Document:

EX-10.40

	

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: 

	To the Company:	Building Materials Holding Corporation
Four Embarcadero Center, Suite 3250
San Francisco, California 94111
Attn: Chairman of the Compensation
Committee
Fax: (415) 627-9119

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

	To Executive:	Robert E. Mellor
Building Materials Holding Corporation
Four Embarcadero Center, Suite 3250
San Francisco, California 94111
Telecopier: (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. 

	/s/ Robert E. Mellor
———————————————
Robert E. Mellor	BUILDING MATERIALS HOLDING
CORPORATION

By: /s/ Peter S. O’Neill
       ———————————————
Title: Chairman, Compensation Committee

	

55EX-10.41

	

EXHIBIT 10.41 

EXECUTION VERSION 

FIRST AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT

     THIS
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
“Amendment“), dated as of December 11, 2002, is entered into by
and among: 

	 	     (1)
BUILDING MATERIALS HOLDING CORPORATION, a Delaware corporation (“Holdings”); 

	 	     (2)
Each of the financial institutions listed in Schedule 2.01 to the Credit Agreement referred
to in Recital A below currently a party to such Credit Agreement (collectively, the
“Banks“); and

	 	     (3)
WELLS FARGO BANK, N.A., as administrative agent for the Banks (in such capacity, the
“Agent”).

	

RECITALS

     A.
Holdings, the Guarantors, the Banks and the Agent are parties to that certain Amended and
Restated Credit Agreement dated as of August 30, 2001 (the “Credit Agreement”). 

     B.
Holdings has requested the Banks and the Agent to amend the Credit Agreement in certain
respects. 

     C. The
Banks and the Agent are willing so to amend the Credit Agreement upon the terms and
subject to the conditions set forth below. 

AGREEMENT

     NOW,
THEREFORE, in consideration of the above recitals and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Holdings, the Banks and the Agent hereby agree as follows: 

     1.
Definitions, Interpretation. All capitalized terms defined above
and elsewhere in this Amendment shall be used herein as so defined. Unless
otherwise defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in the Credit Agreement, as amended by
this Amendment. The rules of construction set forth in Article I of the
Credit Agreement shall, to the extent not inconsistent with the terms of
this Amendment, apply to this Amendment and are hereby incorporated by
reference. 

     2.
Amendments to Credit Agreement. Subject to the satisfaction of the conditions set forth
in Paragraph 4 below, the Credit Agreement is hereby amended as follows: 

	 	     (a)
Section 8.11 is hereby amended to read in its entirety as follows:

	 	     8.11
Restricted Payments. Holdings shall not, and shall not suffer or permit any Subsidiary
to, declare or make any dividend payment or other distribution of assets, properties,
cash, rights, obligations or securities on account of any shares of any class of its
capital stock (other than dividends or other distributions by a Subsidiary to Holdings),
or purchase, redeem or otherwise acquire for value any shares of its capital stock or any
warrants, rights or options to acquire such shares, now or hereafter outstanding; except
that Holdings may:

	 	     (a)
declare and make dividend payments or other distributions payable solely in its common
stock;

	

56 

	 	     (b)
declare and make dividend payments or other distributions payable in cash so long as no
Default has occurred and is continuing on the date of, or will result after giving effect
to, any such payment;

	 	     (c)
declare dividends required to be declared or paid pursuant to the terms of any securities
issued in a Permitted Equity Offering so long as the dividend provisions of such
securities were approved by the Majority Banks in writing prior to the issuance of such
securities;

	 	     (d)
purchase, redeem or otherwise acquire shares of its common stock or warrants or options
to acquire any such shares with the proceeds received from the substantially concurrent
issue of new shares of its common stock;

	 	     (e)
allow any Subsidiary that is not a Wholly-Owned Subsidiary to make distributions to its
owners (on a pro rata basis); and

	 	     (f)
purchase shares of Holdings’ common stock either (1) for deposit into the 401(k) trust
fund on behalf of Holdings’ employees by using funds obtained through employee payroll
deductions of such employees, or (2) to the extent necessary to provide discounts to
employees in connection with Holdings’ Employee Stock Purchase Plan.

	 	     (b)
Subsection 8.19(d) is hereby amended to read in its entirety as follows:

	 	     (d)
Holdings shall not permit as at the end of any fiscal quarter, measured on a consolidated
basis for Holdings and its Subsidiaries for the period of four fiscal quarters ended on
such date in accordance with GAAP, the ratio of (i) EBITA to (ii) the sum of (A) cash
Interest Expense, plus (B) cash taxes, plus (C) scheduled principal payments in respect
of Indebtedness, plus (D) cash dividend payments to be less than 1.20 to 1.00.

	

     3.
Representations and Warranties. Holdings hereby represents and
warrants to the Agent and the Banks that the following are true and correct on
the date of this Amendment and that, after giving effect to the amendments set
forth in Paragraph 2 above, the following will be true and correct on the
Amendment Effective Date (as defined below): 

	 	     (a)
The representations and warranties of Holdings and its Subsidiaries set forth in Article
VI of the Credit Agreement and in the other Loan Documents are true and correct;

	 	     (b)
No Default or Event of Default has occurred and is continuing;

	 	     (c)
No event or circumstance that has resulted or could reasonably be expected to result in a
Material Adverse Effect has occurred and is continuing; and

	 	     (d)
Each of the Loan Documents is in full force and effect.

	

(Without limiting the scope
of the term “Loan Documents,” Holdings expressly acknowledges in
making the representations and warranties set forth in this Paragraph 3
that, on and after the date hereof, such term includes this Amendment.) 

     4.
Amendment Effective Date. The amendments effected by Paragraph
2 above shall become effective on December 11, 2002 (the “Amendment
Effective Date”), subject to receipt by the Agent and the Banks on or
prior to the Amendment Effective Date of the 

	

57 

	

following, each in form and
substance satisfactory to the Agent, the Banks and their respective counsel:  

	 	     (a)
This Amendment duly executed by Holdings, the Majority Banks and the Agent;

	 	     (b)
A letter in the form of Exhibit A hereto, dated the Amendment Effective Date and duly
executed by each Guarantor;

	 	     (c)
A Certificate of the Secretary of Holdings, dated the Amendment Effective Date,
certifying that the Certificate of Incorporation, Bylaws and resolutions of the board of
directors of Holdings, in the form delivered to the Agent on the Effective Date, are in
full force and effect and have not been amended, supplemented, revoked or repealed since
such date;

	 	     (d)
Payment by Holdings of all accrued and unpaid fees, costs and expenses to the extent then
due and payable on the Amendment Effective Date, together with reasonable Attorney Costs
of Wells Fargo to the extent invoiced prior to or on the Amendment Effective Date, plussuch
additional amounts of reasonable Attorney Costs as shall constitute Wells Fargo’s
reasonable estimate of Attorney Costs incurred or to be incurred by it in connection with
this Amendment; and

	 	     (e)
Such other evidence as the Agent or any Bank may reasonably request to establish the
accuracy and completeness of the representations and warranties and the compliance with
the terms and conditions contained in this Amendment and the other Loan Documents.

	

     5.
Effect of this Amendment. On and after the Amendment Effective
Date, each reference in the Credit Agreement and the other Loan Documents to the
Credit Agreement shall mean the Credit Agreement as amended hereby. Except as
specifically amended above, (a) the Credit Agreement and the other Loan
Documents shall remain in full force and effect and are hereby ratified and
confirmed and (b) the execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power, or remedy of the Banks or the Agent, nor constitute a waiver of
any provision of the Credit Agreement or any other Loan Document. 

     6.
Miscellaneous. 

	 	     (a)
Counterparts. This Amendment may be executed in any number of identical
counterparts, any set of which signed by all the parties hereto shall be deemed to
constitute a complete, executed original for all purposes.

	 	     (b)
Headings. Headings in this Amendment are for convenience of reference only and are not
part of the substance hereof.

	 	     (c)
Governing Law. This Amendment shall be governed by and construed in accordance with the
laws of the State of California without reference to conflicts of law rules.

	

58 

	

     IN
WITNESS WHEREOF, Holdings, the Agent and the Banks have caused this Amendment to
be executed as of the day and year first above written. 

		BUILDING MATERIALS HOLDING CORPORATION

By: ______________________________________

Title:  ____________________________________

WELLS FARGO BANK, N.A.,
as Agent, Issuing Bank, Swingline Bank and a Bank

By: ______________________________________

Title:  ____________________________________

FIRST UNION NATIONAL BANK,
as Syndication Agent and a Bank

By: ______________________________________

Title:  ____________________________________

U.S. BANK NATIONAL ASSOCIATION

By: ______________________________________

Title:  ____________________________________

UNION BANK OF CALIFORNIA, N.A.

By: ______________________________________

Title:  ____________________________________

	

59 

		COMERICA WEST INCORPORATED

By: ______________________________________

Title:  ____________________________________

WASHINGTON MUTUAL BANK DBA WM BUSINESS BANK

By: ______________________________________

Title:  ____________________________________

BNP PARIBAS

By: ______________________________________

Title:  ____________________________________

HARRIS TRUST AND SAVINGS BANK

BBy: ______________________________________

Title:  ____________________________________

GUARANTY BANK

By: ______________________________________

Title:  ____________________________________

WEST COAST BANK

By: ______________________________________

Title:  ____________________________________ 

	

60 

		BANK LEUMI USA

By: ______________________________________

Title:  ____________________________________

LASALLE BUSINESS CREDIT, INC.

By: ______________________________________

Title:  ____________________________________

ISRAEL DISCOUNT BANK OF NEW YORK

By: ______________________________________

Title:  ____________________________________ 

	

61 

	

EXHIBIT A
GUARANTOR
CONSENT LETTER

December 11, 2002 

TO: WELLS FARGO BANK, N.A., 

     As the
Agent for the Banks under the Credit Agreement referred to below 

     1.
Reference is made to the following: 

	 	     (a)
The Amended and Restated Credit Agreement dated as of August 30, 2001 (the “Credit
Agreement”) among Building Materials Holding Corporation, a Delaware corporation (“Holdings”),
each of the undersigned in their capacity as guarantors (collectively, the “Guarantors”),
the financial institutions which are from time to time parties thereto (the “Banks”),
and Wells Fargo Bank, N.A., as agent for the Banks (the “Agent”); and

	 	     (b)
The First Amendment to Amended and Restated Credit Agreement dated as of December 11,
2002 (the “First Amendment”) among Holdings, the Banks and the Agent.

	

     2.
Each Guarantor hereby consents to the First Amendment. Each Guarantor expressly agrees
that such amendment shall in no way affect or alter the rights, duties, or obligations of
such Guarantor, the Banks or the Agent under the Guaranty as set forth in the Credit
Agreement.  

     3.
From and after the date hereof, the term “Credit Agreement“as used in the
Guaranty shall mean the Credit Agreement, as amended by the First Amendment.  

     4.
Each Guarantor’s consent to the First Amendment shall not be construed (i) to have
been required by the terms of the Guaranty or any other document, instrument or agreement
relating thereto or (ii) to require the consent of such Guarantor in connection with any
future amendment of the Credit Agreement or any other Loan Document.  

62 

	

     IN
WITNESS WHEREOF, each Guarantor has executed this Guarantor Consent Letter as of
the day and year first written above. 

		BMC WEST CORPORATION

By: __________________________________

Title: _________________________________

BMC WEST CORPORATION SOUTHCENTRAL

By: __________________________________

Title: _________________________________

BMCW SOUTHCENTRAL, L.P.

By: BMC WEST CORPORATION
SOUTHCENTRAL, its General Partner

By: __________________________________

Title: _________________________________

BMCW, LLC

By: __________________________________

Title: _________________________________

BMC CONSTRUCTION, INC. (formerly known as BMHC FRAMING , INC.)

By: __________________________________

Title: _________________________________

	

63 

		KNIPP BROTHERS INDUSTRIES, LLC

By: BMC Framing, Inc., its Managing Member

By: __________________________________

Title: _________________________________

KB INDUSTRIES LIMITED PARTNERSHIP

By: BUILDING MATERIALS HOLDING CORPORATION, its General Partner

By: __________________________________

Title: _________________________________

	

64 

	

OFFICER’S
CERTIFICATE

     The
undersigned hereby certify that the organizational documents including the
Certificate of Incorporation, Bylaws and Resolutions, including all amendments
thereto, of each of the following entities that were provided to the Agent and
the Lenders on the Effective Date of the Credit Agreement dated as of August 30,
2001, are in full force and effect and have not been revised or amended since
such date. 

     DATED
this 11th day of December, 2002. 

			BUILDING MATERIALS HOLDING CORPORATION

By:    _______________________________

          Paul S. Street, Senior Vice President, Chief

          Administrative Officer, General Counsel

          and Corporate Secretary

			BMC WEST CORPORATION

By:    _______________________________

          Paul S. Street, Senior Vice President, Chief

          Administrative Officer, General Counsel

          and Corporate Secretary

			BMC WEST CORPORATION SOUTHCENTRAL

By:    _______________________________

          Paul S. Street, Senior Vice President, Chief

          Administrative Officer, General Counsel

          and Corporate Secretary

			BMCW SOUTHCENTRAL, L.P.

                                                     By:   BMC WEST CORPORATION SOUTHCENTRAL,
         its General Partner

By:    _______________________________

          Paul S. Street, Senior Vice President, Chief

          Administrative Officer, General Counsel

          and Corporate Secretary

	

65 

			BMCW, LLC

By:    _______________________________

          Paul S. Street, Senior Vice President, Chief

          Administrative Officer, General Counsel

          and Corporate Secretary

			BMC CONSTRUCTION, INC.

By:    _______________________________

          Paul S. Street, Senior Vice President, Chief

          Administrative Officer, General Counsel

          and Corporate Secretary

	

66

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