Building Materials Holding (BLGM) 10-K 2002 FY Annual report

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

     2.1Engagement.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“).

     2.2Exclusive 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

     3.1Base 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.

     3.2Salary 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.

     3.3Bonus.

     (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.

     3.4Vacation. 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.

     3.5Other 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.

     3.6Stock 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.

     3.7Reimbursement 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.

     5.1Non-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.

     5.2Solicitation 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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     5.3Solicitation 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.

     5.4Compliance 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.

     5.5Cooperation. 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.

     5.6Return 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

     6.1Indemnification. 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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     6.2Change 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.

     6.3Supplemental 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.

     7.1Termination 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.

     7.2Termination 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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     7.3Voluntary 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.

     7.4Termination 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.

     7.5Termination 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.

     7.6Termination 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.

     7.7Termination 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.

     7.8Certain 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

     10.1Waiver. 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.

     10.2Amendments. 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.

     10.3Severability. 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.

     10.4Assignment.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.

     10.5Successors 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.

     10.6Governing 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.

     10.7Attorneys 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.

     10.8No 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.

     10.9Interpretation 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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     10.10Headings. 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.

     10.11Entire 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.

     10.12Counterparts. 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.

     10.13Remedies.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.

     10.14No 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.

     10.15Dispute 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

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