affiliates,
successors, or assigns, including, but not limited to, his participation in any
court or arbitration proceedings, giving of testimony, signing of affidavits, or
such other personal cooperation as counsel for the Company shall request. Any
such activities shall be scheduled, to the extent reasonably possible, to
accommodate Executives business and personal obligations at the time. The
Company shall pay Executives reasonable travel and incidental
out-of-pocket expenses incurred in connection with any such cooperation, as well
as the reasonable costs of an attorney Executive engages to advise him in
connection with the foregoing.


5.6
Return of Business Records and Equipment. Upon termination of
Executives employment hereunder, Executive shall promptly return to the
Company: (i) all documents, records, procedures, books, notebooks, and any other
documentation in any form whatsoever, including but not limited to written,
audio, video or electronic, containing any information pertaining to the Company
which includes confidential information, including any and all copies of such
documentation then in Executives possession or control regardless of
whether such documentation was prepared or compiled by Executive, Company, other
employees of the Company, representatives, agents, or independent contractors,
and (ii) -all equipment or tangible personal property entrusted to Executive by
the Company. Executive acknowledges that all such documentation, copies of such
documentation, equipment, and tangible personal property are and shall at all
times remain the sole and exclusive property of the Company.


6.    Covenants
of the Company


6.1
Indemnification. In the event Executive is made, or threatened to be
made, a party to any legal action or proceeding, by reason of the fact that
Executive is or was an employee, director or officer of the Company or serves or
served any other entity in any capacity at the Companys request, Executive
shall be indemnified by the Company, and the Company shall pay Executives
related expenses when and as incurred, including but not limited to attorney
fees, all to the fullest extent permitted by law.
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|6.2
Change of Control. During the Employment Term, the Company shall continue
in full force and effect with respect to Executive, the Severance Agreement, as
amended from time to time with the written consent of Executive. The Severance
Agreement shall control the compensation and benefits to be received by
Executive in the event of a Change of Control (as defined in the Severance
Agreement). No amendment to the Severance Agreement shall be made without the
written consent of Executive.


6.3
Supplemental Retirement Program. The Company shall establish for
Executive and make contributions to fund an additional defined contribution
supplemental retirement program (the SRIP), designed to
provide Executive with a retirement annuity, at age 65, in an amount, taken
together with other pension and social security benefits to which Executive may
be entitled at age 65, equal to 35% of his final average compensation from Base
Salary and Annual Bonus for the last three years of his employment. The SRIP
shall be based on the assumptions set forth on Schedule 1 to this Agreement. The
annual benefit will be reduced if Executives employment terminates before
2008. The annual contribution shall be calculated each year, and Executive
acknowledges that the amount of the contribution will likely be different from
the amounts shown in Schedule 1. Executive further acknowledges that the
contribution will vary based on the performance of the Company and whether
Executive meets or exceeds targeted bonus levels under the Annual Bonus Plan.
LTIP participation shall not be included in calculating average compensation
above.


7.    Compensation and
Benefits Upon Termination Other than in Connection with a Change of Control.


7.1
Termination Upon Death. If Executive dies prior to the expiration of the
Employment Term, the Company shall pay to Executives estate, or other
designated beneficiary(s) as shown in the records of the Company, any earned but
unpaid Base Salary, a pro-rata amount of the annual bonus that Executive would
be eligible to receive under the Companys Annual Bonus Plan for the year
in which Executives death occurs, LTIP benefits in accordance with the
terms of the LTIP, accrued benefits under the SRIP and any other benefits that
Executive is entitled to receive as of the Date of Termination under applicable
benefit plans of the Company, less standard withholdings for tax and social
security purposes. Except as required by law, after the Date of Termination, the
Company shall have no obligation to make any other payment, including severance
or other compensation, of any kind to Executives estate upon a termination
of employment by death.


7.2
Termination Upon Disability. The Company may terminate Executives
employment in the event Executive suffers a Disability. In the event that
Executives employment is terminated pursuant to this Section 7.2,
Executive shall receive payment for any earned and unpaid Base Salary, a
pro-rata amount of the annual bonus that Executive would be eligible to receive
under the Companys Annual Bonus Plan for the year in which such
termination occurs, LTIP benefits in accordance with the terms of the LTIP,
accrued benefits under the SRIP, and any other benefits that Executive is then
entitled to receive under applicable benefit plans of the Company, less standard
withholdings for tax and social security purposes. Except as required by law,
after the Date of Termination, no other compensation of any kind or severance or
other payment of any kind or payment in lieu of notice shall be payable by the
Company to Executive upon a termination of employment for Disability.
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|7.3
Voluntary Termination. Executive may voluntarily terminate his employment
with the Company at any time upon 90 days prior written notice. The
Company may accelerate the termination of Executives employment and the
right to any further compensation to a date prior to the 90th day upon written
notice thereof being delivered to Executive by the Company. In the event that
Executives employment is terminated under this Section 7.3, Executive
shall receive payment for any earned and unpaid Base Salary, and benefits the
Executive is entitled to receive under the employee benefit plans of the
Company, but excluding bonuses otherwise payable under the Companys Annual
Bonus Plan, less standard withholdings for tax and social security purposes,
through the Date of Termination. Except as required by law, after the Date of
Termination the Company shall have no further obligation to pay any compensation
of any kind or severance payment of any kind nor to make any further payment in
lieu of notice to Executive.


7.4
Termination for Cause. The Board may terminate Executives
employment with the Company at any time for Cause. In the event that
Executives employment is terminated under this Section 7.4, Executive
shall receive payment for all earned but unpaid Base Salary, and benefits the
Executive is then entitled to receive under the employee benefit plans of the
Company, but excluding bonuses otherwise payable under the Companys Annual
Bonus Plan, less standard withholdings for tax and social security purposes,
through the Date of Termination. Except as required by law, after the Date of
Termination the Company shall have no further obligation to pay any severance or
compensation of any kind nor to make any payment in lieu of notice to Executive.
Except as required by law, all benefits provided by the Company to Executive
under this Agreement or otherwise shall cease as of the Date of Termination.


7.5
Termination Without Cause. The Company may, at any time and without prior
written notice, terminate Executive without Cause. In the event that
Executives employment with the Company is terminated without Cause,
Executive shall receive (i) payment for all earned but unpaid Base Salary, and
benefits the Executive is then entitled to receive under benefit plans of the
Company, if any, less standard withholdings for tax and social security
purposes, through the Date of Termination; (ii) within 90 days after execution
by Executive of a mutual release of claims, payment in a lump sum of an amount
equal to 36 months of Executives then current Base Salary if the
termination occurs during the first 24 months of the Initial Term, 24 months of
Executives then current Base Salary if the termination occurs during the
last 36 months of the Initial Term, and 12 months if the termination occurs
during any renewal period or if the Agreement is not renewed at the end of the
Initial Term, in each case less standard withholdings for tax and social
security purposes; (iii) payment of a pro-rata amount of the Annual Bonus that
Executive would be eligible to receive under the Companys Bonus Plan for
the year in which the termination occurs; (iv) payment of amounts accrued under
the LTIP in accordance with the terms of the LTIP; (v) if, and only if permitted
under the terms of the Companys plans, continuation of Executives
participation in the Companys medical and health insurance plans during
the period he is to receive severance compensation and assuming Executive is
eligible and elects COBRA, payment on Executives behalf of continuation
premiums for health insurance under Federal or State COBRA for a period of 18
months following the date that severance payments cease; (vi) acceleration of
the vesting of a portion of any unvested stock options in the amount that would
have become vested at the end of the calendar year in which the termination
occurred; and (vii) payment of the annual contribution to the SRIP for the
calendar year in which the termination occurs. No other compensation of any kind
or severance or other payment of any kind shall be payable by the Company to
Executive

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|after such Date of Termination.
Except as specifically provided in this Section 7.5 and except as required by law, all
benefits provided by the Company to Executive under this Agreement or otherwise shall
cease as of the Date of Termination.


7.6
Termination for Good Reason. Notwithstanding anything in this Section 7
to the contrary, Executive may voluntarily terminate his employment with the
Company and receive the benefits detailed in Section 7.5 upon or within 180 days
following the occurrence of an event constituting Good Reason.


7.7
Termination Following a Change of Control. If the employment of Executive
is terminated following a Change of Control (as defined in the Severance
Agreement), the provisions of this Section 7 shall not apply and all payments
shall be made in accordance with the provisions of the Severance Agreement.


7.8
Certain Definitions. For purposes of this Agreement, the following term shall have the
meanings set forth below.


(a)
Cause shall mean that Executive shall: (i) commit an act of
fraud, embezzlement or misappropriation involving the Company; (ii) be convicted
by a court of competent jurisdiction of, or enter a plea of guilty of no contest
to, any felony involving moral turpitude or dishonesty; (iii) commit an act, or
fail to commit an act, involving the Company which amounts to, or with the
passage of time would amount to, willful misconduct, gross negligence or a
breach of this Agreement and which results or will result in material harm to
the Company; or (iv) willfully fail to perform the responsibilities and duties
specified herein for a period of 10 days following receipt of written notice
from the Company which specifically describes past instances of willful failure
of performance; provided that in the case of (iv) above, during the 10-day
period following receipt of such notice, Executive shall be given the
opportunity to take reasonable steps to cure any such claimed past failure of
performance.


(b)
Date of Termination shall mean (i) if Executive is terminated
by the Company for Disability, 30 days after written notice of termination is
given to Executive (provided that Executive shall not have returned to the
performance of his duties on a full-time basis during such 30-day period) or
(ii) if Executives employment is terminated by the Company for any other
reason or by Executive, the date on which a written notice of termination,
specifying in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executives employment is given; provided that, in
the case of a termination for Cause, Executive shall not have cured the matter
or matters stated in the notice of termination within the 10-day notice period
provided in Section 7.8(a) above.


(c)
Disability shall mean a physical or mental disability that
renders Executive unable, as determined in good faith by a licensed physician,
to perform the essential functions of his position, even with reasonable
accommodation, for 180 days within any 12-month period. The Company and
Executive or his legal representative shall use their best efforts to agree on
the physician to determine disability. If they cannot agree within 10 days after
the first party makes a written proposal stating the name of a physician, then
the other party shall select a physician within 10 days and within 10 days
thereafter the two physicians shall select a third physician. All such
physicians must be board certified in the medical area giving rise to the
alleged disability.

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|The determination of the third
physician shall be final and binding. If one party fails to select a physician within the
10-day period, the physician named by the other party shall make the determination of
disability.


(d)
Good Reason shall mean Executives resignation from
employment within 180 days after the occurrence of one of the following events:
(i) a change of Executives title as Chief Executive Officer or a material
reduction in Executives responsibilities without Executives written
consent; or (ii) a reduction, without Executives written consent, in his
Base Salary or participation in the employee benefit plans described in this
Agreement.


8.
Warranties and Representations.Executive hereby represents and
warrants to the Company that he is not now under any obligation of a contractual
or quasi-contractual nature known to him that is inconsistent or in conflict
with this Agreement or that would prevent, limit or impair the performance by
Executive of his obligations hereunder; and has been or has had the opportunity
to be represented by legal counsel in the preparation, negotiation, execution
and delivery of this Agreement and understands fully the terms and provisions
hereof


9.    Notices


All
notices required or permitted to be given by either party hereunder shall be in
writing and shall be deemed sufficiently given if mailed by registered or
certified mail, or personally delivered to the party entitled thereto at the
address stated below, or to such changed address as the addressee may have given
by a similar notice:
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|To the Company: | Building Materials Holding CorporationFour Embarcadero Center, Suite 3250San Francisco, California 94111Attn: Chairman of the CompensationCommitteeFax: (415) 627-9119
|--------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|With a Copy to: | Building Materials Holding Corporation720 Park Blvd., Suite 200P.O. Box 7006Boise, Idaho, 83707Fax: (208) 387-4367Attention: Paul Street, Esq.
|--------------- | ----------------------------------------------------------------------------------------------------------------------------------------------

|To Executive: | Robert E. MellorBuilding Materials Holding CorporationFour Embarcadero Center, Suite 3250San Francisco, California 94111Telecopier: (415) 627-9119
|------------- | --------------------------------------------------------------------------------------------------------------------------------------------------

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|10.    General
Provisions


10.1
Waiver. No waiver by any party hereto of any failure of any other party
to keep or perform any covenant or condition of this Agreement shall be deemed
to be a waiver of any preceding or succeeding breach of the same, or any other
covenant or condition.


10.2
Amendments. No provision of this Agreement may be amended, modified or
waived unless such amendment, modification or waiver shall be agreed to in
writing and signed by Executive and a duly authorized officer of the Company.


10.3
Severability. If any provision of this Agreement shall be determined to
be invalid or unenforceable by a court of competent jurisdiction, the remaining
provisions of this Agreement shall remain in full force and effect to the
fullest extent permitted by law.


10.4
Assignment.No right to or interest in any payments shall be assignable
by either party; provided; however, that this provision shall not preclude
Executive from designating one or more beneficiaries to receive any amount that
may be payable after his death and shall not preclude his executor or
administrator from assigning any right hereunder to the person or persons
entitled hereto. Further, the Company may assign this Agreement: (a) to an
affiliate so long as such affiliate assumes the Companys obligations
hereunder, or (b) in connection with a merger or consolidation involving the
Company or a sale of substantially all its assets or shares to the surviving
corporation or purchaser as the case may be so long as such assignee assumes the
Companys obligations hereunder.


10.5
Successors and Assigns. This Agreement and the obligations of the Company
and Executive hereunder shall be binding upon and shall be assumed by their
respective successors including, without limitation, any corporation or
corporations acquiring the Company, whether by merger, consolidation, sale or
otherwise.


10.6
Governing Law. The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of California without regard to the
principles of conflict of laws thereof.


10.7
Attorneys Fees and Costs. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys fees, costs, and necessary
disbursements in addition to any other relief to which that party may be
entitled. This provision shall be construed as applicable to the entire
contract.


10.8
No Representation. No officer, employee or representative of the Company
has any authority to make any representation or promise in connection with this
Agreement or the subject matter hereto which is not contained herein, and
Executive agrees that he has not executed this Agreement in reliance upon any
such representation or promise.


10.9
Interpretation of Agreement. Each of the parties has been represented by
counsel in the negotiation and preparation of this Agreement. The parties agree
that this Agreement is to be construed as jointly drafted. Accordingly, this
Agreement will be construed according to the fair meaning of its language, and
the rule of construction that ambiguities are to be resolved against the
drafting party will not be employed in the interpretation of this Agreement.
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|10.10
Headings. The headings of sections and subsections are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.


10.11
Entire Agreement.This document constitutes the entire understanding and
Agreement of the parties with respect to the subject matter of this Agreement,
and any and all prior agreements, understandings and representations are hereby
terminated and cancelled in their entirety and are of no further force or
effect.


10.12
Counterparts. This Agreement may be executed in two or more counterparts
with the same effect as if the signatures to all such counterparts was upon the
same instrument, and all such counterparts shall constitute but one instrument.


10.13
Remedies.In view of the position of confidence which Executive will
enjoy with the Company and the anticipated relationship with the clients,
customers, and employees of the Company and its affiliates pursuant to his
employment hereunder, and recognizing both the access to confidential financial
and other information which Executive will have pursuant to his employment,
Executive expressly acknowledges that the restrictive covenants set forth in
Section 5 are reasonable and necessary in order to protect and maintain the
proprietary interests and other legitimate business interests of the Company and
its affiliates. Executive further acknowledges that (1) it would be difficult to
calculate damages to the Company and its affiliates from any breach of his
obligations under this Section 5, (ii) that injury to the Company and its
affiliates from any such breach would be irreparable and impossible to measure,
and (iii) that the remedy at law for any breach or threatened breach of Section
5 would therefore be an inadequate remedy and, accordingly, the Company shall,
in addition to all other available remedies (including without limitation
seeking such damages as it can show it and its affiliates has sustained by
reason of such breach and/or the exercise of all other rights it has under this
Agreement), be entitled to injunctive and other similar equitable remedies.


10.14
No Mitigation of Damages. Executive shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by
Executive as a result of employment by another employer or by retirement
benefits after the Date of Termination, except as specifically provided
hereunder. The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executives then existing rights, or rights which would accrue
solely as a result of the passage of time, under any Company benefit plan or
other contract, plan or arrangement.


10.15
Dispute Resolution and Binding Arbitration. Executive and the Company
agree that in the event a dispute arises concerning or relating to
Executives employment with the Company, such dispute shall be submitted to
binding arbitration in accordance with the employment arbitration rules of
Judicial Arbitration and Mediation Services (JAMS) by a
single impartial arbitrator selected as follows: if the Company and Executive
are unable to agree upon an impartial arbitrator within 10 days of a request for
arbitration, the parties shall request a panel of t employment arbitrators from
JAMS and alternative strike names until a single arbitrator remains. The
arbitration shall take place in San Francisco, California, and both

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|Executive and the Company agree to
submit to the jurisdiction of the arbitrator selected in accordance with JAMS rules
and procedures. Except as set forth in Section 10.13 hereof, Executive and the Company
agree that the arbitration procedure provided for in this section will be the exclusive
avenue of redress for any disputes relating to or arising from Executives
employment with the Company, and that the award of the arbitrator shall be final and
binding on both parties, and nonappealable. The arbitrator shall have discretion to award
monetary and other damages, or no damages, and to fashion such other relief as the
arbitrator deems appropriate. The arbitrator shall also have discretion to award the
prevailing party reasonable costs and attorneysfees incurred in bringing or
defending an action under this provision. THE COMPANY AND EXECUTIVE ACKNOWLEDGE AND AGREE
THAT BY AGREEING TO ARBITRATE, THEY ARE WAIVING ANY RIGHT TO BRING AN ACTION AGAINST THE
OTHER IN A COURT OF LAW, EITHER STATE OR FEDERAL, AND ARE WAIVING THE RIGHT TO HAVE
CLAIMS AND DAMAGES, IF ANY, DETERMINED BY A JURY.


IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and year
first above written.
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|/s/ Robert E. MellorRobert E. Mellor | BUILDING MATERIALS HOLDINGCORPORATIONBy: /s/ Peter S. ONeill       Title: Chairman, Compensation Committee
|--------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------

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