10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended December 31, 2005

OR

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ________ to _______

Commission file number 0-19335.

www.bmhc.com

Building Materials Holding Corporation

Delaware	91-1834269
(State of incorporation)	(IRS Employer Identification No.)

Four Embarcadero Center, Suite 3250, San Francisco, CA 94111

(415) 627-9100

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock ($.001 par value)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ¨ No þ

The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2005 was $864,493,013.  The market value computation excludes 1,754,794 shares of common stock held by affiliates such as directors, officers and holders of more than 5% of the shares outstanding as of June 30, 2005.

The number of shares outstanding of common stock as of February 22, 2006 was 14,458,294.

Documents Incorporated by Reference

(1) Portions of the Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders on May 2, 2006, are incorporated by reference in Part III of this Form 10-K.

Building Materials Holding Corporation

FORM 10-K

For the Fiscal Year Ended December 31, 2005

INDEX

PART I
	Item 1.	Business	2
	Item 1A.	Risk Factors	12
	Item 1B.	Unresolved Staff Comments	15
	Item 2.	Properties	16
	Item 3.	Legal Proceedings	16
	Item 4.	Submission of Matters to a Vote of Security Holders	16
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
	Item 6.	Selected Financial Data	18
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	35
	Item 8.	Financial Statements and Supplementary Data	36
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	67
	Item 9A.	Controls and Procedures	67
	Item 9B.	Other Information	67
PART III
	Item 10.	Directors and Executive Officers of the Registrant	68
	Item 11.	Executive Compensation	72
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	73
	Item 13.	Certain Relationships and Related Transactions	73
	Item 14.	Principal Accounting Fees and Services	73
PART IV
	Item 15.	Exhibits and Financial Statement Schedules	74
		Signatures	81

1

Introduction - Risk Factors and Forward-Looking Statements

There are a number of business risks and uncertainties that affect our operations and therefore could cause future results to differ from past financial performance or expected results and ultimately affect the trading price of our common shares.  Information regarding these risks and uncertainties is contained in Item 1A of this Form 10-K under the caption Risk Factors.

Certain statements in this Form 10-K including those related to expectations about homebuilding activity in our markets, demographic trends supporting homebuilding and anticipated sales and operating income are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Statements that are not historical or current facts, including statements about our expectations, anticipated financial results and future business prospects are forward-looking statements.  While these statements represent our current judgment on what the future may hold and we believe these judgments are reasonable, these statements involve risks and uncertainties that are important factors that could cause our actual results to differ materially from those in forward-looking statements.  These factors include, but are not limited to the risks and uncertainties cited in Item 1A of this Form 10-K under the caption Risk Factors.  Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date of the filing of our 2005 Annual Report on Form 10-K.  We undertake no obligation to update forward-looking statements.

PART I

ITEM 1.  Business

General Overview

Building Materials Holding Corporation, a Fortune 1000 company, is one of the largest providers of residential construction services and building products in the United States with annual sales of approximately $3 billion.  We serve the homebuilding industry through two subsidiaries, BMC Construction and BMC West.  BMC Construction provides construction services to high-volume production homebuilders in key growth markets across the country.  With locations in the western and southern states, BMC West distributes building products and manufactures building components for professional builders and contractors.  

As the result of a branding strategy, we changed the name of BMC Construction to SelectBuild Construction.  This change is expected to be formally announced in the first quarter of 2006.

Incorporated in the state of Delaware in 1987, Building Materials Holding Corporation trades on the NASDAQ under the ticker symbol BMHC and is headquartered in San Francisco, California.

Periodic and current reports filed with the Securities and Exchange Commission are available at our website www.bmhc.com.

Industry Overview

The residential construction services and building products industry is dependent on demand for single-family homes.  Housing demand is influenced by many factors including the overall condition of the U.S. economy, mortgage and other interest rates, consumer confidence, job formation and demographic trends as well as other factors.  The National Association of Home Builders reported single-family housing starts at a historic high of 1.7 million units in 2005 and is projecting approximately a 7% decline in housing starts in 2006 to 1.6 million units.  Although the industry remains fragmented, consolidation continues to occur among building material distributors and construction service providers.  The industry is experiencing the emergence of larger scale operations with improved financial strength, negotiating leverage and other resources.  

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At BMC Construction, we offer construction services to high-volume production homebuilders.  Our services include framing, concrete, plumbing, other construction trades, managing labor and construction schedules as well as sourcing materials.  High-volume production homebuilders complete a substantial share of single-family residential construction.  These builders generally outsource framing and other construction services.  

At BMC West, we distribute building materials, manufacture building components and provide construction services to professional builders and contractors.  Products include dimensional lumber, panel products and building materials purchased from manufacturers as well as manufactured building components including millwork, trusses and wall panels.  Construction services include framing and installation of miscellaneous building products.   We compete with local, regional and national building products distributors.  We serve our customers based on a regional market management approach where strategic locations offer our entire breadth of building products, manufactured building components and construction services to a market area.  

Our ability to provide construction services and distribute building products is a competitive advantage to builders seeking full-service providers.  Many businesses lack the advantages we offer such as a proven reputation for providing quality construction services and building products, expertise in sourcing products and labor, sufficient working capital and administrative as well as management support.

Acquisition Strategy

Our acquisition strategy is focused on increasing our construction service offerings and manufactured building components.  The fragmented nature of the existing construction services and building products markets provides us with acquisition opportunities.  We clearly define and thoroughly analyze target markets.  In attractive markets, acquisitions are evaluated based on their anticipated performance, management depth, cultural fit, industry reputation and long-term potential customer base.  We typically enter a market by purchasing all or part of an existing business and seek to rapidly integrate our services and products to capture market share.  We assign experienced due diligence teams to review potential acquisition candidates and develop integration plans once we have agreed in principle to the general terms of an acquisition.

Over the past few years, BMC Construction acquired businesses providing construction services to high-volume production homebuilders.  Specifically, these businesses were as follows:

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2005

·   framing services in San Diego, California (October)

·   concrete services in Las Vegas, Nevada and concrete and plumbing services in southern California (September)

·   additional 20% interest in our existing business providing foundation and shell construction services in Florida (20% August 2005 and 60% January 2003)

·   51% interest in concrete services in Arizona (July)

·   73% interest in plumbing services in Phoenix and Tucson, Arizona (60% April and 13% July)

·   stucco services in Las Vegas, Nevada (June)

·   51% interest in framing services in Chicago, Illinois (January)

2004

·   remaining 49% interest in our existing framing services business in northern California (49% July 2004 and 51% July 2002)

2003

·   67.33% interest in framing services in Delaware, Maryland and Virginia (October)

·   60% interest in foundation and shell construction services in Florida (January)

In January 2006, we also completed the acquisition of two framing services businesses in northern and southern California as well as Reno, Nevada.  As part of our growth strategy, we continue to evaluate acquisition opportunities that strengthen and broaden our construction trades as well as presence in attractive markets.  

At BMC West, we recently completed the acquisition of three facilities providing building materials distribution and millwork services in Houston, Texas (February 2006).  We continue to pursue other potential candidates and are also expanding our building products, manufactured building components, millwork and construction services to become a full-service provider to homebuilders.

Both of our business segments customize their respective building products and construction services mix to meet customer needs in their respective markets.  Our acquisition and expansion strategy has changed our sales mix as follows:

	2005			2004			2003
Construction Services		54	%		43	%		35	%
Building Products		46			57			65
		100	%		100	%		100	%

Our Customers

We build relationships with professional builders engaged in single-family residential construction.  Builders are generally repeat customers, with high-volume material and labor needs that require materials procurement, manufactured building components, construction services and on-time job-site delivery.  These services and products are not typically offered by retailers selling to do-it-yourselfers, home improvement contractors and trades people.

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BMC Construction customers are high-volume production homebuilders.  Our ability to offer multiple trades such as framing, concrete, plumbing and other construction services allows builders to focus on other aspects of their business, including land development and new home sales.  We maintain favorable relationships with our customers due to our:

·   reputation for providing quality construction services

·   multiple construction trade offerings

·   timely completion of contracts

·   competitive pricing

BMC West customers are primarily local and regional professional homebuilders and contractors.  We maintain favorable customer relationships as a result of our:

·   quality and availability of products

·   dependability, scope and quality of services

·   reliable delivery and production schedules

·   competitive pricing

·   availability of trade credit

On a consolidated basis, our largest customer accounted for 6.6% of sales in 2005, while the top five customers represented approximately 23% of consolidated sales.  At BMC Construction and BMC West, the top five customers accounted for approximately 33% and 14% of each business segment’s sales, respectively.  

Focus on Service

Our focus on service is a key factor that distinguishes us from competitors.  We employ experienced, service-oriented individuals.  Our construction service skills and product knowledge enable customers to rely on our expertise for project implementation and product recommendations.  Our quality assurance efforts and initiatives limit callbacks on the services and products we provide.  Our dedication to providing superior customer service to builders allows our employees to develop consistent relationships and generate repeat and referral business.

Competition

Our construction services and products compete with similar offerings in the marketplace.  The markets in each of our business segments are fragmented and highly competitive.  Our competitors vary in size, management expertise and capabilities.

BMC Construction provides construction services to high-volume production homebuilders.  Competitors range from single-crew operations to large well-managed organizations spanning multiple markets.  Also, some high-volume production homebuilders perform their own framing and other construction services.  Our multiple trade offerings in certain markets include framing, concrete, plumbing and other construction services and allow homebuilders to secure these construction services with us.  We believe our ability to provide multiple trades such as framing, concrete and plumbing in certain markets is a competitive advantage.  We also compare favorably to competitors in some of our markets as a result of our certifications from the National Association of Home Builders which demonstrates our professional credibility, competence, business integrity and solid record of customer satisfaction.  Additionally, we are recognized in our markets for our reputation, quality and reliability of our services and products as well as capital resources.

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BMC West competes with local, regional and national building products distributors.  Builders generally select suppliers based on competitive pricing, product availability, reliable delivery, service, trade credit and knowledgeable personnel.  Our industry reputation helps us attract experienced and professional product and service personnel.  We also offer training programs to enhance product and service knowledge.  By working closely with our customers and supported by our management information systems, our business units maintain appropriate inventory and staffing levels and are well positioned to deliver quality building products.  We serve our customers based on a regional market management approach where strategic locations offer our entire breadth of building products, manufactured building components and construction services to a market area.  We believe being a full-service provider to many of our customers distinguishes us from our competition and is a competitive advantage.

Sales and Marketing

Our operations are located in many of the largest and most rapidly growing markets for single-family home construction.  Our presence is principally in the single-family home construction markets of California; Las Vegas, Nevada; Phoenix and Tucson, Arizona; Texas; the Intermountain and Northwest states as well as Florida.  Economic strength as well as historical population and migration trends have generally supported the growth of residential construction in our market areas.  According to the United States Census Bureau, housing starts have favored the southern and western regions, contributing over 70% of annual starts over the past three years.  Because of weather conditions in some of our markets, our operating results may be affected by slower construction activity during the first and fourth quarters of the year.  

BMC Construction relies on the value and solid reputation of their integrated construction services model to secure and maintain national and regional relationships with high-volume production homebuilders.  

BMC West attracts customers by consistently providing quality building products and dependable customer service.  Marketing consists of industry-wide brand communications along with an array of regional marketing events and activities to enhance customer relationships.  

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Business Segments

The following information is presented for our BMC Construction and BMC West business segments.  

Sales to external customers by services and products (thousands):

	2005		2004		2003
BMC Construction
Construction services	$	1,358,333	$	744,932	$	408,167
Building products	35,553		8,769		―
	$	1,393,886	$	753,701	$	408,167
BMC West
Construction services	$	228,176	$	159,430	$	89,885
Building products	1,290,098		1,177,894		917,019
	$	1,518,274	$	1,337,324	$	1,006,904
Total	$	2,912,160	$	2,091,025	$	1,415,071

Selected financial information is as follows (thousands):

	Sales							Income(1) (Loss) Before Taxes and			Equity in Net Income		Depreciation
	Total		Inter- Segment			Trade		Minority Interests			of Affiliates		and Amortization		Capital(2) Expenditures		Assets
Year Ended December 31, 2005
BMC Construction	$	1,395,182	$	(1,296	)	$	1,393,886	$	160,957		$	―	$	12,375	$	62,611	$	611,067
BMC West		1,519,903		(1,629	)		1,518,274		151,030			―		14,988		17,335		447,619
Corporate		―		―			―		(72,631	)		―		704		―		91,839
	$	2,915,085	$	(2,925	)	$	2,912,160		239,356		$	―	$	28,067	$	79,946	$	1,150,525
Interest Expense									14,420
								$	224,936
Year Ended December 31, 2004
BMC Construction	$	753,956	$	(255	)	$	753,701	$	59,689		$	―	$	8,216	$	14,382	$	268,498
BMC West		1,338,470		(1,146	)		1,337,324		96,083			―		14,599		17,036		409,160
Corporate		―		―			―		(47,664	)		―		497		―		65,386
	$	2,092,426	$	(1,401	)	$	2,091,025		108,108		$	―	$	23,312	$	31,418	$	743,044
Interest Expense									13,560
								$	94,548
Year Ended December 31, 2003
BMC Construction	$	408,929	$	(762	)	$	408,167	$	18,954		$	1,431	$	4,410	$	5,555	$	187,479
BMC West		1,007,373		(469	)		1,006,904		54,826			―		15,315		12,121		390,764
Corporate		―		―			―		(33,351	)		―		1,060		―		25,956
	$	1,416,302	$	(1,231	)	$	1,415,071		40,429		$	1,431	$	20,785	$	17,676	$	604,199
Interest Expense									9,279
								$	31,150

⁽¹⁾   In 2005, impairments of $1.3 million were recognized for goodwill and certain customer relationships for BMC Construction.  During 2004, impairments of $1.3 million for the carrying amount of certain properties held for sale and $1.0 million in the carrying amount of goodwill resulting from a change in business strategy were recognized for BMC West.  As a result of changes in a specific market, an impairment of $0.8 million in the carrying amount of certain customer relationships was recognized for BMC Construction in 2003.

⁽²⁾ Property and equipment from acquisitions are included as capital expenditures.

7

Operating Strategy

Our business units operate in specific markets and are organized under our business segments, BMC Construction and BMC West.  Each regional manager has substantial autonomy and responsibility to address customer needs specific to their markets.  The reputation of a construction services provider or building products distributor is often determined locally, where service, product suitability and knowledgeable customer service are critical.  Managers are responsible for optimizing business activities in their markets, including the efficient use of personnel, assessing and maintaining working capital and construction labor requirements, identifying potential customers and developing appropriate service and product offerings.  Incentive compensation is based on successful growth and financial returns tied to specific market areas and regions. We focus on improving efficiency and productivity at our business units while giving special attention and support to units that are not meeting strategic objectives.  When a business unit fails to meet performance criteria, alternatives include adjusting the mix of products and services, restructuring management, consolidation or liquidation.

Purchasing

We purchase building products from numerous manufacturers and suppliers.  In 2005, our largest supplier accounted for approximately 9.6% of purchases.  Because commodity wood products are available from several manufacturers and suppliers, we believe the loss of any single supplier would not have a material adverse effect on our financial position, results of operations or cash flows.  

In order to meet market specific needs and maintain appropriate inventory levels, purchasing decisions are made at the business unit level.  Large volume purchases are made under company-wide guidelines.  In addition, we participate in volume rebate programs with our suppliers.

The prices of commodity wood products, concrete, steel and other building products are volatile and may adversely impact financial condition and results of operations when prices rapidly rise or fall.  Our information systems allow business unit managers to closely monitor sales and inventory.  With this supply and demand information, we generally avoid overstocking commodity wood products.  As a result, we turn our commodity wood product inventory on average 12 to 13 times per year.  Such rapid inventory turnover limits our potential exposure to inventory loss from commodity price fluctuations.  

Management Information Systems

We are standardizing software and infrastructure platforms that support the information needs of our organization.  Our standardization effort includes job cost and construction information, estimating, inventory management, reporting, project scheduling and human resource management.

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We have developed a project methodology that allows us to efficiently deploy these information systems to our business units and acquisitions.  Most acquisitions are on-line with our corporate infrastructure within 30 days of acquisition, enabling access to our network capabilities.  

Our job cost and construction information systems are operating in approximately 80% of our BMC Construction business units with full deployment scheduled by 2007.  We expect our inventory management system to be upgraded by early 2007 and our human resources system to be completed in 2006.  We continue to research, recommend and implement new technology solutions to improve information for decision-making and our efficiencies.

We have also made investments in our infrastructure to improve backup capabilities for our network.  Because of our rapid growth, we are expanding our data center capabilities beyond our facility in Boise, Idaho to also include Phoenix, Arizona.  This will provide redundant services between the two centers and allow for a more seamless disaster recovery capability.  We are also moving to the next generation of wide area network technology to provide a redundant link between our locations and the data centers.  This architecture will also reduce the costs to operate our network and provide us with the capability to rapidly deploy additional bandwidth to meet accelerating business demand.

Safety and Risk Management

Due to our growth in construction services in recent years, the number of employees dedicated to our construction trades has increased.  The construction services industry incurs a higher number of accidents and subsequent costs for workers’ compensation claims than typically experienced at building materials distribution facilities.  Consequently, we have initiated several programs to enhance safety and reduce the risks encountered by our employees.  These programs include instruction and training for truck drivers, fall protection and construction safety as well as on-line training programs about compliance matters and safety hazards in the workplace.  Additionally, our managers are compensated for their effectiveness in reducing the incidence of workers compensation claims.

We maintain comprehensive insurance coverage to mitigate the potential cost of claims.  Our estimated cost for automobile, general liability and workers compensation claims is determined by actuarial methods.  Claims in excess of certain amounts are insured with third-party insurance carriers.  Reserves for claims are recognized based on the estimated costs of these claims as limited by the deductible of the applicable insurance policies.  

Employees

Our success is highly dependent on the quality of our employees.  Due to competition in attracting and retaining qualified employees, we maintain competitive compensation and benefit programs to attract, motivate and retain top-performers.  We also provide extensive product knowledge, customer service and other supervisory/management training programs to achieve our goal of being both the employer and supplier of choice.

We employ approximately 21,000 people.  Specifically, BMC Construction employs 16,000 employees, while BMC West employs 5,000.  Unions represent approximately 1,000 or less than 5% of these employees.  We have not experienced any strikes or other work interruptions and have maintained generally favorable relations with our employees.

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Executive Officers

Name	Age	Position and Business Experience
Robert E. Mellor	62	Chairman of the Board, President and Chief Executive Officer Mr. Mellor became Chairman of the Board of Directors in 2002 and has been President and Chief Executive Officer since 1997. He has been a director since 1991. He was previously Of Counsel with the law firm of Gibson, Dunn & Crutcher LLP from 1990 to 1997. He is a director for Coeur d’Alene Mines Corporation, The Ryland Group, Monro Muffler Brake and the California Chamber of Commerce. He is also on the board of councilors of Save-the-Redwoods League. He does not serve on the audit committee of any of these boards. Mr. Mellor intends to remove himself as a director from one of these boards in 2006.
William M. Smartt	63	Senior Vice President and Chief Financial Officer Mr. Smartt has been a Senior Vice President and Chief Financial Officer since April 2004.  Prior to joining the Company, he was an independent consultant from August 2001 to March 2004.  From 1992 to 2001, he was Executive Vice President, Chief Financial and Administrative Officer of DHL Express, a leader in international air express service.  His previous experience as a Chief Financial Officer included ten years with Di Giorgio Corporation, a Fortune 500 Company, whose product lines included the distribution of building materials, prefabricated components and framing services.
Michael D. Mahre	46	Senior Vice President - Corporate Development, President and Chief Executive Officer - BMC Construction Mr. Mahre was elected a Senior Vice President in 2003.  He was elected Vice President of Corporate Development in 2001 and Chief Executive Officer of BMC Construction in 2002.  He joined the Company in 1999 as Director of Financial Planning and Analysis. Mr. Mahre was a principal of The Cambria Group, a private equity investment firm, from 1997 to 1998.
Stanley M. Wilson	61	Senior Vice President, President and Chief Executive Officer - BMC West Mr. Wilson was elected President and CEO of BMC West in 2004 and was appointed Senior Vice President in 2003.  He was elected Vice President in 2000 and was General Manager of the Pacific Division of BMC West from 1993 to 2003.  Mr. Wilson has been with the company since its beginning in 1987.  His previous experience includes 20 years with the building materials distribution business of Boise Cascade Corporation.

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Eric R. Beem	36	Vice President and Controller Mr. Beem was appointed Vice President in January 2006 and Controller in April 2005.  He joined the Company as Accounting Manager in 1996.  Mr. Beem is a Certified Public Accountant and his experience includes three years with an international public accounting firm.
John D. Fa	35	Vice President, Real Estate Mr. Fa joined the company as Vice President, Real Estate in December 2005.  He previously served from 1999 to 2005 as Associate Director for Development at Presidio Trust in San Francisco.
Mark R. Kailer	52	Vice President, Treasurer and Investor Relations Mr. Kailer has been Vice President and Treasurer since 2003.  He joined the company in 2000 as Assistant Treasurer.  He was previously Senior Manager of Treasury Services at Circle International Group, a publicly-traded global logistics company based in San Francisco, from 1997 to 2000.
Jeffrey F. Lucchesi	52	Senior Vice President, Chief Information Officer Mr. Lucchesi joined the company in August 2004 as Senior Vice President and Chief Information Officer. From 2000 to 2004, he was Senior Vice President of Worldwide Operations for Corio, Inc., an enterprise application service provider.  Mr. Lucchesi also served from 1994 to 2000 as Vice President and Chief Information Officer for DHL Express, a leader in international air express services.
Steven H. Pearson	58	Senior Vice President - Human Resources Mr. Pearson has been Senior Vice President of Human Resources since 2001.  From 1987 through 2001 he served as Vice President of Human Resources.  Mr. Pearson has been with the Company since its beginning in 1987.  His previous experience also includes 18 years in the human resource function of Boise Cascade Corporation.
Paul S. Street	57	Senior Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary Mr. Street joined the Company in 1999 as Senior Vice President, General Counsel and Corporate Secretary and has been Chief Administrative Officer since 2001.  He previously served as our outside General Counsel & Secretary while a partner of the law firm of Moffatt, Thomas, Barrett, Rock & Fields.

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ITEM 1A.  Risk Factors

Risks Related to Our Business

There are a number of business risks and uncertainties that affect our operations and therefore could cause future results to differ from past performance or expected results.  These risks or uncertainties may include, but are not limited to the following factors:

Our business is dependent on demand for single-family homes which is influenced by changes in the overall condition of the U.S. economy, including interest rates, job formation, consumer confidence and other important factors.

The residential construction services and building products industry is highly dependent on demand for single-family homes which is influenced by several factors.  These factors include economic changes nationally and locally, mortgage and other interest rates, job formation, consumer confidence, demographic trends, inflation and building permit activity as well as other factors.  The construction of new homes may also experience declines due to the availability and affordability of land in attractive metropolitan areas, shortages of qualified trades people, material shortages and regulations that impose restrictive zoning and density requirements.  All of these factors could limit demand for home construction and may adversely impact our financial condition, results of operations or cash flows.

There are risks associated with changes to our business model.

Our business model seeks the strategic growth of construction services and distribution of building products in an effort to provide a comprehensive solution to high-volume production and other homebuilders.  Providing these services and products include the risks of availability and cost of qualified labor and claims for construction defects, product liability and workers compensation as well as the timely sourcing and availability of building products.  Additionally, there is no guarantee that our efforts to offer these comprehensive solutions will continue to be accepted by the marketplace.

The integration of acquired businesses may not result in anticipated cost savings and revenue synergies being fully realized or may take longer to realize than expected.

Our growth over the past several years has been largely due to acquisitions and we intend to continue this strategy.  The integration of acquired businesses may not result in anticipated cost savings and revenue synergies being fully realized or may take longer to realize than expected.  The management and acquisition of businesses involves substantial risks including:

·   the uncertainty that an acquired business will achieve anticipated operating results;

·   significant expenses to integrate;

·   diversion of management attention;

·   departure of key personnel from the acquired business;

·   effectively managing entrepreneurial spirit and decision-making;

·   integration of different information systems;

·   managing new construction service trades;

·   unanticipated costs and exposure to unforeseen liabilities and;

·   impairment of assets.

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Our growth is dependent upon our ability to identify suitable acquisition candidates.

Our growth over the past several years has been largely due to acquisitions and we intend to continue this strategy.  Failure to identify and acquire suitable acquisition candidates could have a material adverse effect on our growth.  Also, the increasing level of consolidation occurring in the building products distribution and construction services industry may limit the availability and suitability of acquisition candidates.

Our success is dependent upon the availability of and our ability to attract, train and retain qualified individuals.

Competition for employees is especially intense in both construction services and building products distribution.  In markets with strong housing demand, we may experience shortages in qualified labor and key personnel, which may limit our ability to complete contracts as well as obtain additional contracts with builders.  Changes to immigration policies could also limit the availability of qualified labor.  We have been successful in recruiting and retaining qualified employees, however we cannot guarantee that we will continue to be successful in the future.

An inability to implement and maintain cost structures that align with revenue growth may have an adverse impact on our operating results.

When we experience slower periods of homebuilding activity, acquire new businesses or expand existing operations, we may experience inefficiencies in our cost structures.  Our evaluation and changes to fixed and variable expenses in response to declining sales may not occur in a timely manner, leading to higher costs and lower returns on sales.

Changes in the business models of customers may limit our ability to provide construction services and building products required by our customers.

As the business models of our customers evolve, our existing construction service and building product offerings may not meet the needs of certain homebuilders.  Homebuilders may decide to no longer outsource construction services.  Also, changes to housing patterns may occur, such as urban living rather than single-family suburban neighborhoods.  If we do not timely assess shifts in customer expectations, preferences and demands, our financial condition, results of operations or cash flows could be adversely affected.

Our operating results are affected by fluctuations in our costs and the availability of sourcing channels for commodity wood products, concrete, steel and other building materials.

Prices of commodity wood products, concrete, steel and other building products are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations and periodic delays in delivery.  Rapid and significant changes in product prices may affect sales as well as margins due to a limited ability to pass on short-term price changes.  We do not use derivative financial instruments to hedge commodity price changes.  

Generally, our products are obtainable from various sources and in sufficient quantities.  However, we may experience shortages of building products as a result of unexpected demand or production difficulties as well as transportation limitations.  Any disruption in our sources of supply for key building products could negatively impact our financial condition, results of operations or cash flows.

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Our business is subject to intense competition.

We experience competition across all markets for our construction services and building products.  Recently, there has been increased consolidation within the building materials distribution and construction services industry.  Also, other building materials distributors, including large retail distributors focused on consumers, may more aggressively pursue our target market of professional homebuilders.  These competitive pressures may lead to decreases in sales, margin reductions and increases in operating costs and may limit acquisition opportunities.  Loss of significant market share due to competition could result in the closure of facilities.

Weather conditions, including natural catastrophic events, may cause our operating results to fluctuate each quarter.

Our first and fourth quarters historically have been, and are expected to continue to be, adversely affected by weather conditions in some of our markets, causing decreases in operating results due to slower homebuilding activity.  In addition, natural catastrophic events may cause our operating results to fluctuate.

The nature of our business exposes us to construction defect and product liability claims as well as other legal proceedings.

We are involved in construction defect and product liability claims relating to our various construction trades and the products we distribute and manufacture.  Although we believe we maintain adequate insurance, we may not be able to maintain such insurance on acceptable terms or such insurance may not provide adequate protection against potential liabilities.  Current or future claims may adversely affect our financial condition, results of operations or cash flows.

We may be adversely affected by disruptions in our information systems.

Our operations are dependent upon information for decision-making and the related information systems.  A substantial disruption in our information systems for a prolonged period could result in delays in our services and products and adversely affect our ability to complete contracts and fulfill customer demands.  Such delays, problems or costs may have an adverse effect on our financial condition, results of operations or cash flows.

Actual and perceived vulnerabilities as a result of terrorist activities and armed conflict may adversely impact consumer confidence and our business.

Instability in the economy and financial markets as a result of terrorism or war may impact consumer confidence and result in a decrease in homebuilding in our markets.  Terrorist attacks may also directly impact our ability to maintain operations and services and may have a material adverse effect on our business.

Numerous other matters of a local and regional scale, including those of a political, economic, business, competitive or regulatory nature may have an adverse impact on our business.

Many factors shape the homebuilding industry.  In addition to the factors previously cited, there are other matters of a local and regional scale, including those of a political, economic, business, competitive or regulatory nature which may have a material adverse effect on our business.

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Risks Related to Our Shares

Risks related to our shares include, however are not limited to:  

Our share price may fluctuate significantly, which may make it difficult for shareholders to sellour shares when desired or at attractive prices.

The market price of our shares is subject to significant changes as a result of our operating performance and the other factors discussed above as well as perceptions and events that are beyond our control.  Price and trading volume fluctuations for our shares may be unrelated or disproportionate to our operating performance.  Additionally, our share price could fluctuate based on the expectations and performance of other publicly traded companies in the construction services and building products distribution industry.  

Anti-takeover defenses in our governing documents and certain provisions under Delaware law couldprevent an acquisition of our company or limit the price that investors might be willing to pay for our shares.

Our governing documents and certain provisions of Delaware law that apply to us could make it difficult for another company to acquire control of our company.  For example, we have a rights plan, commonly known as a “poison pill,” which would make it difficult for someone to acquire our company without the approval of our Board of Directors.  Also, our certificate of incorporation allows our Board of Directors to issue, at any time and without shareholder approval, preferred shares with such terms as it may determine.  These provisions and others could delay, prevent or allow our Board of Directors to resist an acquisition of our company, even if a majority of our shareholders favored the proposed transaction.

ITEM 1B.  Unresolved Staff Comments

We have no unresolved comments from the Securities and Exchange Commission.

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ITEM 2.  Properties

We lease our headquarters in San Francisco, California and our administrative service center in Boise, Idaho.  Principal properties include distribution centers for building products, millwork fabrication and distribution sites, truss manufacturing plants, sales and administrative offices.  Properties are located in growing metropolitan areas and emerging housing markets.  Substantially all of the properties for BMC Construction are leased while at BMC West approximately 63% are owned and 37% are leased.  Our properties provide adequate capacity to meet the needs of our customers and are in good operating condition.  Locations operate under the trade names BMHC, BMC Construction and BMC West, as well as other brand names or trademarks.  Properties by business segment are as follows:

BMC Construction		BMC West
Location	Number of Properties	Location	Number of Properties
Arizona	11	Arizona	1
California	17	California	7
Florida	12	Colorado	18
Illinois	1	Idaho	8
Nevada	9	Montana	8
Virginia	1	Nevada	3
		Oregon	2
		Texas	27
		Utah	7
		Washington	5

ITEM 3.  Legal Proceedings

We are involved in litigation and other legal matters arising in the normal course of business.  In the opinion of management, the recovery or liability, if any, under any of these matters will not have a material effect on our financial position, results of operations or cash flows.

ITEM 4.  Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year.

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PART II

ITEM 5.  Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common shares are traded on the NASDAQ market under the symbol BMHC.  The high and low share prices as well as cash dividends for each period were as follows:

	2005			2004
	High	Low	Cash Dividends Declared	High	Low	Cash Dividends Declared
First quarter	$49.73	$34.00	$0.08	$18.33	$14.90	$0.06
Second quarter	$72.26	$44.00	$0.10	$19.28	$15.70	$0.06
Third quarter	$97.31	$69.36	$0.15	$27.65	$16.97	$0.08
Fourth quarter	$96.22	$68.21	$0.15	$38.94	$25.62	$0.08

At the annual meeting of shareholders on May 3, 2005, our shareholders voted to increase the number of authorized common shares to 50 million from 20 million.  

On February 14, 2006, our Board of Directors approved a two for one split of our outstanding common shares.  Shareholders of record as of February 28, 2006 will receive a stock dividend of one additional common share for every common share they own.  The additional shares will be distributed on March 14, 2006. 

The information throughout this Form 10-K is presented as of December 31, 2005 and before the two for one split of our common shares which is effective February 28, 2006.

On February 14, 2006, our Board of Directors approved a quarterly cash dividend of $0.10 per share for common shares outstanding after the share split.  The dividend is payable on March 24, 2006 to shareholders of record.  

Dividends are paid at the discretion of the Board of Directors and we expect to continue these payments.  The continuation of dividend payments (cash or shares) depends on many factors, including financial position, results of operations or cash flows.  

As of February 22, 2006, there were approximately 9,858 shareholders of record and the closing price of our shares was $74.18.

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ITEM 6.  Selected Financial Data

The following selected financial data should be read in conjunction with Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations as well as Item 8 - Financial Statements and Supplementary Data.  These resources provide further information to understand the comparability of selected financial data.

Selected Financial Data

(thousands, except share data)

	Year Ended December 31
	2005		2004			2003		2002			2001
Sales(1)
Construction services	$	1,586,509	$	904,362		$	498,052	$	293,063		$	147,363
Building products		1,325,651		1,186,663			917,019		868,431			945,504
Total sales	$	2,912,160	$	2,091,025		$	1,415,071	$	1,161,494		$	1,092,867
Income from operations(2)	$	239,356	$	108,108		$	40,429	$	39,121		$	42,629
Net income(3)	$	129,507	$	53,910	(4)	$	19,929	$	7,015	(5)	$	20,844
Net income per share:
Basic	$	9.22	$	4.00		$	1.50	$	0.54		$	1.61
Diluted	$	8.82	$	3.87		$	1.48	$	0.53		$	1.60
Annual cash dividends declared per share(6)	$	0.48	$	0.28		$	0.21	$	0.05		$	―
Working capital	$	304,459	$	284,173		$	216,898	$	170,492		$	160,904
Total assets	$	1,150,525	$	743,044		$	604,199	$	503,074		$	485,742
Long-term debt, net of current portion	$	278,169	$	206,419		$	186,773	$	157,375		$	167,417
Shareholders’ equity	$	470,061	$	327,678		$	271,010	$	251,300		$	242,894
Cash flows provided by operations	$	199,280	$	33,677		$	12,479	$	35,726		$	63,687

⁽¹⁾ Acquisitions provided sales of $403.9 million in 2005; $221.4 million in 2004; $155.2 million in 2003; $117.4 million in 2002 and $100.5 million in 2001.

⁽²⁾ Acquisitions provided income (loss) from operations of $31.6 million in 2005; $2.8 million in 2004; ($3.6) million in 2003; $9.8 million in 2002 and $7.7 million in 2001.

⁽³⁾ Impairments of assets net of tax were $0.8 million in 2005; $1.4 million in 2004; $0.5 million in 2003; $4.1 million in 2002 and $1.1 million in 2001.

⁽⁴⁾ Includes a reduction of expenses for lower than expected insurance costs of $3.8 million net of tax.

⁽⁵⁾ The transitional impairment analysis of goodwill resulted in an impairment of $11.7 million net of tax.

⁽⁶⁾ In February 2006, our Board of Directors approved a two for one split of our outstanding common shares and first quarter cash dividend. The first quarter cash dividend will be $0.10 per share after the split or $0.20 per share prior to the split of our common shares. The cash dividend was initiated in the fourth quarter of 2002.  

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ITEM 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Consolidated Financial Statements and related notes that appear in Item 8 of Form 10-K as well as the caption under this item entitled Business Risks and Forward-Looking Statements.

OVERVIEW

Homebuilding Industry

The residential construction services and building products industry experienced another strong year in 2005.  Factors that influence the demand for single-family homes such as economic conditions, mortgage interest rates, job formation and consumer confidence were generally favorable.  Consequently, the National Association of Home Builders reported an increase of 7.2% in single-family housing starts to a historic high of 1.7 million units in 2005.  The forecast for 2006 projects a decline of approximately 7% in single-family housing starts to 1.6 million units.

Our operations are located in attractive metropolitan areas that have generally outpaced U.S. averages for residential building permit activity.  With construction services and building product offerings in California; Las Vegas, Nevada; Phoenix and Tucson, Arizona; Texas; the Intermountain and Northwest states as well as Florida, we believe we are in homebuilding markets supported by positive demographic trends.  We are optimistic about the industry trends that support our business and therefore remain confident in our long-term growth.

Our Strategy

We grow our business through acquisitions as well as strategically expanding the breadth of our construction services and building products offered to professional builders and contractors.  In particular, we believe high-volume production homebuilders are seeking quality, reliable and cost effective solutions to meet their construction services needs.  In 2005, we completed several acquisitions to expand the trades offered to homebuilders.  Our services include framing, concrete, plumbing and other construction services as well as building product distribution and manufactured building components including trusses, millwork and wall panels.

Business Segments

We compete in the homebuilding industry through two business segments:  BMC Construction and BMC West.  BMC Construction offers construction services to high-volume production homebuilders through operations in key growth markets across the country.  With locations in the western and southern states, BMC West distributes building products and manufactures building components for professional builders and contractors.  These two business segments are subsidiaries of our holding company - Building Materials Holding Corporation.

As the result of a branding strategy, we changed the name of BMC Construction to SelectBuild Construction.  This change is expected to be formally announced in the first quarter of 2006.

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Acquisition History

Over the past few years, BMC Construction acquired businesses providing construction services to high-volume production homebuilders.  Specifically, these businesses were as follows:

2005

·   framing services in San Diego, California (October)

·   concrete services in Las Vegas, Nevada and concrete and plumbing services in southern California (September)

·   additional 20% interest in our existing business providing foundation and shell construction services in Florida (20% August 2005 and 60% January 2003)

·   51% interest in concrete services in Arizona (July)

·   73% interest in plumbing services in Phoenix and Tucson, Arizona (60% April and 13% July)

·   stucco services in Las Vegas, Nevada (June)

·   51% interest in framing services in Chicago, Illinois (January)

2004

·   remaining 49% interest in our existing framing services business in northern California (49% July 2004 and 51% July 2002)

2003

·   67.33% interest in framing services in Delaware, Maryland and Virginia (October)

·   60% interest in foundation and shell construction services in Florida (January)

In January 2006, we acquired framing businesses in Palm Springs, California and Reno, Nevada.  As part of our growth strategy, we continue to evaluate acquisition opportunities that strengthen and broaden our construction trades as well as presence in attractive markets.

At BMC West, we recently acquired three facilities providing building materials distribution and millwork services in Houston, Texas (February 2006).  We continue to pursue other potential candidates and are also expanding and integrating our building products, manufactured building components, millwork and construction services to become a full-service provider to homebuilders.

Performance Measurements

We measure our operating performance and financial condition based on several factors including:

● Sales	● Management of working capital
● Income from operations	● Return on investment

We evaluate our results of operations including and excluding acquisitions not present in comparable periods.  We believe this approach enhances an understanding of our acquisitions and operating results for the respective reporting periods.

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The discussion of our results of operations and financial condition provides information to assist the reader in understanding our financial statements, changes in key items in those financial statements and the primary factors that accounted for those changes.  The discussion of our consolidated financial results is followed by a more detailed review of our business segments.

RESULTS OF OPERATIONS

2005 COMPARED WITH 2004

The following table sets forth the amounts and percentage relationship to sales of certain costs, expenses and income items (millions):

	Year Ended December 31
	2005					2004
Sales
Construction services	$	1,586.5		54.5	%	$	904.3		43.2	%
Building products		1,325.7		45.5			1,186.7		56.8
Total sales		2,912.2		100.0			2,091.0		100.0
Costs and operating expenses
Cost of goods sold
Construction services		1,285.9		81.1			768.4		85.0
Building products		967.9		73.0			897.7		75.6
Total cost of goods sold		2,253.8		77.4			1,666.1		79.7
Impairment of assets		1.3		―			2.3		0.1
Selling, general and administrative expenses		420.9		14.5			317.0		15.2
Other income, net		(3.2	)	(0.1	)		(2.5	)	(0.1	)
Total costs and operating expenses		2,672.8		91.8			1,982.9		94.9
Income from operations		239.4		8.2			108.1		5.1
Net income	$	129.5		4.4	%	$	53.9		2.6	%
Earnings per diluted share	$	8.82				$	3.87

Consolidated Financial Results

Selected financial results are as follows (millions):

		2005		2004		$ Δ	% Δ
Sales
Construction services	$	1,586	$	904	$	682	75	%
Building products		1,326		1,187		139	12	%
	$	2,912	$	2,091	$	821	39	%
Income from operations	$	239	$	108	$	131	121	%

A key element of our business strategy for the past several years entails shifting our product and service mix from commodity lumber to value added manufactured building components and construction services.  More recently, in the periods presented in this Form 10-K, we have aggressively pursued this shift in emphasis to meet the demands of the market.  

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Sales increased $821 million to $2.9 billion due to an increase in construction services and the acquisition of construction services businesses.  Sales from acquisitions not present in comparable periods were $404 million or approximately half of the increase.  Strong homebuilding activity was prevalent in most of our markets, particularly the Southwest region.  Building permits and housing starts were also higher in most of our markets relative to the prior year.

Income from operations for 2005 increased 121% to $239 million from $108 million in the prior year.  Improved margins, particularly from demand for our construction services, were a key factor.  Margins as a percent of sales for construction services were up 3.9% while building products also improved 2.7% compared to the prior year.  Selling, general and administrative expenses were 14.5% of sales and improved by 70 basis points.  These expenses were lower as a percent of sales due to better leveraging of these expenses at our building products operations.

Business Segments

Sales and operating income by business segment are as follows (millions):

	2005					2004
	Sales		Income from Operations			Sales		Income from Operations
BMC Construction	$	1,394	$	161		$	754	$	60
BMC West		1,518		151			1,337		96
Corporate		―		(73	)		―		(48	)
	$	2,912	$	239		$	2,091	$	108

BMC Construction

Selected financial results are as follows (millions):

	2005			2004		$ Δ			% Δ
Sales	$	1,394		$	754	$	640			85	%
Less: Acquisitions		(385	)		―		(385	)		―
	$	1,009		$	754	$	255			34	%
Income from operations	$	161		$	60	$	101			168	%
Less: Acquisitions		(31	)		―		(31	)		―
	$	130		$	60	$	70			117	%

Sales increased $640 million in 2005.  Acquisitions of construction services businesses not present in the same periods represented 60% of this increase.  Home construction activity was strong in Las Vegas and Phoenix as well as most of our other markets.  In addition, housing starts in our markets compared favorably to the prior year.

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Income from operations for 2005 improved over $100 million compared to the prior year.  Margin improvement was a key factor, improving 4.6% as a percent of sales to 19.3% compared to 14.7% in the prior year.  Further market acceptance of the value of our construction services, particularly in the Las Vegas and Phoenix markets as well as improved management of contracts, most notably in our Florida operations, contributed to the improvement.  Acquisitions also contributed approximately 30% or $31 million to the increase in operating income.  Selling, general and administrative expenses specific to the business segment were $56 million higher with more than half of the increase due to acquisitions completed during the year.  As a percent of sales, these expenses were 7.7% compared to 6.8% in the prior year.

BMC West

Selected financial results are as follows (millions):

	2005			2004		$ Δ			% Δ
Sales	$	1,518		$	1,337	$	181			14	%
Less: Acquisitions		(19	)		―		(19	)		―
	$	1,499		$	1,337	$	162			12	%
Income from operations	$	151		$	96	$	55			57	%
Less: Acquisitions		―			―		―			―
	$	151		$	96	$	55			57	%

Sales increased $181 million in 2005 as we experienced strong housing construction across all our regions.  Building permit activity for single-family homes in our markets was up 13% and compares favorably to the U.S. average of 4%.  In particular, our Texas, Northwest and Intermountain regions reported strong increases in sales compared to a year ago.  Our continued focus on a regional business model that provides customers with expanded choices for building products and services from multiple locations also contributed to our sales growth.

Income from operations for 2005 increased $55 million due to improved margins.  Margins as a percent of sales were 2.1% higher and were 25.7% compared to 23.6% in the prior year.  Inventory was effectively managed despite fluctuations during the year in commodity wood product prices.  Selling, general and administrative expenses specific to the business segment were approximately $21 million higher than the preceding year.  However, these expenses were effectively leveraged as they represented 15.9% of sales compared to 16.5% in the prior year.

Corporate

Corporate represents expenses to support the operations of our business segments, BMC Construction and BMC West.  These costs include management, information systems, administrative functions for reporting, accounts payable and human resources, professional fees for regulatory compliance as well as incentive compensation.  These costs are not allocated to our business segments.

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Selected financial results are as follows (millions):

	2005	2004	$ Δ	% Δ
Operating expenses	$73	$48	$25	52%

Corporate and other expenses were $25 million higher in 2005 due to incentive compensation from improved operating performance, professional fees for regulatory compliance and additional personnel to support our expanding business.  These expenses were 2.5% of sales compared to 2.3% in 2004.

2004 COMPARED WITH 2003

The following table sets forth the amounts and percentage relationship to sales of certain costs, expenses and income items (millions):

	Year Ended December 31
	2004					2003
Sales
Construction services	$	904.3		43.2	%	$	498.1		35.2	%
Building products		1,186.7		56.8			917.0		64.8
Total sales		2,091.0		100.0			1,415.1		100.0
Costs and operating expenses
Cost of goods sold
Construction services		768.4		85.0			436.9		87.7
Building products		897.7		75.6			688.4		75.1
Total cost of goods sold		1,666.1		79.7			1,125.3		79.5
Impairment of assets		2.3		0.1			0.8		0.1
Selling, general and administrative expenses		317.0		15.2			250.3		17.6
Other income, net		(2.5	)	(0.1	)		(1.7	)	(0.1	)
Total costs and operating expenses		1,982.9		94.9			1,374.7		97.1
Income from operations		108.1		5.1			40.4		2.9
Net income	$	53.9		2.6	%	$	19.9		1.4	%
Earnings per diluted share	$	3.87				$	1.48

Consolidated Financial Results

Selected financial results are as follows (millions):

	2004		2003		$ Δ		% Δ
Sales
Construction services	$	904	$	498	$	406		82	%
Building products		1,187		917		270		29	%
	$	2,091	$	1,415	$	676		48	%
Income from operations	$	108	$	40	$	68		170	%

Sales exceeded $2 billion in 2004, an increase of $676 million over the prior year.  Existing operations accounted for 67% or $455 million of the increase and acquisitions of construction services businesses not present in comparable periods represented the remaining $221 million.  Construction services continue to increase as a result of our strategy to offer more construction services and value-added building products to homebuilders.

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Income from operations for 2004 increased to $108 million from $40 million in the prior year.  Margins as a percent of sales were 20.3% and approximately the same as the prior year of 20.5%.  Margins for building products were 0.6% lower, while margins for construction services improved 2.7%. Selling, general and administrative expenses were 15.2% of sales compared to 17.7% in 2003 as a result of improved leveraging of these expenses at our building products operations and maintaining these expenses as a percent of sales at our construction services operations and corporate functions.  

Business Segments

Sales and operating income by business segment are as follows (millions):

	2004					2003
	Sales		Income from Operations			Sales		Income from Operations
BMC Construction	$	754	$	60		$	408	$	19
BMC West		1,337		96			1,007		55
Corporate		―		(48	)		―		(34	)
	$	2,091	$	108		$	1,415	$	40

BMC Construction

Selected financial results are as follows (millions):

	2004			2003		$ Δ			% Δ
Sales	$	754		$	408	$	346			85	%
Less: Acquisitions		(185	)		―		(185	)		―
	$	569		$	408	$	161			39	%
Income from operations	$	60		$	19	$	41			216	%
Less: Acquisitions		(6	)		―		(6	)		―
	$	54		$	19	$	35			184	%

Sales of $754 million in 2004 increased 85% over the prior year.  Acquisitions of construction services businesses not present in comparable periods accounted for $185 million or 53% of the increase with the remaining $161 million from existing operations.  Higher sales were due to robust home construction in Las Vegas, Phoenix and northern California as well as contract increases from rising labor and material costs.

Income from operations for 2004 was $60 million, up significantly from $19 million in the prior year.  Margins as a percent of sales were a driving factor, improving 3.3% over the prior year.  The improvement was primarily due to the increased value assigned to our construction services in strong housing markets as well as integration efficiencies from recent acquisitions.  Although selling, general and administrative expenses specific to the business segment were approximately $24 million higher than the prior year, these expenses were 6.8% of sales and consistent with the prior year.

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BMC West

Selected financial results are as follows (millions):

	2004			2003		$ Δ			% Δ
Sales	$	1,337		$	1,007	$	330			33	%
Less: Acquisitions		(36	)		―		(36	)		―
	$	1,301		$	1,007	$	294			29	%
Income from operations	$	96		$	55	$	41			75	%
Less: Acquisitions		3			―		3			―
	$	99		$	55	$	44			80	%

Sales of $1.3 billion in 2004 were 33% higher than the prior year.  The increase was due to both growth in sales at existing business units and the impact of higher commodity wood product prices relative to the prior year.  In addition to the benefit of commodity prices, higher sales were due to strong housing demand as building permits in our markets were up 14% compared to the prior year.

Income from operations for 2004 was $96 million, up from $55 million in the prior year.  Despite rising commodity wood product prices, margins remained at approximately 24% as a percent of sales, reflective of our effective management of inventory.  Selling, general and administrative expenses specific to the business segment were up $29 million or 15% compared to the prior year primarily due to variable compensation expenses.  However, these expenses were leveraged against higher sales as they decreased 2.5% to 16.5% of sales compared to the prior year.

Corporate

Corporate represents expenses to support the operations of our business segments, BMC Construction and BMC West.  These costs include management, information systems, administrative functions for reporting, accounts payable and human resources, professional fees for regulatory compliance as well as incentive compensation.  These costs are not allocated to our business segments.

Selected financial results are as follows (millions):

	2004		2003		$ Δ		% Δ
Operating expenses	$	48	$	34	$	14		41%

Although corporate and other expenses were $14 million higher in 2004 due to compensation expenses from improved operating performance, these expenses remained essentially the same at 2.3% of consolidated sales in both years.

LIQUIDITY AND CAPITAL RESOURCES

Our primary need for capital resources is to fund working capital and acquisitions as well as finance capital expenditures.  Capital resources have primarily consisted of cash flows from operations and additional debt.  For the year ended December 31, 2005, $199.3 million of cash was provided by operations and funded capital expenditures and the majority of our acquisitions as additional debt borrowed was $78.5 million.

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Operations

In 2005, cash provided by operating activities was $199.3 million, up significantly from $33.7 million in 2004.  Strong home construction activity and improved margins in both our construction services and building products segments resulted in higher net income, providing $75.6 million of additional operating cash flow over the prior year.  Also, working capital requirements were lower than the prior year due to lower commodity wood product prices as well as improved inventory turns and days sales outstanding.  This improved management of working capital resulted in cash used of $0.8 million compared to $61.3 million of cash used in the prior year.  

Cash provided from operating activities was $33.7 million in 2004 up significantly from $12.5 million in 2003.  Strong home construction activity and our strategy to provide additional construction services resulted in higher net income or $34.0 million of additional operating cash flow over the prior year.  Changes in working capital requirements used $28.8 million of this cash flow.

Capital Investment and Acquisitions

In 2005, cash used in investing activities was $261.6 million compared to $58.0 million for the same period a year ago.  Cash use included $203.2 million for the acquisition of three businesses providing framing, concrete and stucco services, a truss manufacturing facility and partial acquisition of four businesses providing concrete, plumbing and framing services.  Cash used for investing activities also included $46.5 million for purchase of property and equipment and $14.1 million for the purchase of marketable securities.  Cash used in investing activities was $203.6 million higher than the prior year when $58.0 million was used for the purchase of property and equipment, acquisition of three businesses providing distribution, windows installation and framing and the partial acquisition of a truss manufacturing facility as well as the purchase of marketable securities at our captive insurance subsidiary.  

Cash used in investing activities was $58.0 million in 2004 compared to $30.5 million in 2003.  Cash use included $27.7 million for property and equipment, $22.7 million for the acquisition of three businesses and partial acquisition of another business as well as $19.0 million invested in marketable securities at our captive insurance subsidiary.  The cash use was partially offset by proceeds of $12.3 million from the disposition of property in Montana, Texas and Utah.

Financing

In 2005, cash provided by financing activities was $72.9 million compared to $24.3 million in the prior year.  Coupled with strong operating cash flows, funds were borrowed to finance acquisitions and purchase property and equipment whereas funds were borrowed to finance working capital requirements and purchase property and equipment in 2004.  

Cash provided by financing activities was $24.3 million in 2004 compared to $28.3 million in the prior year.  The primary sources of cash were $20.8 million of net borrowings from the revolver and an increase in book overdrafts and stock options exercised net of tax benefit.  Cash from the net borrowings of the revolver, book overdrafts and stock options exercised were used to make payments on the term note, other notes and dividends.

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Revolver

In June 2005, we entered into an amended $300 million revolver with a group of lenders.  The revolver matures in June 2010.  The revolver consists of both LIBOR and Prime based borrowings.  Interest rates are subject to quarterly adjustment based on operating performance and range from LIBOR plus 0.75% to 2.00%, or Prime plus 0.0% to 0.75%.  Interest is paid quarterly.  As of December 31, 2005, $77.5 million was outstanding under the revolver.

Term Notes

In June 2005, we also entered into a $75 million term note with a group of lenders.  The term note matures in June 2010 with 10% of the initial principal payable for each of the two years commencing September 2006, 20% of the initial principal payable for one year commencing September 2008 and the remaining principal balance due June 2010.  Interest rates are subject to quarterly adjustment based on operating performance and range from LIBOR plus 0.75% to 2.00%, or Prime plus 0.0% to 0.75%.  Interest is paid quarterly.  As of December 31, 2005, $75 million was outstanding under this term note.

In August 2003, we entered into a $125 million term note with a group of lenders.  The term note matures in June 2010 and is payable in quarterly installments for the first six years in amounts equal to 1% of the initial principal amount per year and equal quarterly installments for the remaining principal balance during year seven.  The term note was amended in March 2005 to reduce interest rates by 0.75% and in June 2005 to reduce interest rates another 0.25%.  The interest rate for the term note is LIBOR plus 1.75% or Prime plus 1.00%.  Interest is paid quarterly.  As of December 31, 2005, $121.9 million was outstanding under this term note.

Other

Other long-term debt of $13.9 million consists of term notes, equipment notes and capital leases for equipment.  Interest rates vary and dates of maturity are through March 2013.

Expansion of Credit Facility, Covenants and Maturities

The credit facility consists of the revolver and term notes.  The credit facility may be increased an aggregate amount of up to $150 million.  The credit facility is collateralized by all tangible and intangible property, except assets of the captive insurance subsidiary.  The credit facility contains covenants and conditions requiring the maintenance of certain financial ratios.  At December 31, 2005, we were in compliance with these covenants and conditions.  

Scheduled maturities of long-term debt are as follows (thousands):

2006	$	10,131
2007		13,914
2008		14,073
2009		77,775
2010		171,851
Thereafter		556
	$	288,300

As of December 31, 2005 and December 31, 2004, there were $75.9 million and $41.2 million, respectively of letters of credit outstanding that guaranteed performance or payment to third parties.  These letters of credit reduce borrowing availability under the revolver.  

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Hedging Activities

Derivative and hedging activities are recorded on the balance sheet at their fair values.  In June 2004, we entered into interest rate swap contracts that effectively convert a portion of the floating rate borrowings of the $121.9 million term note to a fixed interest rate through June 2009, thus reducing the impact of increases in interest rates on future interest expense.  Approximately 82% of the outstanding floating rate borrowings of the term note as of December 31, 2005 have been hedged through the designation of interest rate swap contracts accounted for as cash flow hedges.  As a result, the interest rate on $100 million of the $121.9 million floating rate borrowings outstanding at December 31, 2005 was fixed at an average rate of 6.14%.  After giving effect to the interest rate swap contracts, total borrowings are 40% fixed and 60% floating.

The fair value of derivative instruments is based on pricing models using current market rates.  The fair value of the interest rate swap contracts was a long-term asset of $1.2 million as of December 31, 2005.  The effective portion was recorded as accumulated other comprehensive income, net, a separate component of shareholders’ equity, and is subsequently reclassified into earnings in the same financial statement line item, interest expense, in the same period during which the hedged transaction is recognized in earnings.  A corresponding deferred tax liability of $0.5 million was also recorded in accumulated other comprehensive income, net for the income tax expense related to the estimated asset of the interest rate swap contracts.  The ineffective portion of the change in the value of the interest rate swap contracts is immediately recognized as a component of interest expense.  Hedge ineffectiveness for the period ended December 31, 2005 was not significant.  Management may choose not to swap floating rate debt to a fixed rate or may terminate a previously executed swap if the floating rate positions are more beneficial.

Equity

At the annual meeting of shareholders on May 3, 2005, our shareholders voted to increase the number of authorized common shares to 50 million from 20 million.  These additional shares may be issued for reasons including but not limited to stock splits, financing acquisitions, establishing strategic relationships with corporate partners and providing equity incentives.

On February 14, 2006, our Board of Directors approved a two for one split of our outstanding common shares.  Shareholders of record as of February 28, 2006 will receive a stock dividend of one additional common share for every common share they own.  The additional shares will be distributed on March 14, 2006.  

The information throughout these financial statements is presented as of December 31, 2005 and before the two for one split of our common shares which is effective February 28, 2006.

In the third quarter of 1998, we filed a shelf registration with the Securities and Exchange Commission to register two million common shares.  We may issue these shares in connection with future business acquisitions, combinations or mergers.  Shares have been issued from this registration statement for a portion of the purchase price for acquisitions.  There are approximately 1.9 million shares remaining and available under this shelf registration.

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Based on our historical ability to generate cash flows from operations, borrowing capacity under the credit facility and access to debt and equity markets, management believes it will have sufficient capital to meet anticipated needs.

OFF-BALANCE SHEET ARRANGEMENTS

As part of our on-going business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships often referred to as structured finance or special purpose entities which might be established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes.  As of December 31, 2005, we are not involved in any transactions with unconsolidated entities.

DISCLOSURES OF CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Contractual obligations as of December 31, 2005 (millions):

	Payments Due by Period
Contractual Obligations	Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total			Fair Value
Long-term debt	$	9.9	$	27.4	$	249.6	$	0.6	$	287.5			$286.0
Capital lease obligations		0.3		0.5		―		―		0.8			0.7
Operating leases		19.1		30.6		19.9		7.6		77.2			77.2
Unconditional purchase obligations		―		―		―		―		―			―
Other long-term commitments		―		―		―		―		―			―
	$	29.3	$	58.5	$	269.5	$	8.2	$	365.5			$363.9
Interest rate swap contracts
Notional principal amount of interest rate exchange agreements maturing
Variable to fixed		―		―		―		―	$	100.0			(1.2)
Average pay rate		―		―		―		―		4.39	%
Average receive rate		―		―		―		―		3.30	%
													$362.7

Accelerated repayment of our revolver and term notes may occur if certain financial conditions or warranties and representations are not met.  The credit facility consists of the revolver and term notes.  The credit facility is collateralized by all tangible and intangible property, except assets of the captive insurance subsidiary.  The credit facility contains covenants and conditions requiring the maintenance of certain financial ratios.  At December 31, 2005, we were in compliance with these covenants and conditions.  

We have potential put and call obligations associated with our interests in BBP Companies, Riggs Plumbing, RCI Construction, A-1 Truss, WBC Mid-Atlantic and WBC Construction.  Under the purchase agreements, we have the right to purchase the remaining portions during certain periods or if certain conditions are met.  Likewise, the other owners have the option to require us to purchase the remaining portions during certain dates.  The purchase price for the remaining portions will be based generally on a multiple of historical earnings.

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As part of our revolver, we have $75.9 million in letters of credit outstanding principally for the deductible portion of automobile, general liability and workers’ compensation claims.  These obligations are not required to be recorded on our balance sheet and renew automatically on their various anniversary dates or until released by their respective beneficiaries.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Prices of commodity wood products, which are subject to significant volatility, may adversely impact operating income when prices rapidly rise or fall within a relatively short period of time.  We do not use derivative financial instruments to hedge commodity wood product prices.

Changes in interest expense occur when market interest rates change.  Changes in the carrying amount of debt could also increase these interest rate risks.  We use interest rate swap contracts to hedge interest rate risks.  Approximately 82% of the outstanding floating rate borrowings of the term notes as of December 31, 2005 have been hedged through the designation of interest rate swap contracts accounted for as cash flow hedges.  After giving effect to the interest rate swap contracts, total borrowings are 40% fixed and 60% floating.  Based on debt outstanding as of December 31, 2005, a 0.25% increase in interest rates would result in approximately $0.4 million of additional interest expense annually.

CRITICAL ACCOUNTING ESTIMATES

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.  These estimates and assumptions include critical accounting estimates which are defined by the Securities and Exchange Commission as those that are the most important to the portrayal of our financial condition, results of operations or cash flows.  These estimates require management’s subjective and complex judgments often as a result of the need to estimate matters that are inherently uncertain.  We review the development, selection and disclosure of these estimates with our Audit Committee.  Management believes the estimates utilized are reasonable under the circumstances, however actual results could differ from these estimates and may require adjustment in future periods.  Our critical accounting estimates are:

Revenue Recognition for Construction Services

The percentage-of-completion method is used to recognize revenue for construction services.  Periodic estimates of our progress towards completion are made based on a comparison of labor costs incurred to date with total estimated contract costs for labor.  The percentage-of-completion method requires the use of various estimates, including among others, the extent of progress towards completion, contract revenues and contract completion costs.  Contract revenues and contract costs to be recognized are dependent on the accuracy of estimates, including quantities of materials, labor productivity and other cost estimates.  We have a history of making reasonable estimates of the extent of progress towards completion, contract revenues and contract completion costs.  However, due to uncertainties inherent in the estimation process, it is possible that actual completion costs may vary from estimates.  Revisions of contract revenues and cost estimates as well as provisions for estimated losses on uncompleted contracts are reflected in the period such revisions are determined.  

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Estimated Losses on Uncompleted Contracts and Changes in Contract Estimates

Estimated losses on uncompleted contracts and changes in contract estimates are reflected in the period such revisions are determined.  These reserves are established by assessing estimated costs to complete, change orders and claims for uncompleted contracts.

At December 31, 2005, the reserve for these estimated losses was $0.5 million for BMC Construction and less than $0.1 million for BMC West.  These reserves are established by assessing estimated costs to complete, change orders and claims.  Assumptions for estimated costs to complete include material prices, labor costs, labor productivity and contract claims.  Such estimates are inherently uncertain and therefore it is possible that actual completion costs may vary from these estimates.  We have a history of making reasonable estimates of the extent of progress towards completion, contract revenue and contract completion costs.  However, due to uncertainties inherent in the estimation process, it is possible that actual completion costs may vary from estimates.  Revisions of estimated losses on uncompleted contracts are reflected in the period such revisions are determined.

Goodwill

Goodwill represents the excess of purchase price over the fair values of net tangible and identifiable intangible assets of acquired businesses.  An annual assessment for impairment is completed in the fourth quarter and whenever events and circumstances indicate the carrying amount may not be recoverable.  An impairment is recognized if the carrying amount is more than the estimated future operating cash flows as measured by fair value techniques.

At December 31, 2005, goodwill was $167.3 million for BMC Construction and $20.2 million for BMC West.  Our fourth quarter assessment concluded with an impairment of $0.8 million related to goodwill due to changes in a specific market at BMC Construction and no impairment for goodwill at BMC West.  The impairment assessment includes determining the estimated fair value of reporting units based on discounting the future operating cash flows using a discount rate reflecting our estimated average cost of funds.  Future operating cash flows are derived from our budget information, which includes assumptions of future volumes, pricing of commodity products and labor costs.  Prices for commodity products are inherently volatile.  

Due to the variables associated with prices of commodity products and the effects of changes in circumstances, both the precision and reliability of the estimates of future operating cash flows are subject to uncertainty.  As additional information becomes known, we may change our estimates.

Insurance Deductible Reserves

The estimated cost of automobile liability, general liability and workers’ compensation claims is determined by actuarial methods.  Claims in excess of insurance deductibles are insured with third-party insurance carriers.  Reserves for claims are recognized based on the estimated costs of these claims as limited by deductibles of the applicable insurance policies.  

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At December 31, 2005, the reserve for automobile, general liability and workers’ compensation claims was $42.6 million.  The actuarial assessment includes determining the estimated cost of claims.  The reserve for these claims is susceptible to change based on the estimated cost of the claims.  Actual loss experience substantially different than the actuarial assumptions may occur.  Future reserves are subject to the nature and frequency of claims, medical cost inflation and changes in the insurance deductibles of the applicable insurance policies.

Share-based Compensation

Our estimate of the fair values of our share-based payment transactions are based on the modified Black-Scholes-Merton model.  In order to meet the fair value measurement objective, we are required to develop estimates regarding expected exercise patterns, share price volatility, forfeiture rates, risk-free interest rate and dividend yield.  These assumptions are based principally on historical experience.  When circumstances indicate the availability of new or different information that would be useful in estimating these assumptions, revisions will be made and reflected in the periods such revisions are determined.  Due to uncertainties inherent in these assumptions, it is possible that actual share-based compensation may vary from this estimate.  

RECENT ACCOUNTING PRINCIPLES

In December 2004, the Financial Accounting Standards Board (FASB) revised Statement of Financial Accounting Standards No. 123, Share-Based Payment, and superseded Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.  This statement requires the measurement and recognition of liabilities incurred to employees in share-based payment transactions at fair value.  Compensation cost for share-based awards and the related tax effects are recognized in the same financial statement line as cash compensation as the requisite service is rendered.  Compensation cost is based on the fair value of those awards on the grant date.  This statement is effective for the first quarter of 2006.  As a result, we expect to recognize compensation cost for share-based awards of $4.5 million in 2006, $4.6 million in 2007 and $3.1 million in 2008. These estimates may change based on additional share-based awards as well as actual forfeiture and vesting experience.  Additionally, tax benefits for share-based compensation will be reported as a financing activity, rather than as an operating cash flow.  

BUSINESS RISKS AND FORWARD-LOOKING STATEMENTS

There are a number of business risks and uncertainties that affect our operations and therefore could cause future results to differ from past performance or expected results.  Additional information regarding business risks and uncertainties is contained in Item 1A of this Form 10-K.  These risks and uncertainties may include, however are not limited to:

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·   demand for single-family homes which is influenced by changes in the overall condition of the U.S. economy, including interest rates, job formation, consumer confidence and other important factors;

·   changes to our business model;

·   the integration of acquired businesses may not result in anticipated cost savings and revenue synergies being fully realized or may take longer to realize than expected;

·   our ability to identify suitable acquisition candidates;

·   availability of and our ability to attract, train and retain qualified individuals;

·   our ability to implement and maintain cost structures that align with revenue growth;

·   changes in the business models of our customers may limit our ability to provide construction services and building products required by our customers;

·   fluctuations in our costs and availability of sourcing channels for commodity wood products, concrete, steel and other building materials;

·   intense competition;

·   weather conditions including natural catastrophic events;

·   exposure to construction defect and product liability claims as well as other legal proceedings;

·   disruptions in our information systems;

·   actual and perceived vulnerabilities as a result of terrorist activities and armed conflict; and

·   numerous other matters of a local and regional scale, including those of a political, economic, business, competitive or regulatory nature.

Risks related to our shares include, however are not limited to:  

·   price for our shares may fluctuate significantly; and

·   anti-takeover defenses and certain provisions could prevent an acquisition of our company or limit share price.

Certain statements in the Annual Report to Shareholders including those related to expectations about homebuilding activity in our markets, demographic trends supporting homebuilding and anticipated sales and operating income are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Statements that are not historical or current facts, including statements about our expectations, anticipated financial results and future business prospects are forward-looking statements.  While these statements represent our current judgment on what the future may hold and we believe these judgments are reasonable, these statements involve risks and uncertainties that are important factors that could cause our actual results to differ materially from those in forward-looking statements.  These factors include, but are not limited to the risks and uncertainties cited in the above paragraph.  Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date of the filing of this Form 10-K.  We undertake no obligation to update forward-looking statements.

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ITEM 7A.  Quantitative and Qualitative Disclosures About Market Risk

Inventory Price Risk

Prices of commodity wood products, which are subject to significant volatility, may adversely impact operating income when prices rapidly rise or fall within a relatively short period of time.  We do not use derivative financial instruments to hedge commodity wood product prices.

Interest Rate Risk

Changes in interest expense occur when market interest rates change.  Interest rate swap contracts are currently utilized to hedge interest rate risks.  Approximately 82% of the outstanding floating rate borrowings of the $121.9 million term note as of December 31, 2005 have been hedged through the designation of interest rate swap contracts accounted for as cash flow hedges.  After giving effect to the interest rate swap contracts, total borrowings are 40% fixed and 60% floating.  Based on debt outstanding as of December 31, 2005, a 0.25% increase in interest rates would result in approximately $0.4 million of additional interest expense annually.

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ITEM 8.  Financial Statements and Supplementary Data

Building Materials Holding Corporation

Consolidated Statements of Income

(thousands, except per share data)

	Year Ended December 31
	2005			2004			2003
Sales
Construction services	$	1,586,509		$	904,362		$	498,052
Building products		1,325,651			1,186,663			917,019
Total sales		2,912,160			2,091,025			1,415,071
Costs and operating expenses
Cost of goods sold
Construction services		1,285,949			768,407			436,908
Building products		967,877			897,725			688,354
Impairment of assets		1,320			2,274			829
Selling, general and administrative expenses		420,862			317,002			250,319
Other income, net		(3,204	)		(2,491	)		(1,768	)
Total costs and operating expenses		2,672,804			1,982,917			1,374,642
Income from operations		239,356			108,108			40,429
Interest expense		14,420			13,560			9,279
Income before income taxes, minority interests and equity earnings		224,936			94,548			31,150
Income taxes		79,915			35,198			11,402
Minority interests income		(15,514	)		(5,440	)		(1,250	)
Equity earnings, net of tax of $918		―			―			1,431
Net income	$	129,507		$	53,910		$	19,929
Net income per share:
Basic		$9.22			$4.00			$1.50
Diluted		$8.82			$3.87			$1.48

The accompanying notes are an integral part of these consolidated financial statements.

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Building Materials Holding Corporation

Consolidated Balance Sheets

(thousands, except share data)

		December 31					December 31
		2005	2004				2005	2004
ASSETS					LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS’ EQUITY
Cash and cash equivalents	$	30,078	$	19,496
Marketable securities		3,645		2,216	Accounts payable	$	146,627	$	77,591
Receivables, net of allowances					Accrued compensation		65,928		34,078
of $3,756 and $4,367		363,527		238,071	Insurance deductible reserves		21,872		12,903
Inventory		168,282		153,391	Other accrued liabilities		51,579		26,177
Unbilled receivables		56,128		17,196	Billings in excess of costs and estimated earnings		33,799		11,274
Deferred income taxes		5,768		11,913
Prepaid expenses and other		6,967		7,317	Current portion of long-term debt		10,131		3,404
Total current assets		634,395		449,600	Total current liabilities		329,936		165,427
Property and equipment					Deferred income taxes		6,911		297
Land		47,328		37,036	Insurance deductible reserves		20,753		13,736
Buildings and improvements		118,556		102,321	Long-term debt		278,169		206,419
Equipment		166,633		124,451	Other long-term liabilities		30,689		23,162
Construction in progress		9,485		4,956	Total liabilities		666,458		409,041
Accumulated depreciation		(121,525)		(104,453)
Marketable securities		28,875		16,760	Minority interests		14,006		6,325
Deferred loan costs		3,616		2,084
Other long-term assets		20,465		16,281	Commitments and contingent liabilities		―		―
Other intangibles, net		55,227		13,692
Goodwill		187,470		80,316	Shareholders’ equity
Total assets	$	1,150,525	$	743,044	Common shares, $0.001 par value:
					authorized 50 million and 20 million
					shares; issued and outstanding
					14,379,290 and 13,852,683 shares		14		14
					Additional paid-in capital		143,795		124,594
					Unearned compensation		(2,698)		(1,383)
					Retained earnings		328,463		205,812
					Accumulated other comprehensive income (loss), net		487		(1,359)
					Total shareholders’ equity		470,061		327,678
					Total liabilities, minority interests and shareholders’ equity	$	1,150,525	$	743,044

The accompanying notes are an integral part of these consolidated financial statements.

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Building Materials Holding Corporation

Consolidated Statements of Shareholders’ Equity

(thousands)

													Accumulated Other Comprehensive Income (Loss)
													Net Unrealized Gain (Loss) From
	Common Shares				Additional Paid-In		Unearned			Retained			Interest Rate Swap			Marketable
	Shares		Amount		Capital		Compensation			Earnings			Contracts			Securities			Total
Balance at December 31, 2002	13,136	$	13	$	112,709	$	―		$	138,578		$	―		$	―		$	251,300
Net income										19,929									19,929
Share options exercised	88				913														913
Tax benefit for share options exercised					141														141
Shares issued from Director Plan	25				319														319
Shares issued for acquisitions	85				1,200														1,200
Cash dividends on common shares										(2,792	)								(2,792	)
Balance at December 31, 2003	13,334		13		115,282		―			155,715			―			―			271,010
Net income										53,910									53,910
Unrealized loss													(2,215	)					(2,215	)
Tax benefit for unrealized loss													853						853
Unrealized gain																5			5
Taxes for unrealized gain																(2	)		(2	)
Comprehensive income																			52,551
Share options exercised	412		1		5,008														5,009
Tax benefit for share options exercised					2,041														2,041
Shares issued from Director Plan	17				285														285
Shares issued from Employee Plan	15				356														356
Issuance of restricted shares	75				1,622		(1,622	)											―
Earned compensation expense							239												239
Cash dividends on common shares										(3,813	)								(3,813	)
Balance at December 31, 2004	13,853		14		124,594		(1,383	)		205,812			(1,362	)		3			327,678
Net income										129,507									129,507
Unrealized gain													3,412						3,412
Taxes for unrealized gain													(1,314	)					(1,314	)
Unrealized loss																(410	)		(410	)
Tax benefit for unrealized loss																158			158
Comprehensive income																			131,353

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Share options exercised	430				4,905										4,905
Tax benefit for share options exercised					9,140										9,140
Shares issued from Director Plan	7				380										380
Shares issued from Employee Plan	18				1,160										1,160
Shares issued for acquisition	17				1,000										1,000
Issuance of restricted shares	54				2,616		(2,616)								―
Earned compensation expense							1,301								1,301
Cash dividends on common shares									(6,856)						(6,856)
Balance at December 31, 2005	14,379	$	14	$	143,795	$	(2,698)	$	328,463	$	736	$	(249)	$	470,061

The accompanying notes are an integral part of these consolidated financial statements.

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Building Materials Holding Corporation

Consolidated Statements of Cash Flows

(thousands)

	Year Ended December 31
Operating Activities	2005		2004		2003
Net income	$	129,507	$	53,910	$	19,929
Items in net income not using (providing) cash:
Equity earnings, net of amortization and before taxes of $918		―		―		(2,349)
Minority interests, net		15,514		5,440		1,059
Impairment of assets		1,320		2,274		829
Depreciation and amortization		28,067		23,312		20,785
(Gain) Loss on sale of assets, net		(194)		334		(1,161)
Deferred financing costs		―		―		660
Deferred income taxes		(3,473)		(7,490)		2,556
Tax benefit for share options		9,140		2,041		―
Changes in assets and liabilities, net of effects of acquisitions and sales of business units:
Receivables, net		(19,049)		(45,687)		(35,076)
Inventory		(3,332)		(40,258)		(25,929)
Unbilled receivables		(8,378)		(8,571)		(473)
Prepaid expenses and other current assets		4,340		(1,895)		2,304
Accounts payable		1,852		11,413		3,439
Accrued compensation		24,465		15,643		(2,580)
Insurance deductible reserves		5,777		3,045		11,013
Other accrued liabilities		(4,611)		5,777		9,221
Billings in excess of costs and estimated earnings		(1,911)		(795)		5,579
Other long-term assets and liabilities		18,181		13,057		3,633
Other, net		2,065		2,127		(960)
Cash flows provided by operating activities		199,280		33,677		12,479
Investing Activities
Purchases of property and equipment		(46,540)		(27,652)		(15,887)
Acquisitions and investments in businesses, net of cash acquired		(203,201)		(22,738)		(30,269)
Proceeds from dispositions of property and equipment		1,358		12,278		10,065
Proceeds from sales of business units, net of cash sold		―		―		6,591
Purchase of marketable securities		(14,077)		(19,026)		―
Other, net		892		(871)		(961)
Cash flows used by investing activities		(261,568)		(58,009)		(30,461)
Financing Activities
Net borrowings (payments) under revolver		(3,700)		20,800		9,200
Borrowings under term note		75,000		―		31,500
Principal payments on term note		(1,251)		(1,250)		(9,425)
Net payments on other notes payable		(7,605)		(932)		(410)
Increase in book overdrafts		17,404		5,411		554
Share options exercised		4,905		5,008		895
Dividends paid		(5,807)		(3,505)		(2,649)
Deferred financing costs		(2,236)		(175)		(1,394)
Distributions to minority interests		(2,792)		(728)		―
Other, net		(1,048)		(307)		―
Cash flows provided by financing activities		72,870		24,322		28,271
Increase (Decrease) in Cash and Cash Equivalents		10,582		(10)		10,289
Cash and cash equivalents, beginning of year		19,496		19,506		9,217
Cash and cash equivalents, end of year	$	30,078	$	19,496	$	19,506
Supplemental Disclosure of Cash Flow Information
Accrued but unpaid dividends	$	2,158	$	1,108	$	800
Cash paid for interest	$	13,682	$	12,902	$	9,327
Cash paid for income taxes	$	70,553	$	37,777	$	7,795

Supplemental Schedule of Non-cash Investing Activities
Fair value of assets acquired	$	337,924	$	25,353	$	44,131
Liabilities assumed	$	134,723	$	2,615	$	13,862
Cash paid	$	203,201	$	22,738	$	30,269

The accompanying notes are an integral part of these consolidated financial statements.

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Notes to Consolidated Financial Statements

1.Summary of Significant Accounting Policies

Nature of Operations

Building Materials Holding Corporation (BMHC) provides construction services and building products to professional homebuilders and contractors throughout the United States.  We operate through two separately managed and reportable business segments:  BMC Construction and BMC West.  BMC Construction provides framing and other construction services to high-volume production homebuilders.  BMC West markets and sells building products, manufactures building components (millwork, floor and roof trusses and wall panels) and provides construction services to builders and contractors.  

Principles of Consolidation

The consolidated financial statements include the accounts of BMHC and its subsidiaries.  The equity method of accounting is used for investments in which we have significant influence, however do not control.  All significant intercompany balances and transactions are eliminated.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements as well as the reported amounts of sales and expenses during the reporting period.  Actual amounts may differ materially from those estimates.  The following critical accounting estimates require our subjective and complex judgment often as a result of the need to estimate matters that are inherently uncertain:

·Revenue Recognition for Construction Services

The percentage-of-completion method is used to recognize revenue for construction services.  Periodic estimates of our progress towards completion are made based on a comparison of labor costs incurred to date with total estimated contract costs for labor.  The percentage-of-completion method requires the use of various estimates, including among others, the extent of progress towards completion, contract revenues and contract completion costs.  Contract revenues and contract costs to be recognized are dependent on the accuracy of estimates, including quantities of materials, labor productivity and other cost estimates.  We have a history of making reasonable estimates of the extent of progress towards completion, contract revenues and contract completion costs.  However, due to uncertainties inherent in the estimation process, it is possible that actual completion costs may vary from estimates.  Revisions of contract revenues and cost estimates as well as provisions for estimated losses on uncompleted contracts are reflected in the period such revisions are determined.

·Estimated Losses on Uncompleted Contracts and Changes in Contract Estimates

Estimated losses on uncompleted contracts and changes in contract estimates are reflected in the period such revisions are determined.  These reserves are established by assessing estimated costs to complete, change orders and claims for uncompleted contracts.

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·Goodwill

Goodwill represents the excess of purchase price over the fair values of net tangible and identifiable intangible assets of acquired businesses.  An annual assessment for impairment is completed in the fourth quarter and whenever events and circumstances indicate the carrying amount may not be recoverable.  An impairment is recognized if the carrying amount is more than the estimated future operating cash flows as measured by fair value techniques.  

·Insurance Deductible Reserves

The estimated cost of automobile, general liability and workers’ compensation claims is determined by actuarial methods.  Claims in excess of insurance deductibles are insured with third-party insurance carriers.  Reserves for claims are recognized based on the estimated costs of these claims as limited by the deductibles of the applicable insurance policies.  

·Share-based compensation

Our estimate of the fair values of our share-based payment transactions are based on the modified Black-Scholes-Merton model.  In order to meet the fair value measurement objective, we are required to develop estimates regarding expected exercise patterns, share price volatility, forfeiture rates, risk-free interest rate and dividend yield.  These assumptions are based principally on historical experience.  When circumstances indicate the availability of new or different information that would be useful in estimating these assumptions, revisions will be made and reflected in the periods such revisions are determined.  Due to uncertainties inherent in these assumptions, it is possible that actual share-based compensation may vary from this estimate.  

Cash and Cash Equivalents

Cash equivalents consist of short-term investments that have a maturity of three months or less at the date of purchase.  Cash and cash equivalents totaled $30.0 million at December 31, 2005 and $19.5 million at December 31, 2004.

Receivables

Receivables consist primarily of amounts due from customers and are net of an allowance for doubtful accounts.  The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance.  We determine the allowance based on known troubled accounts, historical experience and other available evidence.

Inventory Valuation

Inventory consists principally of building materials purchased for resale and is valued at the lower of average cost or market.  We participate in vendor rebate programs under which rebates are earned by attaining certain purchase volumes.  Volume rebates are accrued as earned.  These volume rebates are recorded as a reduction in inventory and recognized in cost of goods sold when the related product is sold.

Unbilled Receivables and Billings in Excess of Costs and Estimated Earnings

The percentage-of-completion method results in recognizing costs incurred and estimated revenues on uncompleted contracts.  Unbilled receivables represent revenues recognized for construction services performed, however not yet billed.  Billings in excess of costs and estimated earnings represent billings made in excess of estimated revenues recognized.  These billings are deferred until the actual progress towards completion indicates recognition is appropriate.  Costs include equipment costs, direct labor and material costs related to contract performance.

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Property and Equipment

Property and equipment are recorded at cost.  Cost includes expenditures for major improvements and replacements that extend useful life.  Certain costs of software are capitalized provided those costs are not research and development and certain other criteria are met.  Capitalized interest was $0.2 million in 2005, $0.1 million in 2004 and $0.1 million in 2003.  Expenditures for other maintenance and repairs are expensed as incurred.  Gains and losses from sales and retirements are included in income as they occur.  Depreciation is calculated using the straight-line method over the economic useful lives of the assets.  The estimated useful lives of depreciable assets are generally:  

·ten to thirty years for buildings and improvements

·seven to ten years for machinery and fixtures

·three to ten years for handling and delivery equipment

·three to ten years for software development costs

In order to improve financial returns, we periodically evaluate our investments in property and equipment.  As a result, property and equipment may be consolidated, leased or sold.  We recognized a gain of $0.2 million in 2005, a loss of $0.3 million in 2004 and a gain of $1.2 million in 2003 from the sales of property and equipment.  

Long-lived Assets

Long-lived assets such as property, equipment and intangibles with useful lives are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.  An impairment is recognized if the carrying amount exceeds its fair value and when the carrying amount is not recoverable based on the estimated future operating cash flows on an undiscounted basis.

Revenue Recognition

The percentage-of-completion method is used to recognize revenue for construction services.  Revenues for building products are recognized when title to the goods and risk of loss pass to the buyer, which is at the time of delivery.  

Shipping and Handling

Shipping and handling costs for manufactured building components and construction services are included as a component of cost of sales.  Shipping and handling costs for building products are included as a component of selling, general and administrative expenses and were $64.5 million in 2005, $55.7 million in 2004 and $46.7 million in 2003.

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Share-based Compensation

Grants of share-based compensation are made under the 2004 Incentive and Performance Plan.  Previous share-based compensation plans as well as this plan are more fully described in Note 8.  These plans are accounted for under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations.  The following table illustrates the effect on net income and earnings per share if the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, were applied to share-based compensation (thousands, except per share data):

	Year Ended December 31
		2005		2004		2003
Net income, as reported	$	129,507	$	53,910	$	19,929
Add: Share-based employee compensation    expense determined under APB 25, net of    related tax effects		555		659		446
Deduct: Share-based employee compensation    expense determined under fair value method    for all awards, net of related tax effects		(2,497)		(1,892)		(1,664)
Pro forma net income	$	127,565	$	52,677	$	18,711
Earnings per share:
Basic - as reported		$9.22		$4.00		$1.50
Basic - pro forma		$9.08		$3.90		$1.41
Diluted - as reported		$8.82		$3.87		$1.48
Diluted - pro forma		$8.69		$3.78		$1.39

Recent Accounting Principles

In December 2004, the Financial Accounting Standards Board (FASB) revised Statement of Financial Accounting Standards No. 123, Share-Based Payment, and superseded Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.  This statement requires the measurement and recognition of liabilities incurred to employees in share-based payment transactions at fair value.  Compensation cost for share-based awards and the related tax effects are recognized in the same financial statement line as cash compensation as the requisite service is rendered.  Compensation cost is based on the fair value of those awards on the grant date.  This statement is effective for the first quarter of 2006.  In addition to options previously granted, in January 2006 we granted 204,550 options to directors and employees.  As a result, we expect to recognize compensation cost for share-based awards of $4.5 million in 2006, $4.6 million in 2007 and $3.1 million in 2008. These estimates may change based on additional share-based awards as well as actual forfeiture and vesting experience.  Additionally, tax benefits for share-based compensation will be reported as a financing activity, rather than as an operating cash flow.

Reclassifications

Certain reclassifications, none of which affected previously reported consolidated results of operations, cash flows or shareholders’ equity, have been made to amounts reported in prior periods to conform to the current year presentation.  

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2.Net Income Per Share

Net income per share was determined using the following information (thousands, except per share data):

	Year Ended December 31
		2005		2004		2003
Net income	$	129,507	$	53,910	$	19,929
Weighted average shares used to       determine basic net income per share		14,051		13,494		13,279
Net effect of dilutive stock options and       restricted stock (1)		630		429		162
Weighted average shares used to       determine diluted net income per share		14,681		13,923		13,441
Net income per share:
Basic		$9.22		$4.00		$1.50
Diluted		$8.82		$3.87		$1.48
Annual cash dividends declared per share		$0.48		$0.28		$0.21

⁽¹⁾   Options to purchase 208,000 shares in the first quarter of 2005 and 325,525 shares in 2003 were not dilutive and therefore excluded in the computations of diluted income per share.  There were no options excluded from the computation of diluted income per share in 2004.  Options considered not dilutive are those with exercise prices greater than the average market value of the common shares in the periods presented.  

3.Impairment of Assets

Long-lived assets such as property, equipment and intangibles are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.  An impairment for these assets is recognized if the carrying amount is more than the estimated future operating cash flows on an undiscounted basis.  Similarly, goodwill is evaluated for impairment in the fourth quarter and whenever events and circumstances indicate the carrying amount may not be recoverable.  An impairment is recognized if the carrying amount is more than the estimated future operating cash flows as measured by fair value techniques.

As a result of changes in specific markets, impairments of $0.8 million for the carrying amount of goodwill and $0.5 million for the carrying amount of certain customer relationships were recognized for BMC Construction in 2005.  During 2004, impairments of $1.3 million for the carrying amount of certain properties held for sale and $1.0 million for the carrying amount of goodwill resulting from a change in business strategy were recognized for BMC West.  As a result of changes in a specific market, an impairment of $0.8 million for the carrying amount of certain customer relationships was recognized for BMC Construction in 2003.  

4.Acquisitions and Minority Interests

Our business model seeks the strategic growth of construction services and distribution of building products in an effort to provide a comprehensive solution to high-volume production and other homebuilders.  We typically enter a market by purchasing all or part of an existing business and seek to rapidly integrate our services and products to capture market share.

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Acquisitions are accounted for under the purchase method of accounting.  The purchase price is allocated to the assets acquired, including intangible assets, and liabilities assumed based on their estimated fair values at the date of acquisition.  Subsequent to the initial allocation of purchase price, adjustments may be made to reflect the fair value of working capital and tangible assets.  Any excess of the purchase price over the estimated fair value of the identifiable assets and liabilities acquired is recorded as goodwill.  Operating results of acquired businesses are included in the consolidated statements of income from the date of acquisition.

·   In October 2005, BMC Construction acquired a framing services business in San Diego, California for approximately $72.5 million in cash of which $7.6 million has been retained for the settlement period.  This purchase price is subject to working capital adjustment and an additional cash payment may be required based on operating performance.  Information required to complete the purchase price allocation is not yet available.  Final allocation of the purchase price will be completed as soon as this information is available.  

·   In September 2005, BMC Construction acquired a concrete and plumbing services business in Las Vegas, Nevada and Southern California for $84.1 million in cash.  The purchase price is subject to working capital adjustment of approximately $1.6 million.  Information required to complete the purchase price allocation is not yet available.  Final allocation of the purchase price will be completed as soon as this information is available.  

·   In September 2005, BMC West acquired a truss manufacturing business in McCall, Idaho for $1.3 million in cash.  

·   In June 2005, BMC Construction acquired a stucco business in Las Vegas, Nevada for $5.9 million in cash.  

·   In June 2004, BMC West acquired a framing business in Denver, Colorado for $0.8 million in cash.  

·   In October 2004, BMC Construction acquired a window installation business in Napa, California for $1.8 million in cash.  

·   In March 2004, BMC Construction acquired a distribution facility in Tucson, Arizona for $4.0 million in cash.  

Minority interest reflects the other owners’ proportionate share in the assets and liabilities of business ventures as of the date of purchase, adjusted by the proportionate share of post-acquisition income or loss.  As the operating results of entities with minority interest are consolidated, minority interests income represents the income or loss attributable to the other owners.  

·   In January 2003, BMC Construction acquired a 60% interest in WBC Construction, LLC (WBC Construction) for $22.9 million in cash and the issuance of 70,053 common shares.  In August 2005, BMC Construction acquired an additional 20% interest for approximately $15.0 million in cash.  An additional cash payment of approximately $8.1 million was recorded and will be required based on operating performance.  The remaining 20% interest is owned by Willard Brothers Construction, Inc. and is recognized as minority interest.  WBC Construction provides concrete block masonry and concrete services to high-volume production homebuilders in Florida.  Information required to complete the purchase price allocation for the additional 20% interest is not yet available.  Final allocation of the purchase price will be completed as soon as this information is available.  

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·   In July 2005, BMC Construction acquired a 51% interest in BBP Companies for $9.2 million in cash and 16,836 common shares.  The remaining 49% is owned by BBP Concrete and is recognized as minority interest.  BBP Companies provide concrete services to high-volume production homebuilders in Arizona.  Information required to complete the purchase price allocation is not yet available.  Final allocation of the purchase price will be completed as soon as this information is available.  

·   In April 2005, BMC Construction acquired a 60% interest in Riggs Plumbing, LLC (Riggs Plumbing) for $17.8 million in cash.  In July 2005, we acquired an additional 13% for $1.4 million in cash.  The remaining 27% is owned by Riggs & Associates, LLC and is recognized as minority interest.  Riggs Plumbing provides plumbing services to high-volume production builders in the Phoenix and Tucson markets.  

·   In January 2005, BMC Construction acquired a 51% interest in RCI Construction, LLC (RCI Construction) for $4.9 million in cash.  The remaining 49% is owned by Residential Carpentry, Inc. and is recognized as minority interest.  RCI Construction provides framing services to high-volume production builders in the greater Chicago area.  

·   In September 2004, our majority-owned subsidiary WBC Construction acquired a 51% interest in A-1 Building Components, LLC (A-1 Truss) for $2.3 million in cash.  The remaining 49% is owned by A-1 Roof Trusses, Ltd., Company and is recognized as minority interest.  A-1 Truss manufactures trusses in Fort Pierce, Florida.  

·   In July 2002, BMC Construction acquired a 51% interest in KBI Norcal for $5.8 million in cash, $0.8 million of assumed debt and the issuance of 34,364 common shares.  The remaining 49% interest was owned by RJ Norcal, LLC and recognized as minority interest.  In July 2004, BMC Construction acquired the remaining 49% of KBI Norcal for $14.0 million in cash.  KBI Norcal provides framing services to high-volume production homebuilders in northern California.

·   In October 2003, BMC Construction acquired a 67.33% interest in WBC Mid-Atlantic for $5.1 million in cash and 15,059 common shares.  The remaining 32.67% is owned by ANM Carpentry, Inc. and is recognized as minority interest.  WBC Mid-Atlantic provides framing services to high-volume production builders in Delaware, Maryland and Virginia.

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Assets and liabilities acquired in these acquisitions included (thousands):

	2005		2004			2005		2004
Cash and cash equivalents	$	1,644	$	―	Accounts payable	$	46,078	$	1,265
Receivables		106,407		4,594	Accrued compensation		7,385		194
Inventory		11,559		1,987	Insurance deductible reserves		3,192		―
Unbilled receivables		30,554		―	Other accrued liabilities		30,014		1,071
Deferred income taxes		(6,527)		―	Billings in excess of costs and
Prepaid expenses and other		4,057		127	estimated earnings		24,436		―
					Current portion of long-term debt		5,605		1,131
Total current assets		147,694		6,708	Total current liabilities		116,710		3,661
Property and equipment		33,406		3,766	Deferred income taxes		8,528		―
Other long-term assets		18		528	Long-term debt		10,048		―
Other intangibles, net		46,824		5,868	Other long-term liabilities		―		1,124
Goodwill		109,982		8,483
					Minority interests		(3,172)		(2,081)
Total assets	$	337,924	$	25,353	Total liabilities and minority interests	$	132,114	$	2,704

The following summarizes pro forma results of operations assuming the 2005 acquisitions occurred as of the beginning of 2004.  Due to uncertainties in these assumptions, the pro forma data does not purport to be indicative of the results of operations that would have resulted had the acquisitions been consummated at the beginning of the period presented, or that may occur in the future (thousands, except per share data):

		2005		2004
Sales - as reported	$	2,912,160	$	2,091,025
Pro forma Sales	$	3,265,401	$	2,734,854
Net income - as reported	$	129,507	$	53,910
Pro forma Net income	$	145,471	$	71,646
Net income per share:
Diluted - as reported		$8.82		$3.87
Pro forma Diluted		$9.91		$5.14

Had the 2004 acquisitions taken place as of the beginning of 2004 or 2003, pro forma results of operations would not have been significantly different from reported amounts.

Subsequent to December 31, 2005

In February 2006, BMC West acquired three facilities providing building materials distribution and millwork services in Houston, Texas for approximately $21.0 million in cash.  This purchase price is subject to working capital adjustment and an additional cash payment may be required based on operating performance.  

In January 2006, BMC Construction acquired framing businesses in Palm Springs, California and Reno, Nevada for approximately $48.7 million in cash.  This purchase price is subject to working capital adjustment and an additional cash payment may be required based on operating performance.  

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We have call and put obligations associated with our interests in BBP Companies, Riggs Plumbing, RCI Construction, A-1 Truss, WBC Mid-Atlantic and WBC Construction.  Under the purchase agreements, we have the right to purchase the other owners’ remaining portions during certain periods or if certain conditions are met.  Likewise, the other owners have the option to require us to purchase their remaining portions during certain periods.  The purchase price for the remaining portions will be based generally on a multiple of historical earnings.  The following table summarizes these call and put obligations:

	Call Options	Put Options
BBP Companies	July 2008 through June 2015	July 2008 through June 2015
Riggs Plumbing	April 2008 through March 2013	April 2008 through March 2013
RCI Construction	January 2008 through January 2012	January 2008 through January 2012
A-1 Truss	September 2004 through August 2014	September 2009 through August 2014
WBC Mid-Atlantic	October 2003 through September 2010	December 2006 through December 2008
WBC Construction	January 2006 through January 2009	January 2007 through January 2009

5.Marketable Securities

Investments in marketable securities consist of debt securities held by our captive insurance subsidiary and are considered available-for-sale and recorded at fair values.  Unrealized gains and losses are recorded as a component of accumulated other comprehensive loss, net, a component of shareholders’ equity.  There were no significant unrealized losses.

The fair value of these marketable securities were as follows:

		2005		2004
Cash and cash equivalents	$	415	$	112
U.S. government and agencies		7,838		6,524
Asset backed securities		13,391		7,816
Corporate securities		10,876		4,524
	$	32,520	$	18,976

Contractual maturities were as follows:

		2005		2004
Less than one year	$	3,645	$	2,216
Due in one to two years		9,893		5,484
Due in two to five years		18,982		11,276
	$	32,520	$	18,976

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6.Intangible Assets and Goodwill

Intangible assets represent the values assigned to customer relationships, covenants not to compete and trade names.  Intangible assets are amortized on a straight-line basis over their expected useful lives.  Customer relationships are amortized over three to seventeen years, covenants not to compete over two to five years and trade names over three years.  Intangible amortization expense was $4.7 million in 2005, $4.2 million in 2004 and $1.7 million in 2003.  Intangible assets consist of the following (thousands):

	December 31, 2005
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	58,926	$	(9,165)	$	49,761
Covenants not to compete		7,541		(2,307)		5,234
Trade names		204		(91)		113
Other		146		(27)		119
	$	66,817	$	(11,590)	$	55,227

	December 31, 2004
	Gross Carrying Amount		Accumulated  Amortization		Net Carrying Amount
Customer relationships	$	17,134	$	(5,116)	$	12,018
Covenants not to compete		2,919		(1,426)		1,493
Trade names		204		(23)		181
Other		500		(500)		―
	$	20,757	$	(7,065)	$	13,692

Estimated amortization expense for intangible assets is $8.0 million for 2006, $7.5 million for 2007, $6.5 million for 2008, $6.3 million for 2009, $5.5 million for 2010 and $21.4 million thereafter.

Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets of acquired businesses.  An annual assessment for impairment is completed in the fourth quarter and whenever events and circumstances indicate the carrying amount may not be recoverable.  An impairment is recognized at the reporting unit if the carrying amount is more than the estimated future operating cash flows as measured by fair value techniques.  

Changes in the carrying amount of goodwill by business segment were as follows (thousands):  

	BMC West		BMC Construction		Total
Balance at December 31, 2003	$	20,830	$	51,915	$	72,745
Goodwill acquired		234		8,249		8,483
Purchase price adjustment		―		89		89
Impairment		(1,001)		―		(1,001)
Balance at December 31, 2004	$	20,063	$	60,253	$	80,316
Goodwill acquired		139		107,778		107,917
Impairment		―		(763)		(763)
Balance at December 31, 2005	$	20,202	$	167,268	$	187,470

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7.Debt

Long-term debt consists of the following (thousands):

As of December 31, 2005

				Notional Amount of		Effective Interest Rate
	Balance		Stated Interest Rate	Interest Rate Swaps		Average for Year	As of December 31
Revolver	$	77,500	LIBOR plus 0.75% or Prime plus 0.00%	$	―	5.37%	6.08%
Term note		75,000	LIBOR plus 0.75% or Prime plus 0.00%		―	4.52%	5.28%
Term note		121,875	LIBOR plus 1.75%		100,000	6.23%	6.17%
Other		13,925	Various		―	―	―
		288,300		$	100,000
Less:  Current portion		10,131
	$	278,169

As of December 31, 2004

				Notional Amount of		Effective Interest Rate
	Balance		Stated Interest Rate	Interest Rate Swaps		Average for Year	As of December 31
Revolver	$	81,200	LIBOR plus 1.75% or Prime plus 0.50%	$	―	4.88%	5.25%
Term note		123,125	LIBOR plus 2.75% or Prime plus 2.00%		100,000	5.65%	6.80%
Other		5,498	Various		―	―	―
		209,823		$	100,000
Less:  Current portion		3,404
	$	206,419

Revolver

In June 2005, we entered into an amended $300 million revolver with a group of lenders.  The revolver matures in June 2010.  The revolver consists of both LIBOR and Prime based borrowings.  Interest rates are subject to quarterly adjustment based on operating performance and range from LIBOR plus 0.75% to 2.00%, or Prime plus 0.0% to 0.75%.  Interest is paid quarterly.  As of December 31, 2005, $77.5 million was outstanding under the revolver.

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Term Notes

In June 2005, we also entered into a $75 million term note with a group of lenders.  The term note matures in June 2010 with 10% of the initial principal payable for each of the two years commencing September 2006, 20% of the initial principal payable for one year commencing September 2008 and the remaining principal balance due June 2010.  Interest rates are subject to quarterly adjustment based on operating performance and range from LIBOR plus 0.75% to 2.00%, or Prime plus 0.0% to 0.75%.  Interest is paid quarterly.  As of December 31, 2005, $75 million was outstanding under this term note.

In August 2003, we entered into a $125 million term note with a group of lenders.  The term note matures in June 2010 and is payable in quarterly installments for the first six years in amounts equal to 1% of the initial principal amount per year and equal quarterly installments for the remaining principal balance during year seven.  The term note was amended in March 2005 to reduce interest rates by 0.75% and in June 2005 to reduce interest rates another 0.25%.  The interest rate for the term note is LIBOR plus 1.75% or Prime plus 1.00%.  Interest is paid quarterly.  As of December 31, 2005, $121.9 million was outstanding under this term note.

Other

Other long-term debt of $13.9 million consists of term notes, equipment notes and capital leases for equipment.  Interest rates vary and dates of maturity are through March 2013.

Expansion of Credit Facility, Covenants and Maturities

The credit facility consists of the revolver and term notes.  The credit facility may be increased an aggregate amount of up to $150 million.  The credit facility is collateralized by all tangible and intangible property, except assets of the captive insurance subsidiary.  The credit facility contains covenants and conditions requiring the maintenance of certain financial ratios.  At December 31, 2005, we were in compliance with these covenants and conditions.  

Scheduled maturities of long-term debt are as follows (thousands):

2006	$	10,131
2007		13,914
2008		14,073
2009		77,775
2010		171,851
Thereafter		556
	$	288,300

As of December 31, 2005 and December 31, 2004, there were $75.9 million and $41.2 million, respectively of letters of credit outstanding that guaranteed performance or payment to third parties.  These letters of credit reduce borrowing availability under the revolver.  

Hedging Activities

Derivative and hedging activities are recorded on the balance sheet at their fair values.  In June 2004, we entered into interest rate swap contracts that effectively convert a portion of the floating rate borrowings of the $121.9 million term note to a fixed interest rate through June 2009, thus reducing the impact of increases in interest rates on future interest expense.  Approximately 82% of the outstanding floating rate borrowings of the term note as of December 31, 2005 have been hedged through the designation of interest rate swap contracts accounted for as cash flow hedges.  As a result, the interest rate on $100 million of the $121.9 million floating rate borrowings outstanding at December 31, 2005 was fixed at an average rate of 6.14%.  After giving effect to the interest rate swap contracts, total borrowings are 40% fixed and 60% floating.

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The fair value of derivative instruments is based on pricing models using current market rates.  The fair value of the interest rate swap contracts was a long-term asset of $1.2 million as of December 31, 2005.  The effective portion was recorded as accumulated other comprehensive income, net, a separate component of shareholders’ equity, and is subsequently reclassified into earnings in the same financial statement line item, interest expense, in the same period during which the hedged transaction is recognized in earnings.  A corresponding deferred tax liability of $0.5 million was also recorded in accumulated other comprehensive income, net for the income tax expense related to the estimated asset of the interest rate swap contracts.  The ineffective portion of the change in the value of the interest rate swap contracts is immediately recognized as a component of interest expense.  Hedge ineffectiveness for the period ended December 31, 2005 was not significant.  Management may choose not to swap floating rate debt to a fixed rate or may terminate a previously executed swap if the floating rate positions are more beneficial.

8.Shareholders’ Equity

Preferred Shares

We are authorized to issue 2 million preferred shares, however none of these shares are issued.

Common Shares

At the annual meeting of shareholders on May 3, 2005, our shareholders voted to increase the number of authorized common shares to 50 million from 20 million.  Shares issued and outstanding at December 31, 2005 were 14,379,290.  

On February 14, 2006, our Board of Directors approved a two for one split of our outstanding common shares.  Shareholders of record as of February 28, 2006 will receive a stock dividend of one additional common share for every common share they own.  The additional shares will be distributed on March 14, 2006.  

The information throughout these financial statements is presented as of December 31, 2005 and before the two for one split of our common shares which is effective February 28, 2006.

On February 14, 2006, our Board of Directors approved a quarterly cash dividend of $0.10 per share for common shares outstanding after the share split.  The dividend is payable on March 24, 2006 to shareholders of record.  Cash dividends per share were as follows:

·   $0.15 per share in third quarter of 2005

·   $0.10 per share in second quarter of 2005

·   $0.08 per share in third quarter of 2004

·   $0.06 per share in fourth quarter of 2003

·   $0.05 per share in fourth quarter 2002 (initial dividend)

Of the unissued shares, 709,748 shares were reserved for the following:

	Unissued Shares
Employee Stock Purchase Plan	67,298
2004 Incentive and Performance Plan	642,450

Shareholders’ Rights Plan

In September 1997, our Board of Directors adopted a shareholder rights plan.  If a person acquires 15% or more of our common shares or makes a tender offer or other offer to do so without the approval of the Board of Directors, our shareholders would have the right to purchase our common shares or the shares of the acquiring company at a significant discount.  The Board of Directors has the right to redeem these rights for a nominal amount, to extend the period before the rights may be exercised or to take other actions as defined.  The plan is intended to encourage any person seeking to acquire us to negotiate with the Board of Directors.  The plan expires in September 2007.

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Cash Equity Plan

In April 1999, our Board of Directors adopted the Cash Equity Plan.  Employees were eligible to receive awards of common shares at the discretion of the Compensation Committee of the Board of Directors.  Awards are common share equivalent units which may be exchanged for the market value of those shares.  The number of units available for grant, including those units outstanding and unexercised, cannot exceed two percent of the common shares outstanding at any given time.  The awards vest after three years from the date of grant and expire after five years.  No units were awarded in 2005, 2004 or 2003.  Compensation expense is recognized based on changes in the market value of the common shares.  The related compensation expense for this plan was $0.3 million in 2005, $0.8 million in 2004 and $0.3 million in 2003.  At December 31, 2005, units of 7,100 remain outstanding and unexercised.  No further grants or awards will be made under this plan.  

Employee Stock Purchase Plan

In September 2000, our Board of Directors adopted the Employee Stock Purchase Plan, which our shareholders approved in May 2001.  The plan permits eligible employees to purchase common shares through payroll deductions of up to 10% of an employee’s compensation limited to $25,000 each year.  The purchase price of the shares is 85% of the market price on the last day of each month.  There were 200,000 common shares authorized under this plan and there were 67,298 shares available for future purchase as of December 31, 2005.

Share Option Plans and Share Plans

Previously we granted options and issued common shares under the following shareholder-approved option plans:

·1991 Senior Management and Field Management Plan

·1992 Non-Qualified Stock Option Plan

·1993 Employee Stock Option Plan

·1993 Second Amended and Restated Non-Employee Director Stock Plan

·2000 Stock Incentive Plan

In February 1997, as an additional incentive to attract a member of senior management, the Board of Directors authorized and issued an award of 50,000 options.  

These plans provided options to employees and directors to purchase shares below market prices or options for exercise prices based on the fair value of the shares on the date of the grant.  These options vested over one, four or five years from the date of grant and expire at the end of ten years if unexercised.

In February 2004, we granted 103,500 options to employees from the 2000 Stock Incentive Plan.  These options vest ratably over four years from the date of grant and expire after ten years if unexercised.  These options were awarded at their fair value on the date of grant, therefore no compensation expense was recognized.  

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No further grants will be made under these plans, however grants will be made under the 2004 Incentive and Performance Plan.

2004 Incentive and Performance Plan

In February 2004, our Board of Directors adopted the 2004 Incentive and Performance Plan, which our shareholders approved in May 2004.  A total of 1.2 million shares are reserved for issuance under the plan.  Employees and non-employee directors are eligible to receive awards at the discretion of the Compensation Committee.  The following types of awards may be granted under this plan:  options, appreciation rights, restricted shares, other share-based awards and non-discretionary awards.  

In 2005, we granted 212,000 options to employees.  These options vest ratably over three years from the date of grant and expire after seven years if unexercised.  These options were awarded with exercise prices equal to their fair value on the date of grant, therefore no compensation expense was recognized.  

In 2004, we granted 201,000 options to employees.  These options vest ratably over three years from the date of grant and expire after seven years if unexercised.  These options were awarded with exercise prices above their fair value on the date of grant, therefore no compensation expense was recognized.

In 2005, we issued 59,000 restricted shares to employees.  The weighted-average fair value of the restricted shares granted was $46.37 per share and $2.7 million of unearned compensation was reflected as a component of shareholders’ equity.  In 2004, we issued 74,500 restricted shares to employees.  The weighted-average fair value of the restricted shares granted was $21.78 per share and $1.6 million of unearned compensation was reflected as a component of shareholders’ equity.  

These restricted shares vest in 2007 and 2008, however under certain circumstances some or all of the restricted shares may vest earlier.  Compensation expense is recognized over the vesting period.  Compensation expense of $1.3 million was recognized in 2005 and $0.2 million was recognized in 2004.  Restricted shares are not included in the calculation of basic earnings per share, however restricted shares are included in the calculation of diluted earnings per share.

In 2005, we issued 7,000 shares to non-employee directors and recognized compensation expense of $0.4 million.  These shares vest immediately, however trading is restricted for one year from the date of grant.  

In 2004, we issued 16,800 shares to non-employee directors and recognized compensation expense of $0.3 million.  These shares vest immediately, however trading is restricted for one year from the date of grant.

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The following table summarizes options outstanding and changes:

	2005		2004		2003
	Shares	Weighted Average Exercise Price	Shares	Weighted Average Exercise Price	Shares	Weighted Average Exercise Price
Balance at beginning of the year	1,377,898	$12.87	1,521,177	$12.20	1,515,183	$11.96
Options granted	212,000	$45.75	304,500	$16.83	185,750	$13.92
Options exercised	(430,692)	$11.39	(412,364)	$12.15	(88,547)	$10.10
Options forfeited	(9,250)	$16.81	(35,415)	$26.56	(91,209)	$13.79
Balance at end of the year	1,149,956	$19.46	1,377,898	$12.87	1,521,177	$12.20
Exercisable at end of the year	712,650	$12.63	956,650	$11.53	1,158,540	$12.22
Weighted average fair value of    options granted at fair value	$24.69		$9.64		$8.87
Weighted average fair value of    options granted above fair value	$    ―		$10.31		$ ―

The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

·   expected term of approximately 6.8 years for 2005, 7.5 years for 2004 and 9 years for 2003

·   dividend yield of 0.84% in 2005, 1.51% in 2004 and 1.52% in 2003

·   expected share price volatility of 54.2% in 2005, 54.3% in 2004 and 55.0% in 2003

·   risk-free interest rates of 4.1% in 2005, 4.6% in 2004 and 3.9% in 2003

The following table summarizes information regarding options outstanding at December 31, 2005:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Options Outstanding	Weighted Average Contractual Life (Years)		Weighted Average Exercise Price	Options Exercisable	Weighted Average Exercise Price
$9.69 to $13.93	509,577	5.0	$11.54		464,015	$11.30
$14.00 to $19.50	428,379	6.2	$15.86		248,635	$15.10
$45.54 to $56.72	212,000	6.1	$45.75		―	―
$9.69 to $56.72	1,149,956	5.7	$19.46		712,650	$12.63

The following table summarizes equity compensation information as of December 31, 2005:  

	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by security holders	1,228,706	$21.15	642,450
Equity compensation plans not approved by security holders	50,000(1)	$12.50	―
Total	1,278,706	$20.81	642,450

⁽¹⁾ In February 1997, the Board of Directors authorized issuance of these options as an additional incentive to attract a member of senior management.  The exercise price was equal to the fair market value of the shares on the date the options were granted.  These options vested in February 2002 and expire 10 years from the date of grant.

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9.Income Taxes

The asset and liability method is used to account for income taxes.  Under this method, deferred tax assets and liabilities are recognized for tax credits and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized.  

Income taxes consist of the following (thousands):

	2005			2004			2003
Current income taxes
Federal	$	72,650		$	37,185		$	8,258
State		10,738			5,503			588
		83,388			42,688			8,846
Deferred income taxes
Federal		(3,157	)		(6,809	)		2,240
State		(316	)		(681	)		316
		(3,473	)		(7,490	)		2,556
	$	79,915		$	35,198		$	11,402

For the year ended December 31, 2003, income tax expense of $0.9 million associated with equity in earnings of an unconsolidated company was not included in the table above.  

The tax benefit associated with non-statutory options exercised by employees under the various share plans reduced taxes payable by approximately $9.1 million in 2005, $2.0 million in 2004 and $0.1 million in 2003.  These tax benefits are recognized in additional paid-in capital, a component of shareholders’ equity.  

A reconciliation of the differences between the U.S. statutory federal income tax rate and the effective tax rate as provided in the consolidated statements of income is as follows:

	2005			2004			2003
Statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		3.5			3.3			1.7
Non-deductible items		0.2			―			1.3
Earnings of minority interests		(2.3	)		(2.3	)		(1.4	)
Domestic production deduction		(0.8	)		―			―
Other		(0.1	)		1.2			―
		35.5	%		37.2	%		36.6	%

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Deferred income taxes are provided using the asset and liability method to reflect temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities using presently enacted tax rates and laws.  The components of deferred income taxes included in the consolidated balance sheets were as follows (thousands):

	2005		2004
Deferred tax assets:
Inventory	$	―	$	3,440
Other intangibles, net		―		2,279
Accrued expenses		10,009		10,425
Accrued compensation		13,692		8,407
Other		161		1,657
		23,862		26,208
Deferred tax liabilities:
Inventory		3,116		―
Deferred costs		1,889		1,952
Property and equipment		367		367
Depreciation		14,144		12,273
Other intangibles, net		5,489		―
		25,005		14,592
Net deferred tax (liabilities) assets	$	(1,143)	$	11,616
Classified in the balance sheet as:
Deferred income tax benefit (current assets)	$	5,768	$	11,913
Deferred income taxes (long-term liability)		(6,911)		(297)
	$	(1,143)	$	11,616

As a result of allocating purchase price to the assets acquired and liabilities assumed for acquisitions completed during 2005, we recorded a net deferred tax liability of $15.1 million.

Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax asset will not be realized.  Management believes that it is more likely than not that our future operating results coupled with the existing deferred tax liabilities will generate sufficient taxable income to realize the deferred tax assets.

10. Retirement Plans

We provide a savings and retirement plan for salaried and certain hourly employees whereby eligible employees may contribute a percentage of their earnings to a trust.  Matching contributions of $3.9 million for 2005, $3.3 million for 2004 and $2.8 million for 2003 were made to the trusts based on a percentage of the contributions made by the participating employees.

Additionally, there is a supplemental retirement plan for eligible participants.  Contributions are based on achieving certain operating performance and certain participants receive a guaranteed return ranging from zero to 9% based on years of service.  Contributions were $7.5 million in 2005, $3.6 million in 2004 and $1.7 million in 2003.  The plan’s investments are principally company-owned life insurance policies.  Payments are made to the participants or their beneficiaries over a 15-year period.  

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11. Financial Instruments

The estimated fair values of cash and cash equivalents, receivables, inventory, unbilled receivables, accounts payable and accruals are the same as their carrying amounts due to their short-term nature.  After giving effect to the interest rates swap contracts, the interest for our debt is 40% fixed and 60% variable.  The estimated market value of our debt, based on current interest rates for similar obligations with like maturities at December 31, 2005 was $2.8 million less than whereas December 31, 2004 was $1.7 million more than the amount of debt reported in the consolidated balance sheet.  

Changes in interest rates expose us to financial market risk.  We currently utilize interest rate swap contracts to hedge interest exposure on our term note.  The interest rate swap contracts effectively convert $100 million of the term note to a fixed interest rate of 6.14% through June 2009.  Changes in the fair value of the interest rate swap contracts are recorded as accumulated other comprehensive loss, net, a separate component of shareholders’ equity, and are subsequently reclassified into interest expense as interest expense is recognized on the term note.  

Derivative financial instruments are not utilized to hedge other risks or for speculative or trading purposes.  

12. Commitments and Contingencies

Operating Leases

We lease certain real property, vehicles and office equipment under operating leases.  Expense for these operating leases was $17.2 million in 2005, $11.4 million in 2004 and $9.9 million in 2003.  Certain of these leases are non-cancelable and have minimum lease payment requirements of $19.1 million in 2006, $16.3 million in 2007, $14.3 million in 2008, $12.1 million in 2009, $7.8 million in 2010 and $7.6 million thereafter.  

Legal Proceedings

We are involved in litigation and other legal matters arising in the normal course of business.  In the opinion of management, the recovery or liability, if any, under any of these matters will not have a material effect on our financial position, results of operations or cash flows.

13. Segment Information

The consolidated financial statements include operations from two reportable segments:  BMC Construction and BMC West.  These segments represent businesses that are managed separately.  Each of these businesses requires distinct operating and marketing strategies.  Management reviews financial performance based on these operating segments.

BMC Construction provides construction services to high-volume homebuilders.  These services include wood framing or concrete block masonry, concrete services, plumbing and other services.  Construction services include managing labor and construction schedules as well as sourcing materials.

As the result of a branding strategy, we changed the name of BMC Construction to SelectBuild Construction.  This change is expected to be formally announced in the first quarter of 2006.

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BMC West markets and sells building products, manufactures building components and provides construction services.  Products include structural lumber and building materials purchased from other manufacturers as well as manufactured building components including millwork, trusses and wall panels.  Construction services include framing and installation of miscellaneous building products.  Building products and construction services are sold principally to builders and contractors.

The financial performance for these reporting segments is based on income from operations before interest expense, income taxes, minority interests and equity earnings.  The segments follow the accounting principles described in the Summary of Significant Accounting Policies.  Sales between segments are recognized at market prices and no single customer accounts for more than 10% of sales.

Selected financial information by segment is as follows (thousands):

	Sales							Income(1)(Loss)Before Taxes and				Equity in Net Income		Depreciation
		Total		Inter- Segment			Trade		Minority Interests			of Affiliates		and Amortization		Capital(2) Expenditures		Assets
Year Ended December 31, 2005
BMC Construction	$	1,395,182	$	(1,296	)	$	1,393,886	$	160,957		$	―	$	12,375	$	62,611	$	611,067
BMC West		1,519,903		(1,629	)		1,518,274		151,030			―		14,988		17,335		447,619
Corporate		―		―			―		(72,631	)		―		704		―		91,839
	$	2,915,085	$	(2,925	)	$	2,912,160		239,356		$	―	$	28,067	$	79,946	$	1,150,525
Interest Expense									14,420
								$	224,936
Year Ended December 31, 2004
BMC Construction	$	753,956	$	(255	)	$	753,701	$	59,689		$	―	$	8,216	$	14,382	$	268,498
BMC West		1,338,470		(1,146	)		1,337,324		96,083			―		14,599		17,036		409,160
Corporate		―		―			―		(47,664	)		―		497		―		65,386
	$	2,092,426	$	(1,401	)	$	2,091,025		108,108		$	―	$	23,312	$	31,418	$	743,044
Interest Expense									13,560
								$	94,548
Year Ended December 31, 2003
BMC Construction	$	408,929	$	(762	)	$	408,167	$	18,954		$	1,431	$	4,410	$	5,555	$	187,479
BMC West		1,007,373		(469	)		1,006,904		54,826			―		15,315		12,121		390,764
Corporate		―		―			―		(33,351	)		―		1,060		―		25,956
	$	1,416,302	$	(1,231	)	$	1,415,071		40,429		$	1,431	$	20,785	$	17,676	$	604,199
Interest Expense									9,279
								$	31,150

⁽¹⁾ See Note 3 for an explanation of asset impairments affecting our segments.

⁽²⁾ Property and equipment from acquisitions are included as capital expenditures.

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14.  Quarterly Results of Operations (unaudited)

Operating results by quarter for 2005 and 2004 were as follows (thousands, except per share data):

	Fourth		Third		Second		First
2005
Sales	$	817,883	$	819,828	$	701,521	$	572,928
Income from operations	$	62,336	$	75,820	$	60,892	$	40,308
Net income	$	33,481(2)	$	41,564	$	33,314(1)	$	21,148
Net income per diluted common share		$2.25		$2.81		$2.28		$1.47
Common share prices:
High		$96.22		$97.31		$72.26		$49.73
Low		$68.21		$69.36		$44.00		$34.00
2004
Sales	$	539,309	$	591,480	$	543,393	$	416,843
Income from operations	$	35,904	$	35,080	$	26,473	$	10,651
Net income	$	19,046(4)	$	18,096	$	12,580	$	4,188(3)
Net income per diluted common share		$1.34		$1.29		$0.92		$0.31
Common share prices:
High		$38.94		$27.65		$19.28		$18.33
Low		$25.62		$16.97		$15.70		$14.90

⁽¹⁾ Includes impairment of $0.3 million net of tax for certain customer relationships of BMC Construction.

⁽²⁾ Includes impairment of $0.5 million net of tax for goodwill of BMC Construction.

⁽³⁾ Includes impairment of $0.8 million net of tax for certain properties of BMC West.

⁽⁴⁾ Includes impairment of $0.6 million net of tax for goodwill of BMC West and a $3.8 million net of tax reduction of expenses for lower than expected insurance costs.

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Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for the preparation and fair presentation of the consolidated financial statements included in this annual report.  The consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles and reflect management’s judgments and estimates concerning events and transactions that are accounted for or disclosed.

Our management is also responsible for establishing and maintaining effective internal control over financial reporting.  Our internal control over financial reporting includes those policies and procedures that pertain to our ability to record, process, summarize and report reliable financial data.  Management recognizes that there are inherent limitations in the effectiveness of any internal control and effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation.  Additionally, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.

In order to ensure that the internal controls over financial reporting are effective, management regularly assesses such controls and did so most recently for its financial reporting as of December 31, 2005.  Management’s assessment was based on criteria for effective internal control over financial reporting described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Our assessment excluded the internal controls over financial reporting for acquisitions completed subsequent to June 30, 2005, which included a 51% interest in BBP Companies (concrete services business) and the acquisition of Campbell Companies (concrete and plumbing services business), Quality Truss (a truss manufacturing business) and HnR Framing Systems and Home Building Components (framing services business).  These recent acquisitions comprised 14.2% of our tangible assets and 6.9% of our sales as of and for the year ended December 31, 2005.  Based on this assessment, management concluded that as of December 31, 2005, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with United States generally accepted accounting principles.  

KPMG LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this annual report, has issued an attestation report on management’s assertion with respect to the effectiveness of our internal control over financial reporting as of December 31, 2005.

Date:  February 24, 2006	/s/ Robert E. Mellor
	Robert E. Mellor Chairman of the Board, President and Chief Executive Officer

Date:  February 24, 2006	/s/ William M. Smartt
	William M. Smartt Senior Vice President and Chief Financial Officer

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Building Materials Holding Corporation:

We have audited the accompanying consolidated balance sheets of Building Materials Holding Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2005.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 2005 and 2004 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Building Materials Holding Corporation and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Building Materials Holding Corporation’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 24, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

San Francisco, California

February 24, 2006

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Building Materials Holding Corporation:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, appearing in Item 9A, Controls and Procedures, that Building Materials Holding Corporation maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Building Materials Holding Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.  Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.  

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Building Materials Holding Corporation maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Also, in our opinion, Building Materials Holding Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

64

Building Materials Holding Corporation acquired a 51% interest in BBP Companies and a 100% interest in Campbell Companies, Quality Truss, and HnR Framing Systems and Home Building Components subsequent to June 30, 2005, and management excluded from its assessment of the effectiveness of Building Materials Holding Corporation’s internal control over financial reporting as of December 31, 2005, these entities’ internal control over financial reporting. These entities comprise 14.2% of tangible assets and 6.9% of sales included in the consolidated financial statements of Building Materials Holding Corporation and subsidiaries as of and for the year ended December 31, 2005.  Our audit of internal control over financial reporting of Building Materials Holding Corporation also excluded an evaluation of the internal control over financial reporting of these entities.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Building Materials Holding Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2005, and our report dated February 24, 2006 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

San Francisco, California

February 24, 2006

65

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Building Materials Holding Corporation:

In our opinion, the consolidated statements of income, shareholders’ equity and cash flows for the year ended December 31, 2003 listed in the accompanying index appearing under Item 15(a) (1) present fairly, in all material respects, the results of operations and cash flows of Building Materials Holding Corporation and its subsidiaries for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.  In addition, in our opinion, the financial statement schedule for the year ended December 31, 2003 listed in the accompanying index appearing under Item 15(a)(2)  presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.  These financial statements and financial statement schedule are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit.  We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

March 12, 2004

66

ITEM 9.  Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure

For information regarding our change in independent accountants from PricewaterhouseCoopers LLP, please refer to our Form 8-K/A filed with the United States Securities and Exchange Commission on March 18, 2004.

We have had no disagreements with our independent accountants regarding any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

ITEM 9A.  Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934.  This evaluation was conducted to determine whether the disclosure controls and procedures were effective and timely in bringing material information to the attention of senior management.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in ensuring material information required to be disclosed in reports filed under the Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure.

Changes in Internal Controls

Our disclosure controls and procedures and internal controls over financial reporting are routinely evaluated and tested for effectiveness.  These evaluations are discussed with management and the Audit Committee of the Board of Directors.  As a result of these evaluations, revisions and corrective actions are made to ensure the continuing effectiveness of our disclosure controls and procedures and internal controls over financial reporting.  

There were no changes in the design or operation of our internal controls over financial reporting that occurred during the fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  

Management’s Report on Internal Control Over Financial Reporting

Refer to management’s report on internal control over financial reporting presented in Item 8 - Financial Statements and Supplementary Data (page 62).

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

Refer to report of independent registered public accounting firm presented in Item 8 - Financial Statements and Supplementary Data (page 64).

ITEM 9B.  Other Information

None.

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PART III

ITEM 10.  Directors and Executive Officers of the Registrant

Directors

Directors hold office until the annual meeting of shareholders or until election of a successor, resignation, removal or death.  

Name	Age	Position and Business Experience
Robert E. Mellor	62	Mr. Mellor became Chairman of the Board of Directors in 2002 and has been President and Chief Executive Officer since 1997. He has been a director since 1991. He was previously Of Counsel with the law firm of Gibson, Dunn & Crutcher LLP from 1990 to 1997. He is a director for Coeur d’Alene Mines Corporation, The Ryland Group, Monro Muffler Brake and the California Chamber of Commerce. He is also on the board of councilors of Save-the-Redwoods League. He does not serve on the audit committee of any of these boards. Mr. Mellor intends to remove himself as a director from one of these boards in 2006.
Alec F. Beck	49	Mr. Beck has served as a director since 1996. He is President of Hogan’s Alley, Inc., since 2002, which is the general partner of Lithoprint Co., a printing company, and since 1998, AGC Partners, Ltd., an investment partnership with operations in Austin, Texas.
Sara L. Beckman	49	Dr. Beckman has served as a director since 2002. She is a faculty member of the Operations and Information Technology Management group at the Haas School of Business at University of California - Berkeley where she has been for nearly twenty years. Her teaching and research focus on operations strategy and innovation management. She has also worked in several corporate positions at Hewlett-Packard Company, and as a consultant for Booz, Allen and Hamilton.
Eric S. Belsky	44	Dr. Belsky is nominated for election to the board for the first time. He is a specialist in housing finance, economics and policy. He has nearly 20 years experience conducting research on a wide range of housing and urban topics for public and private sector organizations and clients. He currently is the Executive Director of the Joint Center for Housing Studies at Harvard University and has been for over 5 years. Since 2004, he has been a Lecturer in the Harvard Graduate School of Design. He also served as Research Director for the Millennial Housing Commission 2001-2002, a bipartisan commission appointed by the United States Congress. Dr. Belsky also serves as a director of Champion Enterprises, Inc.

68

James K. Jennings, Jr.	64	Mr. Jennings has served as a director since 2003. Since January 2005, Mr. Jennings has served as Executive Vice President and Secretary of both Ashbrook Simon-Hartley GP, LLC, and Ashbrook Simon-Hartley Operations GP, LLC, the general partners of limited partnerships which own the assets of a manufacturer of waste water treatment equipment with operations in the U.S., U.K. and Chile. He is Executive Vice President, Chief Financial Officer and Director of Atreides Capital, LLC, a private equity investment firm that specializes in the acquisition and operation of middle market manufacturing and distribution companies. He previously served as Executive Vice President, Chief Financial Officer and Director of Consolidation Partners, L.L.C., a privately-held merchant banking organization. Prior to that, he served as Executive Vice President and Chief Financial Officer of Loomis, Fargo & Co. and its predecessor organization, a cash-in-transit service provider, from 1994 to January 2003.
Norman J. Metcalfe	63	Mr. Metcalfe is nominated for election to the board for the first time. For several years he has managed his own investment and real estate business. He has served as Vice Chairman and Chief Financial Officer of The Irvine Company, one of the nation's largest real estate and community development companies. Mr. Metcalfe also serves on the boards of The Ryland Group and The Tejon Ranch Company.
R. Scott Morrison, Jr.	66	Mr. Morrison has served as a director since 2004. For over 5 years, he has been the owner and President of Morrison Properties, a real estate development firm, and a partner in City Center Business Offices, a company that rents business suites on a short-term basis and is based in Fort Lauderdale, Florida. He is formerly a partner and divisional President for the Florida based Arvida Corporation, a real estate firm. Mr. Morrison is also a development principal in the Boca Raton Innovation Center now known as the Florida Atlantic Research Park. Mr. Morrison was also a limited partner in Memphis Prince, L.P., d/b/a Audubon Park Place, which owns a 120 unit apartment building in Memphis, Tennessee, until 2005 when it was sold and he served as the President of the general partner, RSM II, Inc, until 2005 when it was dissolved. The limited partnership filed for protection under Chapter 11 of the federal bankruptcy laws in late 2003 and the court approved a reorganization plan late in 2004.
Peter S. O’Neill	68	Mr. O’Neill has served as a director since 1993. He is the founder of O’Neill Enterprises, LLC., a residential development and homebuilding company which he founded in 1979, and is currently chairman of PON, LLC and related companies. He currently serves on the Board of Trustees and as a member of the Governance Committee for Albertson College of Idaho. He is a member of the Urban Land Institute and is currently serving as a director of IDACORP and Idaho Power Company.

69

Richard G. Reiten 66   Mr. Reiten has served as a director since 2001. He is currently a director for Northwest Natural Gas Co. and was CEO from 2000 to 2002 as well as Chairman of the board until 2005. He is also a director of U.S. Bancorp, Regence Group, IDACORP and National Fuel and Gas. Mr. Reiten is past Chairman of the Board for the American Gas Association and serves on the board of the Associated Electric & Gas Insurance Services Limited. He is also a trustee of the Board of The Nature Conservancy of Oregon, the Oregon Business Council and the Oregon Community Foundation.

Executive Officers

Name	Age	Position and Business Experience
Robert E. Mellor	62	Chairman of the Board, President and Chief Executive Officer Mr. Mellor became Chairman of the Board of Directors in 2002 and has been President and Chief Executive Officer since 1997. He has been a director since 1991. He was previously Of Counsel with the law firm of Gibson, Dunn & Crutcher LLP from 1990 to 1997. He is a director for Coeur d’Alene Mines Corporation, The Ryland Group, Monro Muffler Brake and the California Chamber of Commerce. He is also on the board of councilors of Save-the-Redwoods League. He does not serve on the audit committee of any of these boards. Mr. Mellor intends to remove himself as a director from one of these boards in 2006.
William M. Smartt	63	Senior Vice President and Chief Financial Officer Mr. Smartt has been a Senior Vice President and Chief Financial Officer since April 2004.  Prior to joining the Company, he was an independent consultant from August 2001 to March 2004.  From 1992 to 2001, he was Executive Vice President, Chief Financial and Administrative Officer of DHL Express, a leader in international air express service.  His previous experience as a Chief Financial Officer included ten years with Di Giorgio Corporation, a Fortune 500 Company, whose product lines included the distribution of building materials, prefabricated components and framing services.
Michael D. Mahre	46	Senior Vice President - Corporate Development, President and Chief Executive Officer - BMC Construction Mr. Mahre was elected a Senior Vice President in 2003.  He was elected Vice President of Corporate Development in 2001 and Chief Executive Officer of BMC Construction in 2002.  He joined the Company in 1999 as Director of Financial Planning and Analysis. Mr. Mahre was a principal of The Cambria Group, a private equity investment firm, from 1997 to 1998.

70

Stanley M. Wilson	61	Senior Vice President, President and Chief Executive Officer - BMC West Mr. Wilson was elected President and CEO of BMC West in 2004 and was appointed Senior Vice President in 2003.  He was elected Vice President in 2000 and was General Manager of the Pacific Division of BMC West from 1993 to 2003.  Mr. Wilson has been with the company since its beginning in 1987.  His previous experience includes 19 years with the building materials distribution business of Boise Cascade Corporation.
Eric R. Beem	36	Vice President and Controller Mr. Beem was appointed Vice President in January 2006 and Controller in April 2005.  He joined the Company as Accounting Manager in 1996.  Mr. Beem is a Certified Public Accountant and his experience includes three years with an international public accounting firm.
John D. Fa	35	Vice President, Real Estate Mr. Fa joined the company as Vice President, Real Estate in December 2005.  He previously served from 1999 to 2005 as Associate Director for Development at Presidio Trust in San Francisco.
Mark R. Kailer	52	Vice President, Treasurer and Investor Relations Mr. Kailer has been Vice President and Treasurer since 2003.  He joined the company in 2000 as Assistant Treasurer.  He was previously Senior Manager of Treasury Services at Circle International Group, a publicly-traded global logistics company based in San Francisco, from 1997 to 2000.
Jeffrey F. Lucchesi	52	Senior Vice President, Chief Information Officer Mr. Lucchesi joined the company in August 2004 as Senior Vice President and Chief Information Officer.  From 2000 to 2004, he was Senior Vice President of Worldwide Operations for Corio, Inc., an enterprise application service provider.  Mr. Lucchesi also served from 1994 to 2000 as Vice President and Chief Information Officer for DHL Express, a leader in international air express services.
Steven H. Pearson	58	Senior Vice President - Human Resources Mr. Pearson has been Senior Vice President of Human Resources since 2001.  From 1987 through 2001 he served as Vice President of Human Resources.  Mr. Pearson has been with the Company since its beginning in 1987.  His previous experience also includes 18 years in the human resource function of Boise Cascade Corporation.

71

  Paul S. Street   57   Senior Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary Mr. Street joined the Company in 1999 as Senior Vice President, General Counsel and Corporate Secretary and has been Chief Administrative Officer since 2001.  He previously served as our outside General Counsel & Secretary while a partner of the law firm of Moffatt, Thomas, Barrett, Rock & Fields.

Certain Relationships and Legal Proceedings

Christopher Reiten is the son of Richard G. Reiten, a member of our Board of Directors.  Christopher is not an officer and his compensation is not approved by the Compensation Committee of the Board of Directors. He received compensation of $202,680 as Director of Business Development and Fleet Operations for BMC West in 2005.

During the past five years, there has been no litigation or legal proceeding involving a director or executive officer.

Audit Committee Financial Expert

The Audit Committee of the Board of Directors consists of Alec F. Beck, Sara L. Beckman, Eric S. Belsky, James K. Jennings, Jr. and Norman J. Metcalfe.  Each member is independent as defined under the NASDAQ rules.  The Board of Directors has determined that each Audit Committee member has sufficient knowledge in financial accounting matters to serve on the Audit Committee.  James K. Jennings, Jr. is an audit committee financial expert, as defined by the rules of the Securities and Exchange Commission.  

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires executive officers, directors and persons owning more than 10% of a registered class of equity securities to file reports of ownership and changes in ownership with the SEC and the National Association of Securities Dealers.  These reporting persons are also required by SEC regulations to furnish us with copies of all ownership forms filed.  Based on review of such forms and written representations from reporting persons, we are in compliance with filing requirements as of December 31, 2005, except for one late Form 4 filing for John Fa, Michael Mahre and Paul Street, and two late filings for Ellis Goebel.

Code of Ethics

We have adopted a Code of Ethics and Code of Business Conduct for our directors, chief executive officer, chief financial officer, controller, other officers and employees.  Also, we have adopted a Corporate Governance Guidelines for our directors.  These codes and guidelines require directors, officers and employees to act with honesty and integrity, avoiding actual or apparent conflicts of interest.  As we become aware of issues, prompt action is taken.  Copies are available free of charge on our website at www.bmhc.com, by accessing Investor Information and then Corporate Governance.

ITEM 11.  Executive Compensation

The information required by this item is included in our Proxy Statement under the captions Executive Compensation and Other Information, Compensation Committee Report on Executive Compensation, and Performance Graph and is incorporated herein by reference.  Our Proxy Statement will be filed within 120 days of our year end of December 31, 2005.

72

ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information relating to security ownership of certain beneficial owners and management is included in our Proxy Statement under the caption Security Ownership of Certain Beneficial Owners and Management and is incorporated herein by reference.  

The information relating to securities authorized for issuance under equity compensation plans is included in our Proxy Statement under the caption Executive Compensation Plan Information and is incorporated herein by reference.

ITEM 13.  Certain Relationships and Related Transactions

The information required by this item is included in our Proxy Statement under the caption Certain Relationships and Other Transactions and is incorporated herein by reference.

ITEM 14.  Principal Accounting Fees and Services

The information required by this item is included in our Proxy Statement under the caption Fees Paid to Independent Accountants and is incorporated herein by reference.

73

PART IV

ITEM 15.  Exhibits and Financial Statement Schedules

(a)	The following documents are filed as part of this Annual Report on Form 10-K:
	1.	Financial Statements as filed under Item 8 - Financial Statements and Supplementary Data:
		·Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003
		·Consolidated Balance Sheets as of December 31, 2005 and 2004
		·Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2005, 2004 and 2003
		·Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003
		·Notes to Consolidated Financial Statements
		·Management’s Report on Internal Control Over Financial Reporting
		·Reports of Independent Registered Public Accounting Firms
	2.	Financial Statement Schedules:
		·Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2005, 2004 and 2003        (page 75)
		·Report of Independent Registered Public Accounting Firm (page 76)
Schedules other than those listed are omitted because they are not applicable or the required information is presented in the financial statements and related disclosures.
	3.	Exhibits:
		A list of the exhibits required to be filed as part of this report are presented in the Exhibit Index (page 77).

74

Schedule II

Valuation and Qualifying Accounts

(thousands)

Deductions to Accounts Receivable: Allowance for Returns, Discounts and Doubtful Accounts

Description	Balance at  Beginning of Year	Additions Charged to  Costs and Expenses	Additions Charged to Other  Accounts	Deductions(1)	Balance at End of Year
Year Ended December 31, 2005	$4,367	$   447	$   ―	$1,058	$3,756
Year Ended December 31, 2004	$2,425	$2,804	$   ―	$  862	$4,367
Year Ended December 31, 2003	$2,022	$1,818	$   ―	$1,415	$2,425

(1)   Represents write-offs of uncollectible receivables, net of recoveries.

75

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Building Materials Holding Corporation:

Under date of February 24, 2006, we reported on the consolidated balance sheets of Building Materials Holding Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2005, which report and consolidated financial statements are included in this annual report on Form 10-K.  In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule for the years ended December 31, 2005 and 2004 listed in Item 15(a)(2) of this Form 10-K.  This financial statement schedule is the responsibility of the Company’s management.  Our responsibility is to express an opinion on this financial statement schedule based on our audits.

In our opinion, the 2005 and 2004 financial statement schedule referred to above, when considered in relation to the 2005 and 2004 basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

San Francisco, California

February 24, 2006

76

Exhibit Index Filed with the Annual Report on Form 10-K

For the Year Ended December 31, 2005

Incorporated by Reference

Exhibit
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
3.50	Amended Certificate of Incorporation filed with the Delaware Secretary of State on September 23, 1997	8-K12G3	000-23135	3.(i) 1	September 24, 1997
3.50.1	Certificate of Amendment of Certificate of Incorporation of Building Materials Holding Corporation (filed with this Form)
3.60.1	Amended and Restated By-laws	10-Q	000-23135	3.7	November 14, 2001
4.70	Rights Agreement Dated September 19, 1997, as Amended November 5, 1998	10-K405	000-23135	10.27	March 30, 1999
10.10	Amended and Restated Credit Agreement dated as of June 30, 2005 among Building Materials Holding Corporation, BMC West Corporation and other Subsidiary Guarantors, Wells Fargo Bank, National Association, as Administrative Agent, Co-Lead Arranger, Sole Book Runner and L/C Issuer, and Suntrust Bank as Co-Lead Arranger and Syndication Agent and the other financial institutions party hereto	8-K	000-23135	10.1	July 6, 2005
10.20*	Amended and Restated 1992 Non-Qualified Stock Plan	10-K	000-23135	10.33	March 28, 1997
10.20.1*	Non-Qualified Option Agreement between Michael Mahre and BMC West Corporation Pursuant to the 1992 Non-Qualified Stock Option Plan (filed with this Form)
10.21*	Amended and Restated 1993 Employee Stock Option Plan	10-K	000-23135	10.34	March 28, 1997
10.21.1*	Non-Statutory Stock Option Agreement Pursuant to the Amended and Restated 1993 Employee Stock Option Plan (filed with this Form)
10.22*	Second Amended and Restated Non-Employee Director Stock Option Plan (filed with this Form)
10.23*	Building Materials Holding Corporation 2000 Stock Incentive Plan	S-8	333-44260	4	August 22, 2000
10.23.1*	Non-Statutory Stock Option Agreement Pursuant to the 2000 Stock Incentive Plan (filed with this Form)
10.24*	Building Materials Holding Corporation Employee Stock Purchase Plan	S-8	333-47122	4	October 2, 2000
10.25*	Building Materials Holding Corporation 2004 Incentive and Performance Plan	S-8	333-117237	4	July 8, 2004
10.25.1*	Stock Option Agreement Pursuant to the 2004 Incentive and Performance Plan (filed with this Form)
10.26*	Cash Equity Plan (filed with this Form)
10.27*	Stock Option Agreement Between Robert E. Mellor and BMC West Corporation (filed with this Form)
10.40*	Building Materials Holding Corporation 2005 Bonus Program BMHC Officers (filed with this Form)

77

Incorporated by Reference

Exhibit
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
10.40.1*	Incentive and Performance Compensation Pursuant to 2005 Financial Performance	10-Q	000-23135	10.431	August 3, 2005
10.41*	Building Materials Holding Corporation 2005 Bonus Program BMC West Senior Management (filed with this Form)
10.42*	Building Materials Holding Corporation 2005 Bonus Program BMC Construction Management (filed with this Form)
10.43*	Building Materials Holding Corporation 2005 Deferred Compensation Plan for Directors (filed with this Form)
10.44*	Building Materials Holding Corporation 2005 Deferred Compensation Plan for Executives (filed with this Form)
10.45*	Building Materials Holding Corporation General Terms and Conditions BMHC Officers and BMHC Key Management 2003 Long-Term Cash Incentive Plan (filed with this Form)
10.46*	Building Materials Holding Corporation General Terms and Conditions BMHC Officers and BMHC Key Management 2005 Long-Term Cash Incentive Plan (filed with this Form)
10.47*	Building Materials Holding Corporation General Terms and Conditions BMHC Officers and BMHC Key Management 2005 Long-Term Cash Incentive Plan (filed with this Form)
10.48*	Building Materials Holding Corporation General Terms and Conditions BMC Construction Key Management 2003 Long-Term Cash Incentive Plan (filed with this Form)
10.60*	Building Materials Holding Corporation 2002 Executives Supplemental Retirement Income Plan as amended and restated December 31, 2002 (filed with this Form)

78

Incorporated by Reference

Exhibit
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
10.60.1*	Building Materials Holding Corporation 2005 Executives Supplemental Retirement Income Plan (filed with this Form)
10.70*	Amended and Restated Severance Plan for Certain Key Executive Officers, Senior Management and Key Employees of the Company and its Subsidiaries as Adopted by the Board of Directors on February 17, 2000	10-K	000-23135	10.37	March 31, 2000
10.70.1*	First Amendment to the Severance Plan for Certain Executive Officers, Senior Management and Key Employees of Building Materials Holding Corporation, Effective as of June 16, 2005	8-K	000-23135	10.46	June 20, 2005
10.80	Amended Form of Indemnity Agreement Between the Company and its Officers and Directors	10-K	000-23135	10.7.1	March 26, 2003
10.90*	Employment Agreement by and Between Robert E. Mellor and the Company as of June 1, 2002	10-K	000-23135	10.4	March 26, 2003
10.90.1*	First Amendment to Employment Agreement Between Robert E. Mellor and the Company as of February 23, 2004	10-K	000-23135	10.41	March 15, 2004
10.90.2*	Second Amendment to the Employment Agreement Between Robert E. Mellor and Building Materials Holding Corporation as of June 16, 2005	8-K	000-23135	10.45	June 20, 2005
10.91*	Employment Agreement by and Between William M. Smartt and the Company as of April 1, 2004 (filed with this Form)
21.0	Subsidiaries of Building Materials Holding Corporation (filed with this Form)
23.1	Consent of KPMG LLP (filed with this Form)

79

Incorporated by Reference

Exhibit
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
23.2	Consent of PricewaterhouseCoopers LLP (filed with this Form)
31.1	Certificate of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed with this Form)
31.2	Certificate of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed with this Form)
32.1	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed with this Form)
*Indicates a management contract or compensatory plan

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Building Materials Holding Corporation

Date:  February 27, 2006	/s/ Robert E. Mellor
	Robert E. Mellor
	Chairman of the Board, President and Chief Executive Officer (Principal  Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Robert E. Mellor	Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)	February 27, 2006
Robert E. Mellor
/s/ William M. Smartt	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	February 27, 2006
William M. Smartt
/s/ Eric R. Beem	Vice President and Controller (Principal Accounting Officer)	February 27, 2006
Eric R. Beem
/s/ Alec F. Beck	Director	February 27, 2006
Alec F. Beck
/s/ Sara L. Beckman	Director	February 27, 2006
Sara L. Beckman
/s/ Eric S. Belsky	Director	February 27, 2006
Eric S. Belsky
/s/ James K. Jennings, Jr.	Director	February 27, 2006
James K. Jennings, Jr.
/s/ R. Scott Morrison, Jr.	Director	February 27, 2006
R. Scott Morrison, Jr.
/s/ Peter S. O’Neill	Director	February 27, 2006
Peter S. O’Neill
/s/ Richard G. Reiten	Director	February 27, 2006
Richard G. Reiten

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List of Exhibits Filed
Exhibit
Number	Exhibit Description
3.50.1	Certificate of Amendment of Certificate of Incorporation of Building Materials Holding Corporation
10.20.1*	Non-Qualified Option Agreement between Michael Mahre and BMC West Corporation Pursuant to the 1992 Non-Qualified Stock Option Plan
10.21.1*	Non-Statutory Stock Option Agreement Pursuant to the Amended and Restated 1993 Employee Stock Option Plan
10.22*	Second Amended and Restated Non-Employee Director Stock Option Plan
10.23.1*	Non-Statutory Stock Option Agreement Pursuant to the 2000 Stock Incentive Plan
10.25.1*	Stock Option Agreement Pursuant to the 2004 Incentive and Performance Plan
10.26*	Cash Equity Plan
10.27*	Stock Option Agreement Between Robert E. Mellor and BMC West Corporation
10.40*	Building Materials Holding Corporation 2005 Bonus Program BMHC Officers
10.41*	Building Materials Holding Corporation 2005 Bonus Program BMC West Senior Management
10.42*	Building Materials Holding Corporation 2005 Bonus Program BMC Construction Management
10.43*	Building Materials Holding Corporation 2005 Deferred Compensation Plan for Directors
10.44*	Building Materials Holding Corporation 2005 Deferred Compensation Plan for Executives
10.45*	Building Materials Holding Corporation General Terms and Conditions BMHC Officers and BMHC Key Management 2003 Long-Term Cash Incentive Plan
10.46*	Building Materials Holding Corporation General Terms and Conditions BMHC Officers and BMHC Key Management 2004 Long-Term Cash Incentive Plan
10.47*	Building Materials Holding Corporation General Terms and Conditions BMHC Officers and BMHC Key Management 2005 Long-Term Cash Incentive Plan
10.48*	Building Materials Holding Corporation General Terms and Conditions BMC Construction Key Management 2003 Long-Term Cash Incentive Plan
10.60*	Building Materials Holding Corporation 2002 Executives Supplemental Retirement Income Plan as Amended and Restated December 31, 2002
10.60.1*	Building Materials Holding Corporation 2005 Executives Supplemental Retirement Income Plan
10.91*	Employment Agreement by and Between William M. Smartt and the Company as of April 1, 2004
21.0	Subsidiaries of Building Materials Holding Corporation
23.1	Consent of KPMG LLP
23.2	Consent of PricewaterhouseCoopers LLP
31.1	Certificate of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certificate of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Indicates a management contract or compensatory plan.

82

EX-3.50.1

Exhibit 3.50.1

CERTIFICATE OF AMENDMENT OF

CERTIFICATE OF INCORPORATION OF

BUILDING MATERIALS HOLDING CORPORATION

Building Materials Holding Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), pursuant to the provisions of the General Corporation Law of the State of Delaware (the "GCL"), DOES HEREBY CERTIFY as follows:

FIRST: The Certificate of Incorporation of the Corporation is hereby amended by deleting the first two sentences of ARTICLE FOURTH of the Certificate of Incorporation in their present form and substituting therefor as the first two sentences of ARTICLE FOURTH the following two sentences:

“This Corporation is authorized to issue two classes of stock, designated “Common Stock”, $0.001 par value, and “Preferred Stock”, $0.001 par value. The total number of shares of all classes of stock which the Corporation has authority to issue is Fifty-two Million (52,000,000), consisting of Fifty Million (50,000,000) shares of Common Stock and Two Million (2,000,000) shares of Preferred Stock.”

SECOND: The amendment to the Certificate of Incorporation of the Corporation set forth in this Certificate of Amendment has been duly adopted in accordance with the provisions of Section 242 of the GCL, (a) the Board of Directors of the Corporation having duly adopted a resolution setting forth such amendment and declaring its advisability and submitting it to the stockholders of the Corporation for their approval, and (b) the stockholders of the Corporation having duly adopted such amendment by a vote of the holders of a majority of the outstanding stock entitled to vote thereon at the Corporation's May 3, 2005 annual meeting of stockholders.

IN WITNESS WHEREOF, Building Materials Holding Corporation has caused this Certificate to be executed and acknowledged by its duly authorized officer this 24th day of February, 2006.

BUILDING MATERIALS HOLDING CORPORATION
By:	/s/ Paul S. Street
	Paul S. Street
	Senior Vice President and Secretary

EX-10.20.1

Exhibit 10.20.1

NON-QUALIFIED OPTION AGREEMENT

Pursuant to the 1992 Non-Qualified Stock Option Plan (the “Plan”) of BMC WEST CORPORATION (the “Corporation”), effective January 1, 1992, the Corporation hereby grants to MICHAEL MAHRE (“Participant”) an option to purchase all or any part of an aggregate of 2,500 shares under the Common Stock of the Corporation (the “Option Shares”) under and subject to the terms and conditions of this Agreement and the Plan which is incorporated herein by reference and made a part hereof for all purposes.

Participant and the Corporation agree as follows:

1. Definitions.

The definitions and terms used in the Plan are incorporated herein by reference and shall have the same meaning and be given the same effect.

2. Term of Option

2.1 Option Period. The option rights granted by this Option Agreement for each Option Share shall expire and be of no value and the right of purchase evidenced hereby shall cease upon the tenth (10th) anniversary of the date the Option Share shall vest under Section 3, unless terminated earlier pursuant to Section 2.2.

2.2 Expiration of Option Period Upon Termination of Employment. The option rights granted by this Option Agreement shall expire ninety (90) days after Participant’s termination of employment with the Corporation for any reason, and no shares may thereafter be issued pursuant to this Option Agreement, except as set forth below:

(a) If Participant’s employment is terminated by reason of Participant’s death, Participant’s personal representative may exercise any option rights granted pursuant to this Option Agreement, to the extent vested, at any time within one (1) year after Participant’s death, but in any event not after the expiration of the Option Period prescribed in Section 2.1.

(b) If Participant’s employment is terminated by reason of Participant’s disability or retirement, Participant may exercise any option rights granted pursuant to this Option Agreement, to the extent vested, at any time within one (1) year after such termination, but in any event not after the expiration of the Option Period prescribed in Section 2.1.

3. Vesting of Option.

The option rights granted by this Option shall be exercisable only as to vested Option Shares. Unless vested in accordance with the terms of Section 3.1 or terminated in accordance with the terms of Section 3.2, all of the Option Shares shall vest on January 1, 2003.

3.1 Vesting of Options. The vesting of the Option Shares shall occur at a rate of twenty percent (20%) of the Option Shares under this grant on December 31 each year commencing on December 31, 1999.

3.2 Termination of Vesting Upon Termination of Employment. If a Participant ceases to be employed by the Corporation, vesting shall terminate as of January 1 of the year in which employment is terminated. There shall be no fractional or prorated vesting.

4. Non-transferable.

The option rights granted by this Option are not transferable or assignable otherwise than by will or by the laws of descent and distribution, and during the lifetime of Participant are exercisable only by Participant.

5. Exercise of Option.

Before this Option expires, Participant may exercise his option rights hereunder as to all or any part of his vested Option Shares by delivering to the Corporation at its corporate headquarters, or such other location as the Corporation may designate from time to time, written notice of the intention to purchase Option Shares together with the sum of Ten dollars and 75/100 Dollars ($10.75) per Option Share to be purchased (the “Option Price”). (The options were granted effective April 15, 1999.)

6. Issuance of Option Shares.

Upon receipt of the items and information specified in Section 5, the Corporation shall record in its stock register the name of Participant and issue shares of Common Stock accordingly; provided, however, the Corporation shall have no obligation to issue fractional shares; and provided further that stock certificates issued shall bear any restrictive legend required by any agreement among shareholders or pertinent law.

7. Conditions Applying to the Option and Option Shares.

7.1 If the Corporation subsequently authorized or issues other classes of Common Stock during the term hereof, the Option Shares not yet purchased by Participant shall be the kind and amount of shares that Employee would have received had this Option been exercised in the same manner and to the same extent immediately prior to such event.

7.2 The Option Shares shall be subject to adjustment from time to time as follows:

a. If, at any time before this Option is fully exercised or expires, the total number of shares of the Corporation’s Common Stock outstanding is increased by a stock dividend or subdivision or split-up of such outstanding shares, then, concurrently with the effectiveness of such subdivision or split-up, the number of Option Shares not yet purchased by Participant (calculated to the nearest whole share) shall be proportionately increased, and the purchase price per share shall be proportionately decreased.

b. If, at any time before this Option is fully exercised or expires, the total number of shares of the Corporation’s Common Stock outstanding is decreased by a combination or reverse stock split of such outstanding shares, then concurrently with the effectiveness of such combination, the number of Option Shares not yet purchased by Participant (calculated to the nearest whole share) shall be proportionately decreased, and the purchase price per share shall be proportionately increased.

7.3 In the event of any capital reorganization or any reclassification of the Corporation’s common stock (other than a change in par value or as a result of a stock dividend or subdivision, split-up or combination of Shares), or the consolidation or merger of Corporation with or into another corporation, or the sale or other disposition of all or substantially all the properties and assets of the Corporation, then after such transaction Participant shall be entitled to receive upon the exercise of the option rights granted hereunder, in lieu of each share of Common Stock, the kind and amount of Shares of stock, other securities, money or property receivable upon the consummation of such transaction by the holder of one share of Common Stock of the Corporation issuable under this plan, as if the option had been exercised immediately prior to such transaction.

8. General

Neither the grant of this Option nor the issuance of any shares pursuant to this Option shall be construed as modifying, affecting or evidencing any intention or understanding with respect to the terms of employment of Participant with the Corporation.

IN WITNESS WHEREOF, the Corporation has caused this Option to be executed, effective this 23rd day of April, 1999.

BUILDING MATERIALS

HOLDING CORPORATION

By__________________________

Robert E. Mellor, President

& Chief Executive Officer

PARTICIPANT

_____________________________

Michael Mahre

EX-10.21.1

Exhibit 10.21.1

FIRST AMENDMENT TO THE

AMENDED AND RESTATED

NON-STATUTORY STOCK OPTION AGREEMENT

UNDER THE

1993 EMPLOYEE STOCK OPTION PLAN

OF

BUILDING MATERIALS HOLDING CORPORATION

This Non-Statutory Stock Option Agreement (the "Agreement") is made and entered into as of the Date of Grant indicated below by and between Building Materials Holding Corporation, a Delaware corporation (the "Company"), and the person named below as Optionee.

RECITALS

WHEREAS, Optionee is an employee, officer or consultant of the Company and/or one or more of its parents or subsidiaries; and

WHEREAS, pursuant to the Company's 1993 Employee Stock Option Plan, as amended (the "Plan"), the committee of the Board of Directors of the Company administering the Plan (the "Committee") or the Board of Directors (the “Board”) has approved the grant to Optionee of an option to purchase shares of the common stock of the Company (the "Common Stock"), on the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and the covenants set forth herein, the parties hereto hereby agree as follows:

1. Grant of Option; Certain Terms and Conditions. The Company hereby grants to Optionee, and Optionee hereby accepts, as of the Date of Grant, an option to purchase the number of shares of Common Stock indicated below (the "Option Shares") at the Exercise Price per share indicated below, which option shall expire at 5:00 o'clock p.m., Boise, Idaho time on the Expiration Date indicated below and shall be subject to all of the terms and conditions set forth in this Agreement (the "Option"). The vesting of the Option Shares shall occur at a rate of twenty percent (20%) of the Option Shares under this grant on December 31 each year commencing on December 31, 2000.

Optionee:

Date of Grant: January 20, 2000

Number of shares purchasable: 156,000

Exercise Price per share: $10.00

Expiration Date: January 20, 2010

Annual Vesting Rate: 20%

This Option is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code.

2. Acceleration and Termination of Option.

(a) Termination of Employment or Association.

(i) Death or Permanent Disability. If Optionee shall cease to be an employee of the Company and/or any of its parents or subsidiaries ("Employment") or cease to be a consultant of the Company and/or any of its parents or subsidiaries ("Association") (in either case, a "Termination") by reason of the death or permanent disability of Optionee, then (A) the portion of this Option that has not vested on or prior to the date of such Termination of Employment or Association shall terminate on such date and (B) the remaining vested portion of this Option shall terminate upon the earlier of the Expiration Date or the date which is twelve (12) months after the date of such Termination of Employment or Association. Optionee shall not be deemed to have a permanent disability until proof of the existence thereof shall have been furnished to the Committee or Board in such form and manner, and at such times, as the Committee or Board may require. Any determination by the Committee or Board that Optionee does or does not have a permanent disability shall be final and binding upon the Company and the Optionee.

(ii) Retirement After Age 55. If Optionee's Employment is Terminated by reason of Optionee's retirement in accordance with the Company's then-current retirement policy (or the then-current retirement policy of any of the Company's parents or subsidiaries, if applicable) after age 55 ("Retirement"), then (A) the portion of the Option that has not vested on or prior to the date of such Retirement shall terminate on such date and (B) the remaining vested portion of the Option shall terminate upon the earlier of the Expiration Date or the date which is three (3) years after the date of such Retirement. Employees retiring at age 60 or above with at least 15 years of service will vest 50 percent of their unvested options. An additional five percent will be added for each year of service beyond 15 years, with full vesting after 25 years of service, provided retirement is on or after age 60. Services includes the Company and predecessor company service.

(iii) Termination for Cause. If Optionee's Employment or Association is Terminated for Cause (as defined in the Plan), then this Option shall terminate upon the date of such Termination of Employment or Association and shall cease to be exercisable.

(iv) Other Termination. If Optionee's Employment or Association is Terminated for no reason, or for any reason other than Retirement, death or permanent disability, or for Cause, then (A) the portion of this Option that has not vested on or prior to the date of such Termination of Employment or Association shall terminate on such date and (B) the remaining vested portion of this Option shall terminate upon the earlier of the Expiration Date or the date which is three (3) months after the date of such Termination of Employment or Association.

(b) Events Causing Acceleration of Option. The Committee or Board, in its sole discretion, may accelerate the exercisability of this Option at any time and for any reason. In the event of a Change in Control of the Company (as defined in the Plan), this Option shall become immediately exercisable in full.

(c) Other Events Causing Acceleration and Termination of Option. In the event of (a) a dissolution or liquidation of the Company, or (b) a merger or consolidation in which the Company is not the surviving corporation, the Company shall give to the Optionee, at the time of adoption of the plan for liquidation, dissolution, merger or consolidation, either: a reasonable time thereafter within which to exercise this Option, prior to the effectiveness of such liquidation, dissolution, merger or consolidation, at the end of which time this Option shall terminate; or the right to exercise this Option as to an equivalent number of shares of stock of the corporation succeeding the Company or acquiring its business by reason of such liquidation, dissolution, merger or consolidation.

3. Adjustments. In the event that the outstanding securities of the class then subject to this Option are increased, decreased or exchanged for or converted into cash, property and/or a different number of kind of securities, or cash, property and/or securities are distributed in respect of such outstanding securities, in either case as a result of a reorganization, merger, consolidation, recapitalization, reclassification, dividend (other than a regular, quarterly cash dividend) or other distribution, stock split, reverse stock split or the like, or in the event that substantially all of the property and assets of the Company are sold, then, unless such event shall cause this Option to terminate pursuant to Section 2(c) hereof, the Committee or Board shall make appropriate and proportionate adjustments in the number and type of shares or other securities or cash or other property that may thereafter be acquired upon the exercise of this Option; provided, however, that any such adjustments in this Option shall be made without changing the aggregate Exercise Price of the then unexercised portion of this Option. In the event any fractional shares of stock would result on account of any such adjustment, then the number of shares shall be rounded upward to the nearest whole share.

4. Manner of Exercise. This Option shall be exercisable during Optionee's lifetime only by Optionee, and after Optionee's death only by the person or entity entitled to do so under Optionee's last will and testament or applicable to intestate law. This Option may be exercised with respect to all or any part of the Option Shares then subject to such exercise as follows:

(a) By giving the Company written notice of such exercise specifying the number of the Option Shares as to which the Option is so exercised and accompanied by an amount equal to the aggregate Exercise Price of such shares, in the form of any one or combination of (i) cash, a certified check or postal or express money order payable to the order of the Company in lawful money of the United States, (ii) shares of Common Stock previously acquired by Optionee, in satisfaction of all or a portion of such aggregate Exercise Price; and any Common Stock so delivered shall be valued at its Fair Market Value on the date of exercise, or (iii) delivery of a properly executed exercise notice together with such other documentation as the Committee or Board and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale proceeds required to pay the aggregate Exercise Price.

(b) If required by the Company, by giving satisfactory assurance in writing, signed by Optionee or his or her legal representative, that such shares are not being purchased with a view to the distribution thereof; provided, however, that such assurance shall be deemed inapplicable to (1) any sale of such shares by the Optionee subject to a registration statement covering such sale, which has heretofore been (or may hereafter be) filed and become effective under the Securities Act of 1933, as amended (the "1933 Act"), and with respect to which the registration statement is current and no stop order suspending the effectiveness thereof has been issued, and (2) any other sale of such shares with respect to which, in the opinion of counsel for the Company, such assurance is not required to be given in order to comply with the provisions of the 1933 Act.

As soon as practicable after receipt of such written notice from Optionee, the Company shall, without transfer or issue tax or other incidental expenses to Optionee, deliver to Optionee at the office of the Company, or such other place as may be mutually acceptable to the Company and Optionee, a certificate or certificates for such shares, which certificate or certificates may bear such legend or legends with respect to restrictions on transfer as counsel for the Company deems to be required by applicable provisions of law and this Agreement; provided, however, that nothing herein shall be deemed to impose upon the Company any obligation to deliver any shares of Common Stock to the Optionee if, in the opinion of counsel, for the Company, doing so would violate any provision of: (i) the 1933 Act; (ii) the Securities Exchange Act of 1934, as amended; (iii) any applicable listing requirements of any national securities exchange; (iv) any state securities regulation or "Blue Sky" laws; or (v) requirements under any other law or regulation applicable to the issuance or transfer of such shares. In no event shall the Company be required to take any affirmative action to comply with any of such laws, regulations or requirements, nor shall the Company be liable for any failure to deliver shares of Common Stock because such shares have not been registered or because a registration statement with respect thereto is not current or because such delivery would otherwise be in violation of any applicable law or regulation.

5. Payment of Withholding Taxes. By accepting this Option, the Optionee, both personally and on behalf of any person to whom Optionee, both personally and on behalf of any person to whom Optionee's rights under this Option shall pass by will or the laws of descent and distribution, agrees that, if the Company so requires, whenever Option Shares are to be issued by reason of the exercise of this Option, the Optionee or such other person who is to receive such stock will remit to the Company, prior to the delivery of any certificate or certificates for such shares, all or any part of an amount determined by the Company in its discretion to be sufficient to satisfy federal, state and local withholding tax requirements which the Company, or its counsel, determine may be payable with respect to such exercise. Such withholding may be paid in cash, by check payable to the Company, or by delivery of shares of the Company's Common Stock, valued at the Fair Market Value of such Common Stock on the date of delivery or by surrender of a portion of this Option.

6. Notices. All notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed given if delivered personally or five (5) days after mailing by certified or registered mail, postage prepaid, return receipt requested, to the Company at One Market Plaza, Steuart Tower, Suite 2650, San Francisco, CA 94105, Attention: Ellis C. Goebel, or to Optionee at the address set forth beneath his or her signature on the signature page hereto, or at such other addresses as they may designate by written notice in the aforesaid manner.

7. Restrictions on Transfer. Under the Plan, options are subject to limited transferability by the original option holder subject to the approval of the compensation committee or Board of Directors.

8. The Plan. This Option is granted pursuant to the Plan, as in effect on the Date of Grant, and is subject to all the terms and conditions of the Plan, as the same may be amended from time to time; provided, however, that no such amendment shall deprive Optionee, without his or her consent, of this Option or of any of Optionee's rights under this Agreement. The interpretation and construction by the Committee or Board of the Plan, this Agreement, this Option and such rules and regulations as may be adopted by the Committee or Board for the purpose of administering the Plan shall be final and binding upon Optionee. Until this Option shall expire, terminate or be exercised in full, the Company shall, upon written request therefore, send a copy of the Plan, in its then-current form, to Optionee or any other person or entity then entitled to exercise this Option. Each capitalized term used herein but not defined herein shall have the meaning ascribed thereto in the Plan.

9. Stockholder Rights. No person or entity shall be entitled to vote, receive dividends or be deemed for any purpose the holder of any Option Shares until this Option shall have been duly exercised to purchase such Option Shares in accordance with the provisions of this Agreement.

10. Employment or Association Rights; Other Plans. No provision of this Agreement or of this Option granted hereunder shall (a) confer upon Optionee any right to continue in the employ of or to associate with the Company or any of its parents or subsidiaries, (b) affect the right of the Company and each of its parents and subsidiaries to terminate the Employment or Association of Optionee, with or without cause, or (c) confer upon Optionee any right to participate in any employee welfare or benefit plan or other program of the Company or any of its parents or subsidiaries other than the Plan. Nothing in this Agreement is intended to be a substitute for, or shall preclude or limit the establishment or continuation of, any other plan, practice or arrangement for the payment of compensation or benefits to Optionees generally, which the Company or its parents or subsidiaries now has or may hereafter lawfully put into effect, including, without limitation, any retirement, pension, insurance, stock purchase, incentive compensation or bonus plan. Optionee hereby acknowledges and agrees that the Company and each of its parents and subsidiaries may terminate the Employment or Association of Optionee at any time and for any reason, or for no reason, unless Optionee and the Company or such parent or subsidiary are parties to a written employment or other agreement that expressly provides otherwise.

11. Binding Effect of Agreement. This Agreement shall be binding upon and inure to the benefit of any successors and assigns of the Company or its parents or subsidiaries, and upon Optionee and Optionee's heirs, executors, administrators, personal representatives, permitted assignees and successors in interest.

12. Governing Law. This Agreement and the Option granted hereunder shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, excluding the choice of law provisions thereof.

IN WITNESS WHEREOF, the Company and Optionee have duly executed this Agreement as of the Date of Grant.

BUILDING MATERIALS HOLDING CORPORATION

Robert E. Mellor

President & Chief Executive Officer

OPTIONEE

By: ______________________________

EX-10.22

Exhibit 10.22

BUILDING MATERIALS HOLDING CORPORATION

SECOND AMENDED AND RESTATED

NON-EMPLOYEE DIRECTOR STOCK PLAN

(Approved by the Board of Directors on February 18, 2000)

1. Purpose.

The purpose of the Second Amended and Restated Non-Employee Director Stock Plan (the “Amended Director Plan”) of Building Materials Holding Corporation (the “Company”) is to promote the interests of the Company by attracting and retaining highly qualified independent directors by providing such individuals with an investment interest in the Company’s future success.

2. Definitions.

The following definitions shall apply to this Amended Director Plan:

(a)“Annual Issue Date” shall mean, for each fiscal year, the date on which the stockholders of the Company have their regular annual meeting.

(b)“Board” or “Board of Directors” shall mean the Board of Directors of the Company.

(c)“Eligible Director” shall mean any person who is a member of the Board and who is not a full or part-time employee of the Company or of any parent or subsidiary corporation (as defined in Section 424 of the Internal Revenue Code of 1986, as amended) of the Company, and who has not been an employee of the Company or of any parent or subsidiary of the Company within one (1) year prior to participation in this Amended Director Plan.

(d)“Initial Issue Date” shall mean the later of (i) the date on which an Eligible Director is first elected as a member of the Board by action of the stockholders of the Company, or (ii) in the case of a director who has been an employee of the Company or a parent or subsidiary of the Company, the date on which such director becomes an Eligible Director.

(e)“Shares” shall mean shares of the Common Stock of the Company.

3. Administration.

(a)General.  This Amended Director Plan shall be administered by the Board in accordance with the express provisions of this Amended Director Plan.

(b)Powers of Board.  The Board shall have full and complete authority to adopt such rules and regulations and to make all such other determinations not inconsistent with this Amended Director Plan as may be necessary for the administration of this Amended Director Plan.  Notwithstanding the foregoing, the Company shall have no authority or discretion as to the persons eligible to receive Shares under this Amended Director Plan, which matters are specifically governed by the provisions of this Amended Director Plan.

4. Restrictions.

All Shares proposed to be issued under this Amended Director Plan shall be subject to the requirement that, if at any time the Company shall determine, in its discretion, that the listing, registration or qualification of such Shares issuable under this Amended Director Plan upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the issuing of such Shares, such Shares may not be issued unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company.

5. Shares Subject to Amended Director Plan.

(a)Aggregate Number.  Subject to adjustment in accordance with Section 7(b), a total of 187,500 Shares are reserved for issuance under this Amended Director Plan, of which 13,500 shares are outstanding as of 12/31/2005.  Shares issued under this Amended Director Plan may be unissued Shares or reacquired Shares.

(b)Rights as Stockholder.  No Eligible Director and no beneficiary or other person claiming under or through such Eligible Director shall have any rights as a stockholder with respect to Shares until the issuance (as evidenced by the appropriate entry on the books of the Company or a duly authorized transfer agent) of a stock certificate evidencing the Shares.  Subject to Section 7(b), no adjustment shall be made for dividends or other events for which the record date if prior to the date the certificate is issued.

(c)Rights with Respect to Shares.  No Eligible Director and no beneficiary or other person claiming under or through such Eligible Director shall have any right, title or interest in or to any Shares until such Shares are duly issued pursuant to the terms of this Amended Director Plan.

6. Nondiscretionary Awards.

Shares will be automatically issued to the Eligible Directors as follows:

(a)Initial Issuances.  On the Initial Issue Date, the Company shall issue to each Eligible Director (except for the Eligible Directors who are members of the Board as of the effective date of this Amended Director Plan) the number of Shares equal to Twenty-Five Thousand Dollars ($25,000) divided by the closing price on the relevant Initial Issue Date of one Share on the Nasdaq National Market, rounded up to the nearest 100 shares, for a purchase price of $0.01 per Share.

(b)Regular Annual Issuances.  On each Annual Issue Date, immediately after the annual election of directors, the Company shall issue to each Eligible Director then in office the number of Shares equal to Twenty-Five Thousand Dollars ($25,000) divided by the closing price on the relevant Annual Issue Date of one Share on the Nasdaq National Market, rounded up to the nearest 100 shares, for a purchase price of $0.01 per Share.

(c)Adjustment.  The number of Shares issued in accordance with this Section 6 shall be subject to adjustment in accordance with Section 7(b).

7. Terms of Awards.

(a)Termination of Membership on the Board.  If an Eligible Director’s membership on the Board terminates for any reason, no further Shares shall be issued under this Amended Director Plan to such Eligible Director on or after such date of termination.

(b)Capitalization Changes.  If any change is made in the Shares subject to this Amended Director Plan through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure, or any other capital reorganization, the Board shall make appropriate adjustments as to the maximum number of Share subject to this Amended Director Plan.

(c)Withholding Taxes.  Whenever Shares are to be issued under this Amended Director Plan, the Company shall have the right to require payment to the Company by the person to receive such Shares of an amount sufficient to satisfy federal, state and local withholding ax requirements prior to delivery of any certificate or certificates representing such Shares.  Payment of withholding taxes may be made by delivery of Company stock to the Company.  

8. Legal Requirements.

Shares shall not be offered or issued under this Amended Director Plan unless the offer, issuance and delivery of such Shares shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, and the requirements of any stock exchange upon which the Shares may then be listed.  As a condition precedent to the issuance of Shares pursuant to an award under this Amended Director Plan, the Company may require an Eligible Director to take any reasonable action to comply with such requirements.  Any certificates representing Shares shall bear appropriate legends.

9. Amendment and Interpretation of Amended Director Plan.

(a)Stockholder Approval Required.  The Board may amend this Amended Director Plan at any time.  No amendment adopted without stockholder approval may (i) increase the number of Shares which may be issued hereunder, (ii) modify the requirements as to eligibility for participation, or (iii) materially increase the benefits accruing under this Amended Director Plan.

(b)Prohibited Amendments.  No amendment shall change the nondiscretionary manner in which awards are made under Section 6.

(c)Interpretation.  Questions of interpretation of any of the provisions of this Amended Director Plan shall be resolved by legal counsel for the Company selected by the Chief Executive Officer of the Company.

10. Termination or Suspension of Amended Director Plan.

The Board at any time may suspend or terminate this Amended Director Plan.  This Amended Director Plan, unless sooner terminated, shall terminate on February 19, 2008.  No Shares may be issued under this Amended Director Plan while this Amended Director Plan is suspended or after it is terminated.

11. Effective Date; Stockholder Approval.

This Amended Director Plan has been approved by the Board and shall become effective on February 18, 2000, subject to its approval by the stockholders of the company.  If the stockholders fail to approve this Amended Director Plan, within twelve (12) months from the effective date hereof, the Amended and Restated Non-Employee Director Stock Option Plan shall continue in effect in the form existing prior to this amendment.

12. Director Status.

Nothing in this Amended Director Plan or in any instrument executed pursuant hereto shall confer upon any Eligible Director any right to continue as a member of the Board of the Company or any parent or subsidiary thereof.

13. Other Plans.

Nothing in this Amended Director Plan is intended to be a substitute for, or shall preclude or limit the establishment or continuation of, any other plan, practice or arrangement for the payment of compensation or benefits to directors generally, which the Company now has or may hereafter lawfully put into effect, including, without limitation, any retirement, pension, insurance, stock purchase, incentive compensation or bonus plan.

14. Applicable Law.

This Amended Director Plan shall be governed by, interpreted under, and construed and enforced in accordance with the laws of the State of Delaware, excluding choice of law provisions thereof.

15. Successors and Assigns.

This Amended Director Plan shall be binding upon the successors and assigns of the Company and upon each Eligible Director and such Eligible Director’s heirs, executors, administrators, personal representatives, permitted assignees and successors in interest.

Approved by the Board on February 18, 2000.

EX-10.23.1

Exhibit 10.23.1

NON-STATUTORY STOCK OPTION AGREEMENT

UNDER THE

2000 STOCK INCENTIVE PLAN

OF

BUILDING MATERIALS HOLDING CORPORATION

This Non-Statutory Stock Option Agreement (the "Agreement") is made and entered into as of the Date of Grant indicated in the attached Notice of Grant of Stock Options (the "Grant Notice") by and between Building Materials Holding Corporation, a Delaware corporation (the "Company"), and the person named as Optionee.

RECITALS

WHEREAS, Optionee is an employee, officer or consultant of the Company and/or one or more of its parents or subsidiaries; and

WHEREAS, pursuant to the Company's 2000 Stock Incentive Plan (the "Plan"), the committee of the Board of Directors of the Company administering the Plan (the "Committee") or the Board of Directors (the “Board”) has approved the grant to Optionee of an option to purchase shares of the common stock of the Company (the "Common Stock"), on the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and the covenants set forth herein, the parties hereto hereby agree as follows:

1. Grant of Option; Certain Terms and Conditions. The Company hereby grants to Optionee, and Optionee hereby accepts, as of the Date of Grant, an option to purchase the number of shares of Common Stock indicated in the Grant Notice (the "Option Shares") at the Exercise Price per share indicated in the Grant Notice, which option shall expire at 5:00 o'clock p.m., California time on the Expiration Date indicated in the Grant Notice and shall be subject to all of the terms and conditions set forth in this Agreement (the "Option"). The vesting of the Option Shares shall occur as set forth in the Grant Notice. This Option is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code (the "Code").

2. Acceleration and Termination of Option.

(a) Termination of Employment or Association.

(i) Death or Permanent Disability. If Optionee shall cease to be an employee of the Company and/or any of its parents or subsidiaries ("Employment") or cease to be a consultant of the Company and/or any of its parents or subsidiaries ("Association") (in either case, a "Termination") by reason of the death or permanent disability of Optionee, then (A) the portion of this Option that has not vested on or prior to the date of such Termination of Employment or Association shall terminate on such date and (B) the remaining vested portion of this Option shall terminate upon the earlier of the Expiration Date or the date which is twelve (12) months after the date of such Termination of Employment or Association. Optionee shall not be deemed to have a permanent disability until proof of the existence thereof shall have been furnished to the Committee or Board in such form and manner, and at such times, as the Committee or Board may require. Any determination by the Committee or Board that Optionee does or does not have a permanent disability shall be final and binding upon the Company and the Optionee.

(ii) Retirement After Age 65. If Optionee's Employment is Terminated by reason of Optionee's retirement in accordance with the Company's then-current retirement policy (or the then-current retirement policy of any of the Company's parents or subsidiaries, if applicable) after age 65 ("Retirement"), then (A) the portion of the Option that has not vested on or prior to the date of such Retirement shall terminate on such date and (B) the remaining vested portion of the Option shall terminate upon the earlier of the Expiration Date or the date which is three (3) years after the date of such Retirement. Employees retiring at age 60 or above with at least 15 years of service will vest 50 percent of their unvested options. An additional five percent will be added for each year of service beyond 15 years, with full vesting after 25 years of service, provided retirement is on or after age 60. Services includes the Company and predecessor company service.

(iii) Termination for Cause. If Optionee's Employment or Association is Terminated for Cause (as defined in the Plan), then this Option shall terminate upon the date of such Termination of Employment or Association and shall cease to be exercisable.

(iv) Other Termination. If Optionee's Employment or Association is Terminated for no reason, or for any reason other than Retirement, death or permanent disability, or for Cause, then (A) the portion of this Option that has not vested on or prior to the date of such Termination of Employment or Association shall terminate on such date and (B) the remaining vested portion of this Option shall terminate upon the earlier of the Expiration Date or the date which is three (3) months after the date of such Termination of Employment or Association.

(b) Events Causing Acceleration of Option. The Committee or Board, in its sole discretion, may accelerate the exercisability of this Option at any time and for any reason. In the event of a Change in Control of the Company, this Option shall become immediately exercisable in full. A Change in Control shall be deemed to have occurred if: (i) there shall be consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the transaction or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (ii) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company; or (iii) any 'person' (as defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") shall become the 'beneficial owner' (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly or fifty percent (50%) or more of the Company's outstanding Common Stock or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors shall cease for any reason to constitute a majority thereof, unless the election or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. Notwithstanding the above, a Change of Control shall not be deemed to have occurred in connection with a transaction resulting in a merger, consolidation, sale of assets or sale of securities if such transaction has been initiated (in contrast to an action in response to or resulting from receipt of an offer or its equivalent from a third party) at the direction of the Board of Directors acting with the approval of a majority of the independent directors.

(c) Other Events Causing Acceleration and Termination of Option. In the event of (a) a dissolution or liquidation of the Company, or (b) a merger or consolidation in which the Company is not the surviving corporation, the Company shall give to the Optionee, at the time of adoption of the plan for liquidation, dissolution, merger or consolidation, either: a reasonable time thereafter within which to exercise this Option, prior to the effectiveness of such liquidation, dissolution, merger or consolidation, at the end of which time this Option shall terminate; or the right to exercise this Option as to an equivalent number of shares of stock of the corporation succeeding the Company or acquiring its business by reason of such liquidation, dissolution, merger or consolidation.

3. Adjustments. In the event that the outstanding securities of the class then subject to this Option are increased, decreased or exchanged for or converted into cash, property and/or a different number of kind of securities, or cash, property and/or securities are distributed in respect of such outstanding securities, in either case as a result of a reorganization, merger, consolidation, recapitalization, reclassification, dividend (other than a regular, quarterly cash dividend) or other distribution, stock split, reverse stock split or the like, or in the event that substantially all of the property and assets of the Company are sold, then, unless such event shall cause this Option to terminate pursuant to Section 2(c) hereof, the Committee or Board shall make appropriate and proportionate adjustments in the number and type of shares or other securities or cash or other property that may thereafter be acquired upon the exercise of this Option; provided, however, that any such adjustments in this Option shall be made without changing the aggregate Exercise Price of the then unexercised portion of this Option. In the event any fractional shares of stock would result on account of any such adjustment, then the number of shares shall be rounded upward to the nearest whole share.

4. Manner of Exercise. This Option shall be exercisable during Optionee's lifetime only by Optionee, and after Optionee's death only by the person or entity entitled to do so under Optionee's last will and testament or applicable to intestate law. This Option may be exercised with respect to all or any part of the Option Shares then subject to such exercise as follows:

(a) By giving the Company written notice of such exercise specifying the number of the Option Shares as to which the Option is so exercised and accompanied by an amount equal to the aggregate Exercise Price of such shares, in the form of any one or combination of (i) cash, a certified check or postal or express money order payable to the order of the Company in lawful money of the United States, (ii) shares of Common Stock previously acquired by Optionee, in satisfaction of all or a portion of such aggregate Exercise Price; and any Common Stock so delivered shall be valued at its Fair Market Value (as defined in the Plan) on the date of exercise, or (iii) delivery of a properly executed exercise notice together with such other documentation as the Committee or Board and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale proceeds required to pay the aggregate Exercise Price.

(b) If required by the Company, by giving satisfactory assurance in writing, signed by Optionee or his or her legal representative, that such shares are not being purchased with a view to the distribution thereof; provided, however, that such assurance shall be deemed inapplicable to (1) any sale of such shares by the Optionee subject to a registration statement covering such sale, which has heretofore been (or may hereafter be) filed and become effective under the Securities Act of 1933, as amended (the "Securities Act"), and with respect to which the registration statement is current and no stop order suspending the effectiveness thereof has been issued, and (2) any other sale of such shares with respect to which, in the opinion of counsel for the Company, such assurance is not required to be given in order to comply with the provisions of the Securities Act.

As soon as practicable after receipt of such written notice from Optionee, the Company shall, without transfer or issue tax or other incidental expenses to Optionee, deliver to Optionee at the office of the Company, or such other place as may be mutually acceptable to the Company and Optionee, a certificate or certificates for such shares, which certificate or certificates may bear such legend or legends with respect to restrictions on transfer as counsel for the Company deems to be required by applicable provisions of law and this Agreement; provided, however, that nothing herein shall be deemed to impose upon the Company any obligation to deliver any shares of Common Stock to the Optionee if, in the opinion of counsel, for the Company, doing so would violate any provision of: (i) the Securities Act; (ii) the Exchange Act; (iii) any applicable listing requirements of any national securities exchange; (iv) any state securities regulation or "Blue Sky" laws; or (v) requirements under any other law or regulation applicable to the issuance or transfer of such shares. In no event shall the Company be required to take any affirmative action to comply with any of such laws, regulations or requirements, nor shall the Company be liable for any failure to deliver shares of Common Stock because such shares have not been registered or because a registration statement with respect thereto is not current or because such delivery would otherwise be in violation of any applicable law or regulation.

5. Payment of Withholding Taxes. By accepting this Option, the Optionee, both personally and on behalf of any person to whom Optionee, both personally and on behalf of any person to whom Optionee's rights under this Option shall pass by will or the laws of descent and distribution, agrees that, if the Company so requires, whenever Option Shares are to be issued by reason of the exercise of this Option, the Optionee or such other person who is to receive such stock will remit to the Company, prior to the delivery of any certificate or certificates for such shares, all or any part of an amount determined by the Company in its discretion to be sufficient to satisfy federal, state and local withholding tax requirements which the Company, or its counsel, determine may be payable with respect to such exercise. Such withholding may be paid in cash, by check payable to the Company, or by delivery of shares of the Company's Common Stock, valued at the Fair Market Value of such Common Stock on the date of delivery or by surrender of a portion of this Option.

6. Notices. All notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed given if delivered personally or five (5) days after mailing by certified or registered mail, postage prepaid, return receipt requested, to the Company at Four Embarcadero Center, Suite 3250, San Francisco, CA 94111, Attention: Ellis C. Goebel, or to Optionee at the address set forth in the Grant Notice, or at such other addresses as they may designate by written notice in the aforesaid manner.

7. Restrictions on Transfer. Under the Plan, options are subject to limited transferability by the original option holder subject to the approval of the Committee or Board of Directors.

8. The Plan. This Option is granted pursuant to the Plan, as in effect on the Date of Grant, and is subject to all the terms and conditions of the Plan, as the same may be amended from time to time; provided, however, that no such amendment shall deprive Optionee, without his or her consent, of this Option or of any of Optionee's rights under this Agreement. The interpretation and construction by the Committee or Board of the Plan, this Agreement, this Option and such rules and regulations as may be adopted by the Committee or Board for the purpose of administering the Plan shall be final and binding upon Optionee. Until this Option shall expire, terminate or be exercised in full, the Company shall, upon written request therefor, send a copy of the Plan, in its then-current form, to Optionee or any other person or entity then entitled to exercise this Option. Each capitalized term used herein but not defined herein shall have the meaning ascribed thereto in the Plan.

9. Stockholder Rights. No person or entity shall be entitled to vote, receive dividends or be deemed for any purpose the holder of any Option Shares until this Option shall have been duly exercised to purchase such Option Shares in accordance with the provisions of this Agreement.

10. Employment or Association Rights; Other Plans. No provision of this Agreement or of this Option granted hereunder shall (a) confer upon Optionee any right to continue in the employ of or to associate with the Company or any of its parents or subsidiaries, (b) affect the right of the Company and each of its parents and subsidiaries to terminate the Employment or Association of Optionee, with or without cause, or (c) confer upon Optionee any right to participate in any employee welfare or benefit plan or other program of the Company or any of its parents or subsidiaries other than the Plan. Nothing in this Agreement is intended to be a substitute for, or shall preclude or limit the establishment or continuation of, any other plan, practice or arrangement for the payment of compensation or benefits to Optionees generally, which the Company or its parents or subsidiaries now has or may hereafter lawfully put into effect, including, without limitation, any retirement, pension, insurance, stock purchase, incentive compensation or bonus plan. Optionee hereby acknowledges and agrees that the Company and each of its parents and subsidiaries may terminate the Employment or Association of Optionee at any time and for any reason, or for no reason, unless Optionee and the Company or such parent or subsidiary are parties to a written employment or other agreement that expressly provides otherwise.

11. Binding Effect of Agreement. This Agreement shall be binding upon and inure to the benefit of any successors and assigns of the Company or its parents or subsidiaries, and upon Optionee and Optionee's heirs, executors, administrators, personal representatives, permitted assignees and successors in interest.

12. Governing Law. This Agreement and the Option granted hereunder shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, excluding the choice of law provisions thereof.

EX-10.25.1

Exhibit 10.25.1

BUILDING MATERIALS HOLDING CORPORATION

STOCK OPTION AGREEMENT

Pursuant to the

2004 INCENTIVE AND PERFORMANCE PLAN

BUILDING MATERIALS HOLDING CORPORATION (the “Company”) hereby grants to the optionee attached an option to purchase its Common Stock (the “Option”). The terms and conditions of the Option are set forth in this Stock Option Agreement and in the Company’s 2004 Incentive and Performance Plan (the “Plan”). Unless otherwise defined in this Agreement, capitalized terms used herein have the meanings designated in the Plan.

TERMS AND CONDITIONS

1. VESTING AND EXERCISE.

(a) The Option shall not be exercisable as of the Date of Grant. After the Date of Grant, to the extent not previously exercised, and subject to termination or acceleration and other restrictions as provided in this Agreement and the Plan, the Option shall be exercisable to the extent it becomes vested, which shall occur in accordance with the Vesting Schedule set forth on the attached Notice of Grant of Stock Options.

(b) Notwithstanding the foregoing, if there is a Change in Control of the Company, the Option shall immediately vest in full upon such Change in Control, and shall be exercisable until the Expiration Date, unless earlier terminated pursuant to Section 5 of this Agreement.

(c) To the extent then exercisable, the Option may be exercised during Optionee’s lifetime only by Optionee or by Optionee’s guardian or legal representative in the event of the Optionee’s death or disability.

2. TRANSFER.

Unless otherwise permitted by the Committee, the Option may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution (in which case the descendant or beneficiary shall be subject to all terms of this Agreement and all terms of the Plan applicable to Optionee). Any attempted disposition in violation of this Section 2 shall be void.

3. LIMITATION ON EXERCISE OF INCENTIVE STOCK OPTION.

For so long as required under Section 422 of the Code and the regulations promulgated thereunder, during the term of the Plan, the aggregate Fair Market Value of the Common Stock with respect to which Incentive Stock Options are first exercisable by Optionee under the Plan and all other plans of the Company, its parent or any Subsidiary during any calendar year shall not exceed $100,000. Options in excess of such amount shall be treated as non-qualified stock options. For the purpose of this Section 3, the Fair Market Value of the Common Stock shall be determined at the time the Incentive Stock Option is granted.

4. NOTICE OF SALE.

Optionee must notify the Company in writing of any sale or other disposition of shares of Common Stock acquired pursuant to an Incentive Stock Option if such sale or other disposition occurs (i) within two years of the grant of the Incentive Stock Option or (ii) within one year of the issuance of the shares of Common Stock to Optionee.

5. TERMINATION OF EMPLOYMENT.

(a) Upon a termination of employment for cause, Optionee will not be entitled to exercise the Option at any time after such termination. For purposes of this Section, "cause" is defined as: (i) an act of dishonesty or willful misconduct; (ii) a breach of fiduciary duty owed to the Company, any Subsidiary or its stockholders involving personal profit or any other material breach of fiduciary duty; (iii) an act of fraud, embezzlement, malfeasance or misappropriation of Company property or any Subsidiary's property; (iv) a conviction of an illegal act or felony, or use of illegal drugs or controlled substances; or (v) a willful failure to perform reasonable duties, responsibilities or instructions from the Company or any Subsidiary.

(b) Upon termination of employment for any reason other than for cause, Optionee shall be entitled to exercise his or her Option after termination of employment (i) six (6) monthsfrom the date of termination if termination was caused by death or disability within the meaning of Section 22(e)(3) of the Code; and (ii) ninety (90) days from the date of termination if termination was caused by other than death or disability.

6. RETIREMENT.

Optionee or Permitted Transferee may exercise the Option after retirement as follows:

(a) Retirement After Age 55. Optionee shall be entitled to exercise any Option other than an Incentive Stock Option for a period of thirty-six (36) months from the date of Optionee’s retirement from employment after age 55 in accordance with the Company’s then-current retirement policy (or the then-current retirement policy of any parent or Subsidiary, if applicable), to the extent Optionee was entitled to exercise the Option on the date of Optionee’s retirement, and provided that the actual date of exercise is in no event after the expiration of the term of the Option. In the event that Optionee intends to retire from employment after age 55 and Optionee is the holder of one or more Incentive Stock Options, then Optionee shall be entitled, for a period of sixty (60) days ending on the date which is six (6) months prior to Optionee’s date of retirement, to elect to convert one or more Incentive Stock Options into non-statutory stock options by written request received by the Company within such sixty (60) day period and, thereafter, such newly converted non-statutory stock options shall be subject to the thirty-six (36) month exercise period set forth herein; provided that, Optionee actually retires on his or her retirement date. In the event Optionee fails to convert any Incentive Stock Option under this paragraph, then such Incentive Stock Options shall be governed by the provisions of Section 5 of this Agreement.

(b) Retirement at Age 60 or Older. Optionee shall be entitled to exercise the Option in accordance with the provisions of the Plan and this Agreement, but if Optionee retires at age 60 or older, the Option is also subject to the following accelerated vesting: If Optionee retires at age 60 or older, with at least 15 years of service with the Company and predecessor companies, 50% of Optionee’s unvested Options at the date of retirement automatically vest and an additional 5% of Optionee’s unvested Options vest for each year of service beyond 15 years. If Optionee retires at age 60 or older with 25 or more years of service, all unvested Options vest.

7. STATUS OF PARTICIPANT

Optionee shall not be, or have rights as, a stockholder of the Company with respect to any of the shares of Common Stock subject to the Option until such shares have been purchased and delivered to him or her. The Company shall not be required to issue or transfer any certificates for shares of Common Stock purchased upon exercise of the Option until all applicable requirements of law have been complied with and the shares have been duly listed on any securities exchange on which the Common Stock may then be listed.

8. NO EFFECT ON CAPITAL STRUCTURE.

The Option shall not affect the right of the Company or any Subsidiary to reclassify, recapitalize or otherwise change its capital or debt structure or to merge, consolidate, convey any or all of its assets, dissolve, liquidate, windup, or otherwise reorganize.

9. EXPIRATION OF OPTION.

The right to purchase Common Stock under the Option shall expire seven (7) years from the Date of Grant, unless earlier terminated in accordance with the terms of the Plan or this Agreement. The Company will make every effort to notify you prior to the expiration of an option; however, it is the Optionee's responsibility to be aware of the date the Option terminates.

10. COMMITTEE AUTHORITY.

Any question concerning the interpretation of this Agreement, any adjustments required to be made under the Plan, and any controversy that may arise under the Plan or this Agreement shall be determined by the Committee in its sole discretion. Any decisions by the Committee regarding the Plan or this Agreement shall be final and binding.

11. PLAN CONTROLS.

The terms of this Agreement are governed by the terms of the Plan, as it exists on the date of the grant and as the Plan is amended from time to time. In the event of any conflict between the provisions of this Agreement and the provisions of the Plan, the terms of the Plan shall control.

12. LIMITATION ON RIGHTS; NO RIGHT TO FUTURE GRANTS; EXTRAORDINARY ITEM.

By entering into this Agreement and accepting the Option, Optionee acknowledges that: (a) the Plan is discretionary and may be modified, suspended or terminated by the Company at any time as provided in the Plan; (b) the grant of the Option is a one-time benefit and does not create any contractual or other right to receive future grants of awards or benefits in lieu of awards; (c) all determinations with respect to any such future grants, including, but not limited to, the times when awards will be granted, the number of shares subject to each award, the award price, if any, and the time or times when each award will be settled, will be at the sole discretion of the Company; (d) participation in the Plan is voluntary; (e) the value of the Option is an extraordinary item which is outside the scope of Optionee's employment contract, if any, unless expressly provided for in any such employment contract; (f) the Option is not part of normal or expected compensation for any purpose, including without limitation for calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, and Optionee will have no entitlement to compensation or damages as a consequence of the forfeiture of any unvested portion of the Option as a result of Optionee’s termination of employment for any reason; (g) the future value of the Common Stock subject to the Option is unknown and cannot be predicted with certainty; (h) neither the Plan, the Option nor the issuance of the shares underlying the Option confers upon Optionee any right to continue in the employ or service of (or any other relationship with) the Company or any Subsidiary, nor do they limit in any respect the right of the Company or any Subsidiary to terminate Optionee’s employment or other relationship with the Company or any Subsidiary, as the case may be, at any time with or without Cause; and (i) the grant of the Option will not be interpreted to form an employment relationship with the Company or any Subsidiary.

13. GENERAL PROVISIONS

(a) Notice. Whenever any notice is required or permitted hereunder, such notice must be in writing and delivered in person or by mail (to the address set forth below if notice is being delivered to the Company) or electronically. Any notice delivered in person or by mail shall be deemed to be delivered on the date on which it is personally delivered, or, whether actually received or not, on the third business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address set forth in this Agreement. Notices delivered to Optionee in person or by mail shall be addressed to the address for Optionee in the records of the Company. Notices delivered to the Company in person or by mail shall be addressed as follows:

Company: Building Materials Holding Corporation Attn: Legal Department 720 Park Blvd., Suite 200 Boise, Idaho 83712

The Company or Optionee may change, by written notice to the other, the address previously specified for receiving notices.

(b) No Waiver. No waiver of any provision of this Agreement will be valid unless in writing and signed by the person against whom such waiver is sought to be enforced, nor will failure to enforce any right under this Agreement constitute a continuing waiver of the same or a waiver of any other right hereunder.

(c) Undertaking. Optionee hereby agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either Optionee or the Option pursuant to the express provisions of this Agreement.

(d) Entire Contract. This Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement is made pursuant to the provisions of the Plan and will in all respects be construed in conformity with the express terms and provisions of the Plan.

(e) Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding on, the Company and its successors and assigns and Optionee and Optionee's legal representatives, heirs, legatees, distributees, assigns and transferees by operation of law.

(f) Securities Law Compliance. The Company currently has an effective registration statement on file with the Securities and Exchange Commission with respect to the shares of Common Stock subject to the Option. The Company intends to maintain this registration but has no obligation to do so. If the registration ceases to be effective, Optionee will not be able to transfer or sell shares of Common Stock issued pursuant to the Option unless one or more exemptions from registration under applicable securities laws are available. Such exemptions from registration are very limited and might be unavailable. Optionee agrees that any resale of the shares of Common Stock issued pursuant to the Option shall comply in all respects with the requirements of all applicable securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the respective rules and regulations promulgated thereunder) and any other law, rule or regulation applicable thereto, as such laws, rules, and regulations may be amended from time to time. The Company shall not be obligated to either issue shares of Common Stock or permit the resale of any such shares if such issuance or resale would violate any such requirements.

(g) Information Confidential. As partial consideration for the granting of the Option, Optionee agrees that he or she will keep confidential all information and knowledge that Optionee has relating to the manner and amount of his or her participation in the Plan; provided, however, that such information may be disclosed as required by law and may be given in confidence to Optionee's spouse, tax and financial advisors, or to a financial institution to the extent that such information is necessary to secure a loan.

(h) Governing Law. Except as may otherwise be provided in the Plan, the provisions of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to principles of conflicts of law.

EX-10.26

Exhibit 10.26

Amended

Building Materials Holding Corporation

1999 Cash Equity Pl

ARTICLE I

NAME AND PURPOSE

1.1       Name.  The name of the Plan is the “Building Materials Holding Corporation 1999 Cash Equity Plan.”

1.2       Purpose.  The purpose of the Plan is to provide a meaningful incentive for key management employees of Building Materials Holding Corporation (the Company) to successfully grow its market share of the building materials distribution industry, and thereby to increase the Company’s revenues and profits.  Ultimately, the purpose of the Plan is to align the financial interests of Company management with those of the Company’s shareholders.  The objective of the Plan is to generate significant awards for performance premised on the enhancement of the Company’s stock price.

ARTICLE II

DEFINITIONS OF TERMS

2.1       General Definitions.  The following words and phrases, when used in the Plan, unless otherwise specifically defined or unless the context clearly otherwise requires, shall have the following respective meanings:

(a)       Agreement.  The document which evidences the grant of an Award under this Plan to an individual Employee and which sets forth the terms, conditions and provisions of, and restrictions relating to, such Award.

(b)       Award.  Any grant of Units under the Plan.

(c)       Board.  The Board of Directors of the Company.

(d)       Committee.  The Compensation Committee of the Board of Directors.  The Committee shall consist of an odd number of members, a majority of which is not composed of current employees of the Company.

(e)       Company.  Building Materials Holding Corporation, or a successor corporation to which the majority of Building Materials Holding Corporation’s assets are transferred.

(f)       Effective Date.  April 1, 1999 or such later date as is specified by the Board in approving the Plan.

(g)       Employee.  Any individual employed by the Employer, except officers and directors of Building Materials Holding Corporation and BMC West Corporation.

(h)       Exercise.  An exchange of an Award for cash in the amount of the then current fair market value of Company common stock.

(i)       Exercise Period.  Awards may not be exercised during the blackout period (the "blackout period") commencing at the close of business on the 10^th day of the last month in a quarterly financial period until 48 hours after the date of public disclosure of the financial results for a particular fiscal quarter or year.

(j)       Fair Market Value.  Fair market value shall be the closing price on the exchange upon which the Company’s Shares are traded (currently Nasdaq National Market) on the date the Company receives written notice from the Participant during the Exercise Period of Participant’s Exercise of the Award, or in the absence of sales on the notice date, the closing price on the most recent date on which a sale occurred prior the notice date.  

(k)       Participant.  An Employee who is granted an Award under the Plan.  Awards may be granted only to Employees.

(l)       Plan.  The Building Materials Holding Corporation 1999 Cash Equity Plan and all amendments, attachments and supplements thereto.

(m)       Share.  A share of the Company’s, or a successor entity’s, common stock.

(n)       Subsidiary.  Knipp Brothers Industries, LLC and any other corporation, partnership, joint venture, limited liability company or other entity in an unbroken chain beginning with the Company each of which, other than the last entity in the unbroken chain, owns 50% or more of the total combined voting power of all securities in one of the other entities in such chain.

(o)       Unit.  A measure of an Award, representing the equivalent of one Share.

2.2       Other Definitions.  In addition to the above definitions, certain words and phrases used in the Plan and any Agreement may be defined in other portions of the Plan or in such Agreement.

2.3       Conflicts in Plan.  In the case of any conflict in the terms of the Plan, or between the Plan and an Agreement, relating to an Award, the provisions in the Article of the Plan which specifically grants such Award shall control those in a different Article or in such Agreement.

ARTICLE III

UNITS

3.1       Number of Units.  The number of Units available for grant under the Plan (including Units previously granted and remaining unexercised) shall not exceed two percent (2%) of the number of outstanding Shares from time to time.

3.2       Grants.  The Committee may grant an Award at such times, in such amounts, and under such terms and conditions as it deems appropriate.  Unit grants may vary in number, frequency, price, and otherwise from the initial grants.  The receipt of a grant in any year by any Employee does not entitle that Employee or any other Employee to receive a grant in any other year or at any other time.

3.3       Vesting.  No Unit may be exercised before the third anniversary of the date of grant, except as provided in section 10.8.   Units will vest completely at the end of the three-year service period, measured from the date of grant.

3.4       Exercise and Liquidity.  A Participant may exercise his/her vested Units during any 15 trading day period following the public release of the Company’s financial results for a fiscal quarter or for a fiscal year of the Company (whichever is applicable).  A Participant may exercise vested Units by notifying the Company in writing pursuant to the provisions of the Agreement of his or her desire to exercise his or her vested Units.  Upon exercising the Units, the Participant shall be entitled to receive amount equal to the number of Units exercised multiplied by the Fair Market Value (the closing price of the stock on the day selected) of the Company’s common stock on the date such notice is received by the Company.  Such payment shall be made within 10 business days following the date of exercise.  However, notwithstanding the foregoing, if the Company’s cash compensation obligation attributable to Unit exercises in the aggregate exceeds 25% of the Company’s pre-tax net income for the immediately preceding fiscal year quarter, then the Company shall have the discretion to defer the payment of Awards on a pro rata basis from fiscal quarter to fiscal quarter until such limitation is no longer exceeded (including any additional obligation created by exercises occurring in subsequent quarters).  Except as otherwise provided in Article IX of the Plan, all vested Units must be exercised no later than 30 days following the Participant’s termination of employment.

3.5       Term.  Awards shall have a maximum term of five (5) years from the date of grant.  If not exercised, Awards shall terminate on the fifth anniversary of the grant.

ARTICLE IV

ELIGIBILITY

4.1       Issues Determined by the Committee.  The Participants and the grants they receive under the Plan shall be determined by the Committee in its sole discretion.  In making its determinations, the Committee shall consider past, present and expected future contributions of Participants and potential Participants.

ARTICLE V

ADMINISTRATION

5.1       Committee.  The Plan shall be administered by the Committee.

5.2       Authority.  Subject to the terms of the Plan, the Committee shall have sole discretionary authority to:

(a) Determine the individuals to whom Awards are granted, the type of awards and amounts to be granted, the date of issuance and duration of all such grants;

(b) Determine the terms, conditions and provisions of, and restrictions relating to, each Award granted;

(c) Interpret and construe the Plan and all Agreements;

(d) Prescribe, amend and rescind rules and regulations relating to the Plan;

(e) Determine the content and form of all Agreements;

(f) Determine all questions relating to Awards under the Plan;

(g) Maintain accounts, records and ledgers relating to Awards;

(h) Maintain records concerning its decisions and proceedings;

(i) Employ agents, attorneys, accountants, consultants or other persons for such purposes as the Committee considers necessary or desirable; and

(j) Do and perform all acts that it may deem necessary or appropriate for the administration of the Plan and carry out the purposes of the Plan.

5.3       Decisions of Committee.  All decisions made by the Committee pursuant to the provisions hereof shall be final and binding on all persons.

ARTICLE VI

AMENDMENT OF PLAN

6.1       Power of Committee.  Subject to Article VIII, the Board may amend the Plan at any time and from time to time as it deems necessary.

ARTICLE VII

EFFECTIVE DATE AND TERMINATION OF PLAN

7.1       Effective Date.  The Plan is effective as of April 1, 1999, upon approval by the Board.

7.2       Termination.  Subject to Article VIII, the Plan may be terminated at any time by the Board.  No grants shall be made pursuant to this Plan after the tenth anniversary of the Effective Date.

ARTICLE VIII

MODIFICATION OR TERMINATION OF AWARDS

8.1       General.  Subject to provisions of Section 8.2, the amendment or termination of the Plan shall not adversely affect a Participant’s rights to or under any Award granted prior to such amendment or termination.

8.2       Committee’s Right.  Except as may be provided in an Agreement, any Award granted may be converted, modified, forfeited, or canceled, prospectively or retroactively, in whole or in part, by the Committee in its sole discretion, provided, however, subject to Section 8.3, no such action may impair the rights of any Participant without his or her consent.  Except as may be provided in an Agreement, the Committee may, in its sole and absolute discretion, in whole or in part, waive any restrictions or conditions applicable to, or accelerate the vesting of, any Award.

8.3       Termination of Benefits Under Certain Conditions.  The Committee, in its sole discretion, may cancel any unexpired, unpaid, or deferred Award at any time if the Participant is not in compliance with all applicable provisions of the Plan (including Section 10.2) or with any Agreement or if the Participant, whether or not he or she is currently employed by an Employer, performs acts of willful malfeasance or gross negligence in a matter of material importance to the Company or a Subsidiary.

ARTICLE IX

TERMINATION OF EMPLOYMENT

9.1       Death or Permanent Disability.  In the event of death or permanent disability, the Participant, or his or her estate, may exercise vested Units only within one year of such event.

9.2       Voluntary Termination.  In the event of voluntary termination of employment or involuntary termination of employment without cause, vested Units may be exercised within 30 days after termination.  If a Participant violates the non-compete covenant as described in Section 10.2 within a one-year period, the proceeds of an Award are forfeited and must be repaid to the Company within 30 days of notice of such violation.

9.3        Retirement.  If a Participant retires at age 65, the person may exercise a portion of their unvested equity units determined by dividing the number of months of service relating to the cash equity grant prior to the retirement date divided by 36 months.  If a Participant retires prior to age 65 the Participant must have 15 years of service with the Company or its predecessors at the date of retirement to receive pro rata vesting.  This provision is effective as of January 1, 2001.

9.4       Involuntary Termination With Cause.  In the event of involuntary termination with Cause, all vested and unvested Units shall be canceled and forfeited immediately.  For purposes of the Plan, “Cause” shall mean one of the following: misappropriating any funds or property of the Company; attempting to obtain any personal profit from any transaction in which the Participant has an interest which is adverse to the interest of the Company, unless the Participant has first obtained the consent of the President of the Division of the Company in which the Participant works or in the case of eligible BMHC employees, the President and CEO of BMHC; unreasonable failure or refusal to perform the duties assigned to the Participant continuing after notice by the Board identifying the duties not performed; a violation of Section 10.2 and/or conviction of a felony.

9.5       Exceptions.  Termination of employment excludes a termination and immediate employment by a Subsidiary.

ARTICLE X

GENERAL PROVISIONS

10.1       Withholding.  The Company shall, at the time any distribution is made under the Plan, or at any time any Unit is exercised, withhold from such distribution any amount necessary to satisfy federal, state and local tax withholding requirements with respect to such distribution or exercise of an award.

10.2       Non-Compete Covenant.  Participants in the Plan must agree not to be engaged in any capacity, whether as an employee, director, consultant, stockholder, lessor, creditor, guarantor, or independent contractor, by any company in the building materials distribution (or framing) business within a 100-mile radius of any Company or Subsidiary location for a period of one (1) year following termination of their employment.

10.3       Nontransferability.  Unless otherwise determined by the Committee, (i) no Award granted under the Plan may be transferred or assigned by the Participant to whom it was granted, pursuant to the laws of descent and distribution, or pursuant to a domestic relations order, and (ii) an Award granted under this Plan may be exercised, during the Participant’s lifetime, only by the Participant or by the Participant’s guardian or legal representative.

10.4       Governing Law.  The Plan and each Agreement shall be construed and administered in accordance with the laws of the state of Idaho.

10.5       No Employment Contract.  Neither the adoption of the Plan nor any Award granted hereunder shall confer upon any Employee the right to continued employment nor shall the Plan or any Award interfere in any way with the right of the Company to terminate the employment of any of its Employees at any time.

10.6       No Effect on Other Benefits.  The receipt of Awards under the Plan shall have no effect on any other benefits to which a Participant may be entitled from the Company, under another plan or otherwise, or preclude a Participant from receiving any such benefits.

10.7       Adjustments.  If outstanding Shares are increased or decreased, or are changed into or exchanged for a different number or kind of shares or securities of the Company, through reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or type of Units as to which Awards may be granted under the Plan.  A corresponding adjustment changing the number and/or type of Units allocated to unexercised Awards, or portions thereof, which shall have been granted prior to any such change, shall likewise be made.  Adjustments under this Section 10.7 shall be made by the Board, and its determinations as to what adjustments shall be made, and the extent thereof, shall be final and binding.  The grant of Awards pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve or liquidate, or to sell or transfer all or any part of its business or assets.

10.8       Change of Control.  Upon the dissolution or liquidation of the Company, upon a reorganization, merger or consolidation of the Company with one or more entities as a result of which holders of the outstanding voting stock of the Company prior to the transaction do not own a majority of the outstanding voting stock of the combined entity, or upon a sale of substantially all the property of the Company or the acquisition of Stock representing more than 50% of the voting power of the then outstanding securities of the Company by another entity or person or persons acting in concert (any of which shall be deemed hereunder to constitute a “Terminating Transaction”), any unvested Awards shall become vested.  All persons with unexercised portions of vested Awards then outstanding shall have the right during a period designated by the Company which shall not be later than 30 days after the Terminating Transaction to exercise the unexercised portion of their vested Awards.

10.9       No Rights as A Shareholder.  No Employee who has been granted an Award shall have any rights as a stockholder with respect to any Shares covered by the Award.  No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights of stockholders of the Company.

ARTICLE XI

ADOPTION

This Plan was adopted by the Compensation Committee of Building Materials Holding Corporation on April 2, 1999 and amended April 30, 2001.

EX-10.27

Exhibit 10.27

STOCK OPTION AGREEMENT

OF

BMC WEST CORPORATION

This Stock Option Agreement (this “Agreement”) is made and entered into as of February 6, 1997 (the “Date of Grant”), by and between BMC West Corporation, a Delaware corporation (the “Company”), and Robert E. Mellor, as Optionee.

RECITALS

WHEREAS, Optionee is currently a director of the Company, and has agreed to serve as the President and Chief Executive Officer and as a director of the Company’s parent (“Holdings”) after the Company’s corporate reorganization occurs, pursuant to which the Company will merge with and into a subsidiary of Holdings and, as a result, the Company will become a wholly-owned subsidiary of Holdings; and

WHEREAS, the Board of Directors of the Company (the “Board”) has approved the grant to Optionee of an option to purchase shares of the common stock of the Company (the “Common Stock”), on the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and the covenants set forth herein, the parties hereto hereby agree as follows:

1.Grant of Option; Vesting; Certain Terms and Conditions. The Company hereby grants to Optionee, and Optionee hereby accepts, as of the Date of Grant, an option to purchase 50,000 shares of Common Stock (the “Option Shares”) at an exercise price of $12.50 per share (the “Exercise Price”), which option shall expire at 5:00 o’clock p.m., Boise, Idaho time, on February 5, 2007 (the “Expiration Date”) and shall be subject to all of the terms and conditions set forth in this Agreement (the “Option”). This Option shall vest and become exercisable with respect to a certain number of Option Shares when the Fair Market Value (as defined in Section 4(a) below) of the Common Stock reaches certain values, all in accordance with the schedule below. In order for the vesting thresholds set forth below to be triggered, the Fair Market Value of the Common Stock must be greater than or equal to the amount designated below for ten (10) consecutive trading days or for twenty (20) trading days in any thirty (30) trading day period. Once a threshold is triggered, this Option shall remain exercisable as to the installment associated with such threshold notwithstanding a subsequent decrease in the stock price.

Fair Market Value to be Reached*	Number of Option Shares Vesting When Common Stock Reaches Fair Market Value
$15.00	25,000 shares
$18.00	12,500 shares
$21.00	12,500 shares

* Fair Market Value will be adjusted for stock splits, reverse stock splits, stock dividends, recapitalizations and similar events.

All option shares shall vest, if not earlier vested pursuant to the terms of this Section 1, on February 6, 2002, regardless of the Fair Market Value of the Common Stock prior to or as of such date.

This Option is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code.

2.   Acceleration and Termination of Option.

   (a)        Termination of Employment.

(i)Death or Permanent Disability. If Optionee shall cease to be an employee, director and officer (collectively, “Employment”) of the Company and/or any of its parents or subsidiaries (a “Termination”) by reason of the death or permanent disability of Optionee, then (A) the portion of this Option that has not vested on or prior to the date of such Termination of Employment shall terminate on such date and (B) the remaining vested portion of this Option shall terminated upon the earlier of the Expiration Date or the date which is twelve (12) months after the date of such Termination of Employment. Optionee shall not be deemed to have a permanent disability until proof of the existence thereof shall have been furnished to the Compensation Committee of the Board (the “Committee”) or to the Board in such form and manner, and at such times, as the Committee or Board may require. Any determination by the Committee or Board that Optionee does or does not have a permanent disability shall be final and binding upon the Company and Optionee.

(ii)Retirement After Age 65. If Optionee’s Employment is Terminated by reason of Optionee’s retirement in accordance with the Company’s then-current retirement policy (or the then-current retirement policy of any of the Company’s parents or subsidiaries, if applicable) after age 65 (“Retirement”), then (A) the portion of the Option that has not vested on or prior to the date of such Retirement shall terminate on such date and (B) the remaining vested portion of the Option shall terminate upon the earlier of the Expiration Date or the date which is thirty-six (36) months after the date of such Retirement.

(iii)Termination for Cause. If Optionee’s Employment is Terminated for Cause (as defined below), then this Option shall terminate upon the date of such Termination of Employment and shall cease to be exercisable. Employment shall be deemed to have been terminated for “Cause” if Optionee is determined by the Board to have willfully breached his duty in the course of Employment or to have committed an act of embezzlement, fraud, dishonesty or deliberate disregard of the rules of the Company and/or any of its parents or subsidiaries or engaged in any conduct which constitutes unfair competition with the Company and/or any of its parents or subsidiaries (as determined by the Board acting in its sole discretion).

(iv)Other Termination. If Optionee’s Employment is Terminated for no reason, or for any reason other than Retirement, death or permanent disability, or for Cause, then (A) the portion of this Option that has not vested on or prior to the date of such Termination of Employment shall terminate on such date and (B) the remaining vested portion of this Option shall terminate upon the earlier of the Expiration Date or the date which is twelve (12) months after the date of such Termination of Employment.

(b)Events Causing Acceleration of Option. The Committee or Board, in its sole discretion, may accelerate the exercisability of this Option at any time and for any reason. In the event of a Change in Control of the Company (as defined below), this Option shall become immediately exercisable in full. A “Change in Control” of the Company shall be deemed to have occurred if (i) there shall be consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company’s Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company’s Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or series of related transactions) of all, or substantially all, of the assets of the Company, or (ii) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company, or (iii) any “person” (as defined in sections 13(d) and 14(d) of the Exchange Act), shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty (50%) percent or more of the Company’s outstanding Common Stock, or (iv) during any period of two consecutive years; individuals who at the beginning of such period constitute the entire Board shall cease for any reason to constitute a majority thereof unless the election, or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. Notwithstanding the above, a Change of Control shall not be deemed to have occurred in connection with a transaction resulting in a merger, consolidation, sale of assets or sale of securities if such transaction has been initiated (in contrast to an action in response to or resulting from receipt of an offer or its equivalent from a third party) at the direction of the Board acting with the approval of a majority of the independent directors.

(c)Other Events Causing Acceleration and Termination of Option. In the event of (a) a dissolution or liquidation of the Company, or (b) a merger or consolidation in which the Company is not the surviving corporation, the Company shall give to the Optionee, at the time of adoption of the plan for liquidation, dissolution, merger or consolidation, either: a reasonable time thereafter within which to exercise this Option in full, prior to the effectiveness of such liquidation, dissolution, merger or consolidation, at the end of which time this Option shall terminate; or the right to exercise this Option in full as to an equivalent number of shares of stock of the corporation succeeding the Company or acquiring its business by reason of such liquidation, dissolution, merger or consolidation.

3.Adjustments. In the event that the outstanding securities of the class then subject to this Option are increased, decreased or exchanged for or converted into cash, property and/or a different number or kind of securities, or cash, property and/or securities are distributed in respect of such outstanding securities, in either case as a result of a reorganization, merger, consolidation, recapitalization, reclassification, dividend (other than a regular, quarterly cash dividend) or other distribution, stock split, reverse stock split or the like, or in the event that substantially all of the property and assets of the Company are sold, then, unless such event shall cause this Option to terminate pursuant to Section 2(c) hereof, the Committee or Board shall make appropriate and proportionate adjustments in the number and type of shares or other securities or cash or other property that may thereafter be acquired upon the exercise of this Option; provided, however, that any such adjustments in this Option shall be made without changing the aggregate Exercise Price of the then unexercised portion of this Option. In the event any fractional shares of stock would result on account of any such adjustment, then the number of shares shall be rounded upward to the nearest whole share.

4.Manner of Exercise. This Option shall be exercisable during Optionee’s lifetime only by Optionee or his Permitted Transferee (as defined in Section 7(b) herein), and after Optionee’s death only by the Permitted Transferee or the person or entity entitled to do so under Optionee’s or Permitted Transferee’s last will and testament, whichever is applicable, or applicable intestate law. This Option may be exercised with respect to all or any part of the Option Shares then subject to such exercise as follows:

(a)By giving the Company written notice of such exercise specifying the number of the Option Shares as to which the Option is so exercised and accompanied by an amount equal to the aggregate Exercise Price of such shares, in the form of any one or combination of (i) cash, a certified check or postal or express money order payable to the order of the Company in lawful money of the United States, (ii) shares of Common Stock previously acquired by Optionee, in satisfaction of all or portion of such aggregate Exercise Price, and any Common Stock so delivered shall be valued at its Fair Market Value on the date of exercise; provided, however, that any Options may not be exercised by the delivery of Common Stock more frequently than at six-month intervals, or (iii) delivery of a properly executed exercise notice together with such other documentation as the Committee or Board, and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale proceeds required to pay the aggregate Exercise Price.

“Fair Market Value” as used in this Agreement shall mean (i) if the Common Stock is listed on the New York Stock Exchange or any other established stock exchange or on the Nasdaq National Market, the closing sales price of the Common Stock on the relevant date as reported in the Wall Street Journal, (ii) if the Common Stock is not then listed on an exchange or traded on the Nasdaq National Market, the average of the closing bid and asked prices per share for the Common Stock in the over-the-counter market as quoted on Nasdaq on such date, or (iii) if the Common Stock is not then listed on an exchange or quoted on Nasdaq, an amount determined in good faith by the Board or the Committee.

(b)If required by the Company, by giving satisfactory assurance in writing, signed by Optionee or his or her legal representative, that such shares are not being purchased with a view to the distribution thereof; provided, however, that such assurance shall be deemed inapplicable to (1) any sale of such shares by the Optionee subject to a registration statement covering such sale, which has heretofore been (or may hereafter be) filed and become effective under the Securities Act of 1933, as amended (the “1933 Act”), and with respect to which the registration statement is current and no stop order suspending the effectiveness thereof has been issued, and (2) any other sale of such share with respect to which, in the opinion of counsel for the Company, such assurance is not required to be given in order to comply with the provisions of the 1933 Act.

As soon as practicable after receipt of the written notice(s) required by this Section 4 from Optionee, the Company shall, without transfer or issue tax or other incidental expenses to Optionee, deliver to Optionee at the office of the Company, or such other place as may be mutually acceptable to the Company and Optionee, a certificate or certificates for such shares, which certificate or certificates may bear such legend or legends with respect to restrictions on transfer as counsel for the Company deems to be required by applicable provisions of law and this Agreement; provided, however, that nothing herein shall be deemed to impose upon the Company any obligation to deliver any shares of Common Stock to the Optionee if, in the opinion of counsel for the Company, doing so would violate any provision of: (i) the 1933 Act; (ii) the Exchange Act; (iii) any applicable listing requirements of any national securities exchange; (iv) any state securities regulation or “Blue Sky” laws; or (v) requirements under any other law or regulation applicable to the issuance or transfer of such shares. In no event shall the Company be required to take any affirmative action to comply with any of such laws, regulations or requirements, nor shall the Company be liable for any failure to deliver shares of Common Stock because of such shares have not been registered or because a registration statement with respect thereto is not current or because such delivery would otherwise be in violation of any applicable law or regulation.

5.Payment of Withholding Taxes. By accepting this Option, the Optionee, both personally and on behalf of any person to whom Optionee’s rights under this Option shall pass by will or the laws of descent and distribution, agrees that, if the Company so requires, whenever Option Shares are to be issued by reason of the exercise of this Option, the Optionee or such other person who is to receive such stock will remit to the Company, prior to the delivery of any certificate or certificates for such shares, all or any part of an amount determined by the Company in its discretion to be sufficient to satisfy federal, state and local withholding tax requirements which the Company, or its counsel, determine may be payable with respect to such exercise. Such withholding may be paid in cash, by check payable to the Company or be delivery of shares of the Company’s Common Stock, valued at the Fair Market Value of such Common Stock on the date of delivery or by surrender of a portion of this Option.

6.Notices. All notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed given if delivered personally or five (5) days after mailing by certified or registered mail, postage prepaid, return receipt requested, to the Company at 1475 Tyrell Lane, Boise, Idaho 83706, Attention: Treasurer, or to Optionee at the address set forth beneath his or her signature on the signature page hereto, or at such other addresses as they may designate by written notice in the aforesaid manner.

7.Transferability.

(a)Subject to the provisions of Section 7(b), neither this Option nor any interest therein may be sold, assigned conveyed, gifted, pledged, hypothecated or otherwise transferred in any manner other than by will or the laws of descent and distribution. The transfer by Optionee to a trust created by Optionee for the benefit of Optionee or Optionee’s family which is revocable at any and all times during Optionee’s lifetime by Optionee and as to which Optionee is the sole trustee during his or her lifetime, will not be deemed to be a transfer for purposes of this Agreement. Under such rules and regulations as the Committee or Board may establish, a beneficiary may be designated with respect to an Option grant in the event of the death of Optionee. If the estate of Optionee is the beneficiary with respect to the grant, any rights with respect to such grant may be transferred to the person or entity (including a trust) entitled thereto under the will of Optionee or pursuant to the laws of descent and distribution. In the event of any attempt by Optionee to alienate, assign, pledge, hypothecate, or otherwise dispose of the option or of any right hereunder, except as provided for herein, or in the event of the levy of any attachment, execution, or similar process upon the rights or interest hereby conferred, the Option shall thereupon become null and void and of no effect.

(b)Notwithstanding the provisions of Section 7(a), the Committee or Board may, in its discretion, authorize and permit all or a portion of the Option to be transferred by such Optionee to (i) the spouse, children or grandchildren of the Optionee (collectively, “Immediate Family Members”), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Member, (iii) a partnership in which such Immediate Family Members are the only partners, or (iv) any other person or entity that the Committee or Board, in its discretion, may permit (collectively, when so approved by the Committee or Board, a “Permitted Transferee”); provided that subsequent transfers of transferred Options shall be prohibited except those in accordance with Section 7(a). Following transfer, any such Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Sections 2(c), 4(a), 4(b), 5, 6, 7(a), 9, 11, and 12 hereof the term “Optionee” shall be deemed to refer to the Permitted Transferee. The events of termination of employment of Section 2(a) hereof shall continue to be applied with respect to the original Optionee, following which the Options shall be exercisable by the Permitted Transferee only to the extent, and for the periods specified in Section 2(a). The Company shall have no obligation to notify the Permitted Transferee as to events that may affect the exercisability or expiration of the Option including, without limitation, the original Optionee’s termination of Employment. Before any transfer becomes effective, the intended transferee (or his/her parents or legal guardians) must execute an assumption agreement describing the rights and obligations of the intended transferee including, without limitation, who has the power to exercise the Option (if the intended transferee is a minor, partnership, trust or corporation or otherwise it is not readily apparent who has the authority to exercise such Option), who is responsible for taxes and to whom notices are to be delivered.

8.Stockholder Rights. No person or entity shall be entitled to vote, receive dividends or be deemed for any purpose the holder of any Option Shares until this Option shall have been duly exercised to purchase such Option Shares in accordance with the provisions of this Agreement.

9.Regrants. The Committee or the Board may, with the consent of Optionee, amend this Agreement or adopt a new agreement in lieu of this Agreement to take into account a decrease in the Fair Market Value of the Common Stock, or for any other reason the Committee or the Board shall deem appropriate provided that, any new or amended Agreement granted hereunder shall have an exercise price not less than one hundred percent (100%) of the Fair Market Value at the date of regrant or amendment.

10.Employment Rights: Other Plans. No provisions of this Agreement or of this Option granted hereunder shall (a) confer upon Optionee any right to continue in the employ of or to associate with the Company or any of its parents or subsidiaries, (b) affect the right of the Company and each of its parents and subsidiaries to terminate the Employment of Optionee, with or without cause, or (c) confer upon Optionee any right to participate in any employee welfare or benefit plan or other program of the Company or any of its parents or subsidiaries other than this Agreement. Nothing in this Agreement is intended to be a substitute for, or shall preclude or limit the establishment or continuation of, any other plan, practice or arrangement for the payment of compensation or benefits to Optionee, which the Company or its parents or subsidiaries now has or may hereafter lawfully put into effect, including, without limitation, any retirement, pension, insurance, stock purchase, incentive compensation or bonus plan. Optionee hereby acknowledges and agrees that the Company and each of its parents and subsidiaries may terminate the Employment of Optionee at any time and for any reason, or for no reason, unless Optionee and the Company or such parent or subsidiary are parties to a written employment or other agreement that expressly provides otherwise.

11.Binding Effect of Agreement. This Agreement shall be binding upon and inure to the benefit of any successors and assigns of the Company or its parents or subsidiaries and upon Optionee and Optionee’s heirs, executors, administrators, personal representatives, permitted assignees and successors in interest.

12.Interpretation. The interpretation and construction of this Agreement by the Committee or Board, where specifically reserved to the Committee or Board pursuant to this Agreement, shall be final and binding upon Optionee. Questions of interpretation of any of the provisions of this Agreement not specifically reserved for interpretation by the Committee or the Board shall be resolved by legal counsel for the Company selected by the Board.

13. Governing Law. This Agreement and the Option granted hereunder shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, excluding the choice of law provisions thereof.

IN WITNESS WHEREOF, the Company and Robert E. Mellor, as Optionee, have duly executed this Agreement as of the Date of Grant.

BMC WEST CORPORATION

By:_________________________

Title:________________________

/s/ Robert E. Mellor                        

Street Address

City, State and Zip Code

Social Security Number

EX-10.40

Exhibit 10.40

Building Materials Holding Corporation

2005 Bonus Program

BMHC OFFICERS

Purpose

The BMHC bonus plan is to provide a financial incentive for BMHC Officers to achieve specific financial objectives. The bonus plan is composed of three primary parts: (I) eligibility for participation, (II) creation of a bonus pool, and (III-IV) payout of the bonus pool.  Our philosophy is to have an ongoing and consistent bonus program, however, the directors reserve the right to make any necessary changes each year to ensure its effectiveness for the shareholders and plan participants.  Each year, the plan must be approved by the Compensation Committee of the Board of Directors and implemented by the Chairman, President and Chief Executive Officer.

I. Eligibility for Participation

1. Eligibility for Participation in the Bonus Program

Any employee newly hired or transferred to an eligible position may be placed on the bonus list, pro rata, with the approval of the Chairman, President and Chief Executive Officer.  A participant whose employment terminates during the year is no longer eligible for the plan unless his termination is due to retirement, disability, or death.  In such cases, a pro rata bonus payment may be made.

2. Participation in the Program

An appropriate form will be used at the beginning of the year to identify the individuals who will participate in the plan and to indicate what each participant's share of the pool will be.  The form will be completed at year-end to determine the final bonus awards.

II. Creation of a Bonus Pool

The bonus plan creation and payout will be based upon the attached outline for BMHC Officers.

The payout matrix may change from year to year to reflect growth of the company.

III. Payout of the Bonus Pool

1. The payout of the bonus pool for BMHC officers will be based on company EBITDA (70%) and RONI (30%).  The compensation committee of the Board of Directors retains the right to review any material extraordinary credits or charges to company earnings, including charges under the impairment of asset review, to determine if they should or should not be included in determining the appropriate net income after tax for bonus computation purposes.  In January, prior to the bonus calculations, any charges that may be included in this section will be submitted to the committee for such review.

2. The bonus pool generated in Section III-1 will be paid out in February for those eligible employees still employed on December 31.  An additional pool will be made available for distribution by the Chairman, President and CEO to those key employees who merit such consideration through the achievement of their objectives, unique accomplishments as well as their overall performance and that of the company.  This pool will be determined by dividing the total of the other than CEO officer payout dollars by 90% and multiplying that number by 10%.

3. Payments under the program formula may be subject to adjustment under the provisions of the wage guidelines and/or laws in effect on the date of distribution.

4. Discretionary Payout

An additional discretionary pool of $200,000 has been approved for the BMHC Chairman, President and Chief Executive Officer to award for other special circumstances.  The discretionary pool may be used throughout the company to recognize outstanding performance at the individual or company level and is approved by the Board of Directors taking into consideration the following:

1. The degree of financial success achieved by the corporation.

2. The degree to which participants manage their responsibilities and the resulting effect on profitability, i.e., the management, positive or negative, of circumstances substantially beyond their control.  This includes major market fluctuations, strikes, or major changes in economic conditions.

IV. Communication

It is the responsibility of the Chairman, President and Chief Executive Officer to assure that all the provisions of the bonus plan are communicated to the participants including the potential dollar payouts and requirements necessary to achieve those payouts.

V. Reporting

Financial results will be calculated during the month of January with the appropriate payouts made to participants no later than the end of February.

VI. Authorization

The company retains the right to amend, modify, or otherwise make revisions to this plan annually as deemed necessary by the Board of Directors.

EX-10.41

Exhibit 10.41

Building Materials Holding Corporation

2005 Bonus Program

BMC West Senior Management

Purpose

The BMC West senior management bonus plan is to provide a financial incentive for BMC West Officers to achieve specific financial objectives. The bonus plan is composed of three primary parts: (I) eligibility for participation, (II) creation of a bonus pool, and (III-IV) payout of the bonus pool.  Our philosophy is to have an ongoing and consistent bonus program, however, the directors reserve the right to make any necessary changes each year to ensure its effectiveness for the shareholders and plan participants.  Each year, the plan must be approved by the Compensation Committee of the Board of Directors and implemented by the Chairman, President and Chief Executive Officer of BMHC.

I. Eligibility for Participation

1. Eligibility for Participation in the Bonus Program

Any employee newly hired or transferred to an eligible position may be placed on the bonus list, pro rata, with the approval of the President of BMC West and Chairman, President and CEO of BMHC.  A participant whose employment terminates during the year is no longer eligible for the plan unless his termination is due to retirement, disability, or death.  In such cases, a pro rata bonus payment may be made.

2. Participation in the Program

An appropriate form will be used at the beginning of the year to identify the individuals who will participate in the plan and to indicate what each participant's share of the pool will be.  The form will be completed at year-end to determine the final bonus awards.

II. Creation of a Bonus Pool

The bonus plan creation and payout will be based upon the attached outline for BMC West senior management..

The payout matrix may change from year to year to reflect growth of the company.

III. Payout of the Bonus Pool

1. The payout of the bonus pool for BMC West senior management will be based on BMC West EBITA (33.33%), BMC West lease adjusted RONI (33.33%) and BMHC EBITDA (33.33%). The compensation committee of the Board of Directors retains the right to review any material extraordinary credits or charges to company earnings, including charges under the impairment of asset review, to determine if they should or should not be included in determining the appropriate net income after tax for bonus computation purposes.  In January, prior to the bonus calculations, any charges that may be included in this section will be submitted to the committee for such review.

2. The bonus pool generated in Section III-1 will be paid out in February for those eligible employees still employed on December 31.  An additional pool will be made available for distribution by the Chairman, President and CEO to those key managers who merit such consideration through the achievement of their objectives, unique accomplishments as well as their overall performance and that of the company.  This pool will be determined by dividing the total of the officer payout dollars by 90% and multiplying that number by 10%.  The President of BMC West will determine the distribution of discretionary dollars for those eligible for this program subject to oversight by the CEO of BMHC.

3. With the approval of the Chairman, President and CEO of BMHC, the President of BMC West may establish special bonus plans in addition to those outlined in the Region, Area or location guidelines.  Such plans would be for turnaround situations or other unique situations and established by the first quarter of the year unless circumstances warrant otherwise.

4. Payments under the program formulas may be subject to adjustment under the provisions of the wage guidelines and/or laws in effect on the date of distribution.

5. Discretionary Payout

An additional discretionary pool of $200,000 has been approved for the BMHC Chairman, President and Chief Executive Officer to award for other special circumstances.  The discretionary pool may be used throughout the company to recognize outstanding performance at the individual or company level and is approved by the Board of Directors taking into consideration the following:

1. The degree of financial success achieved by the corporation.

2. The degree to which participants manage their responsibilities and the resulting effect on profitability, i.e., the management, positive or negative, of circumstances substantially beyond their control.  This includes major market fluctuations, strikes, or major changes in economic conditions.

IV. Communication

It is the responsibility of the President of BMC West to assure that all the provisions of the bonus plan are communicated to the participants including the potential dollar payouts and requirements necessary to achieve those payouts.

V. Reporting

Financial results will be calculated during the month of January with the appropriate payouts made to participants no later than the end of February.

VI. Authorization

The company retains the right to amend, modify, or otherwise make revisions to this plan annually as deemed necessary by the Board of Directors.

EX-10.42

Exhibit 10.42

Building Materials Holding Corporation

2005 Bonus Program

BMC Construction Management

Purpose

The BMC Construction staff bonus plan is to provide a financial incentive for select BMC Construction management to achieve specific financial objectives.  The bonus plan is composed of three primary parts: (I) eligibility for participation, (II) creation of a bonus pool, and (III-IV) payout of the bonus pool.  Our philosophy is to have an ongoing and consistent bonus program, however, the directors reserve the right to make any necessary changes each year to ensure its effectiveness for the shareholders and plan participants.  Each year the BMHC CAO will work with outside independent consultants and/or the CFO and insure that total compensation of the participants is reasonable in relation to performance metrics and that internal equity within BMHC is maintained.  After review by the CAO the plan will be sent on to the Compensation Committee.  Each year, the plan must be approved by the Compensation Committee of the Board of Directors and implemented by the Chairman, President and Chief Executive Officer of BMHC and the CEO of BMC Construction.

I. Eligibility for Participation

1. Eligibility for Participation in the Bonus Program

Any employee newly hired or transferred to an eligible position may be placed on the bonus list, pro rata, with the approval of the CEO of BMC Construction.  A participant whose employment terminates during the year is no longer eligible for the plan unless his termination is due to retirement, disability, or death.  In such cases, a pro rata bonus payment may be made.

2. Participation in the Program

An appropriate form will be used at the beginning of the year to identify the individuals who will participate in the plan and to indicate what each participant's share of the pool will be.  The form will be completed at year-end to determine the final bonus awards.

II. Creation of a Bonus Pool

The bonus pool for BMC Construction management staff is proposed to be one percent (1.0%) times BMC Construction (BMCC) EBITA earnings, and four percent (4.0%) times BMCC pre-tax economic profit and zero point three five percent (0.35%) times BMHC EBITA and one point four percent (1.4%) times BMHC pre-tax economic profit.  Final percentage numbers for 2005 will be determined upon receiving the most current forecast prior to 8-1-2005.

The bonus plan creation and payout will be based upon the attached excel sheet outline for BMC Construction management.  The detail calculations of the pool amount and awards will be prepared independent of BMC Construction by the BMHC Controller’s staff and reviewed by the CAO and CFO of BMHC.

The percentage formula may change from year to year to reflect growth of the company, competitive pay practices and specific pay for performance criteria.

III. Payout of the Bonus Pool

1. The compensation committee of the Board of Directors retains the right to review any material extraordinary credits or charges to company earnings, including charges under the impairment of asset review, to determine if they should or should not be included in determining the appropriate earnings for bonus computation purposes.  In January, prior to the bonus calculations, any charges that may be included in this section will be submitted to the committee for such review.  In addition, the committee reserves the right to determine if an excessive “windfall” would be created due to factors beyond what would be appropriate, given the circumstances that exist, and make necessary adjustments to the pool.

2. A discretionary pool will be made available for distribution by the BMCC CEO to those key employees who merit such consideration through the achievement of their objectives, unique accomplishments as well as their overall performance and that of the company.  This pool will be ten percent (10%) of the total pool.

3. The bonus pool generated in Section III-1 will be paid out in February for those eligible employees still employed on December 31.  An interim pay out will be made for non-officers on August 1^st of the current year based on 75% of that earned through the first half of the year.  An employee must still be employed and eligible as of 6-30-05 in order to receive a mid-year pay out.  Employees terminating during the balance of the year after 6-30-05 will not be eligible for any additional payouts except as provided in I-1.  

4. Reallocation of such forfeited payouts to other employees, as noted in paragraph #3, will not be allowed unless specifically approved by the Chairman and CEO of BMHC.

5. With the approval of the Chairman, CEO and President of BMHC, special bonus plans may be established.  Such plans would be for turnaround situations or other unique situations and established by the first quarter of the year unless circumstances warrant otherwise.

6. Payments under the program formulas may be subject to adjustment under the provisions of the wage guidelines and/or laws in effect on the date of distribution.

7. Discretionary Payout

An additional discretionary pool of $200,000 has been approved for the BMHC Chairman, President and Chief Executive Officer to award for other special circumstances.  The discretionary pool may be used throughout BMHC to recognize outstanding performance at the individual or company level and is approved by the Board of Directors taking into consideration the following:

1. The degree of financial success achieved by the corporation.

2. The degree to which participants manage their responsibilities and the resulting effect on profitability, i.e., the management, positive or negative, of circumstances substantially beyond their control.  This includes major market fluctuations, strikes, or major changes in economic conditions.

IV. Communication

It is the responsibility of the CEO of BMC Construction to assure that all the provisions of the bonus plan are communicated to the participants including the potential dollar payouts and requirements necessary to achieve those payouts.

V. Reporting

Financial results will be calculated during the month of January with the appropriate payouts made to participants no later than the end of February.

VI. Authorization

The company retains the right to amend, modify, or otherwise make revisions to this plan annually as deemed necessary by the Board of Directors.

EX-10.43

Exhibit 10.43

Building Materials Holding Corporation

2005 Deferred Compensation Plan

for Directors

(Effective as of January 1, 2005)

TABLE OF CONTENTS

Page

ARTICLE 1. DEFINITIONS		24
1.1	Account	24
1.2	Beneficiary	24
1.3	Cash Account	24
1.4	Change in Control	24
1.5	Code	25
1.6	Committee	25
1.7	Company	25
1.8	Company Contributions	25
1.9	Compensation	25
1.10	Disability	25
1.11	Effective Date	26
1.12	Fees	26
1.13	Hardship	26
1.14	Participant	26
1.15	Plan	26
1.16	Plan Year	26
1.17	Regulations	26
1.18	Separation from Service	26
1.19	Stock	27
1.20	Trust or Trust Agreement	27
1.21	Trust Fund	27
1.22	Trustee	27
ARTICLE 2. ELIGIBILITY		27
ARTICLE 3. DEFERRED COMPENSATION		27
3.1	Deferred Compensation	27
3.2	Vesting	29
3.3	Election of Payment Terms	29
ARTICLE 4. PAYMENT OF DEFERRED COMPENSATION		31
4.1	Payment upon Distribution Event	31
4.2	Withdrawal for Hardship	31
4.3	Payment upon Change in Control	31
4.4	Payment upon Disability	31
4.5	Payment upon Death	31
4.6	Designation of Beneficiary	32
4.7	Administration of Payments	32
4.8	Permitted Acceleration of Payments	32
4.9	Permitted Delay of Payments	33
ARTICLE 5. TRUST AND INVESTMENT		33
5.1	Accounts	33
5.2	Participants’ Rights Unsecured	33

5.3	Trust Agreement	34
5.4	Investment of Contribution	34
5.5	Voting of Shares Held in Stock Accounts	34
ARTICLE 6. AMENDMENT AND TERMINATION		35
ARTICLE 7. ADMINISTRATION		35
7.1	Administration	35
7.2	Applying for Benefits	35
7.3	Liability of Committee; Indemnification	41
7.4	Expenses	41
ARTICLE 8. GENERAL AND MISCELLANEOUS		41
8.1	Rights Against the Company	41
8.2	Assignment or Transfer	42
8.3	Severability	42
8.4	Construction	42
8.5	Governing Law	42
8.6	Payment Due to Incompetence	42
8.7	Taxes	42
8.8	Insurance	42
8.9	Attorney’s Fees	43
8.10	Plan Binding on Successors and Assignees	43

Appendices	Acknowledgment
	Distribution Election
	Director Election of Deferral
	Beneficiary Designation

BUILDING MATERIALS HOLDING CORPORATION

2005 DEFERRED COMPENSATION PLAN

FOR DIRECTORS

Building Materials Holding Corporation, a Delaware corporation (the “Company”) hereby establishes an unfunded plan for the purpose of providing deferred compensation for a select group of non-employee directors and management consultants in compliance with Section 409A of the Internal Revenue Code, as amended (the “Code”).

RECITALS

WHEREAS, the Participants identified by the Compensation Committee of the Board of Directors of the Company, or any other committee designated by the Board of Directors of the Company to administer this Plan in accordance with Article 8 of the Plan (the “Committee”), as eligible to participate in this Plan (each a “Participant,” or collectively the “Participants”) provide services to the Company; and

WHEREAS, the Company desires to adopt an unfunded deferred compensation plan and the Participants desire the Company to pay certain deferred compensation and/or related benefits to or for the benefit of the Participants, or a designated Beneficiary, or both;

NOW, THEREFORE, the Company hereby establishes this deferred compensation plan to take the place of the 1999 Deferred Compensation Plan for Directors with respect to any compensation earned on or after January 1, 2005.

ARTICLE 1.  DEFINITIONS

1.1 Account. means the separate account(s) established under this Plan for each Participant.  The term Account shall include the Cash Account and the Stock Account, except where the context indicates otherwise.  The Company shall furnish each Participant with a statement of his or her Account balances at least annually.

1.2 Beneficiary. means the beneficiary designated by the Participant to receive the Participant’s deferred compensation benefits in the event of his or her death.

1.3 Cash Account. means the separate account established under the Plan for each Participant who elects to defer Fees in a form other than Stock.

1.4 Change in Control. means the occurrence of any of the following, limited to the extent any such occurrence is consistent with the definition of a “change in control event” described in Code Section 409A or related Regulations:

(a) when any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 as amended (“Exchange Act”) (other than the Company, a Subsidiary or a Company benefit plan, including any trustee of such plan acting as trustee) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities, where such person’s beneficial ownership of the Company’s securities was not initiated by the Company or approved by the Company’s Board of Directors; or

(b) the occurrence of a transaction requiring shareholder approval, and involving the sale of all or substantially all of the assets of the Company or the merger of the Company with or into another corporation, where such merger was not initiated by the Company and in which Company is not the surviving parent entity; or

(c) a change in the composition of the Board of Directors of the Company during any 12-month period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(d) any liquidation or dissolution of the Company.

1.5 Code. means the Internal Revenue Code of 1986, as amended from time to time.  Reference to any Code section shall include any successor or comparable provision of the Code or application Regulations.

1.6 Committee. means the Compensation Committee of the Board of Directors of the Company, or any other committee designated by the Board of Directors of the company to administer this Plan in accordance with Article 8.

1.7 Company. means Building Materials Holding Corporation, a Delaware Corporation, any successor organization thereto, and any corporation or other entity that must be aggregated with Building Materials Holding Corporation pursuant to the Code or Regulations.

1.8 Company Contributions. means the Company’s discretionary contribution, if any, pursuant to Section 3.1(b).

1.9 Compensation. means any and all Fees payable or Shares issuable to Participants for services rendered.

1.10 Disability means—

(a) the condition of being unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

(b) by reason of suffering from any medically determinable physical or mental impairment that is expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company.

1.11 Effective Date. means January 1, 2005.

1.12 Fees. means cash amounts payable to Participants for services rendered.

1.13 Hardship. refers to a distribution made on account of an unforeseeable immediate and heavy financial need of the Participant and that is necessary to satisfy that financial need in accordance with Code Section 409A and the related Regulations.

(a) Amount.  The amounts distributed with respect to an emergency cannot exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

(b) Circumstances.  Whether a Participant has an immediate and heavy financial need shall be determined by the Committee based on all relevant facts and circumstances, and shall refer to a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152(a)) of the Participant; loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

1.14 Participant. means any individual who is either (a) a member of the Board of Directors who is not an employee of the Company, or (b) providing management consultation to the Company in his or her capacity as an independent contractor.

1.15 Plan. means the Building Materials Holding Corporation 2005 Deferred Compensation Plan for Directors, as amended from time to time.

1.16 Plan Year. means the year beginning each January 1 and ending December 31.

1.17 Regulations means the rules, regulations, interpretations and procedures promulgated under the Code, as modified from time to time.

1.18 Separation from Service. means the termination of association of the Participant as a director or employee of the Company eligible for participation in a deferred compensation plan, and includes termination by way of resignation, removal or Disability.  A Participant who is on temporary leave of absence, whether with or without pay, shall be deemed not to have terminated association.  “Separation from Service” shall be interpreted in accordance with the meaning of “separation from service” or similar term under Code Section 409A and related Regulations.

1.19 Stock. means the Common Stock issuable by the Company to Participants for services rendered.

1.20 Trust or Trust Agreement. means the Trust Agreement applicable to the Plan, as amended from time to time, entered into between the Company and the Trustee to carry out the provisions of the Plan.

1.21 Trust Fund. means the cash and other assets and/or properties held and administered by Trustee, other than Shares, pursuant to the Trust to carry out the provisions of the Plan.

1.22 Trustee. means the designated Trustee acting at any time under the Trust.

ARTICLE 2.  ELIGIBILITY

Eligibility to participate in the Plan shall be limited to the Participants of the Company who—

(a) are classified as non-employee directors or independent contractors, and

(b) have been selected by the Committee to participate in the Plan.

The Committee shall designate the Participants who shall be covered by this Plan in a separate Acknowledgment (in the form provided by the Committee) for each such Participant. Participation in the Plan shall commence as of the date such Acknowledgment is signed by the Participant and delivered to the Company, provided that deferral of Compensation under the Plan shall not commence until the Participant has complied with the election procedures set forth in Section 3.3.  Nothing in the Plan or in the Acknowledgment should be construed to require any contributions to the Plan on behalf of the Participant by the Company.

ARTICLE 3.  DEFERRED COMPENSATION

3.1 Deferral Elections.

(a) Election to Defer Compensation.  Each eligible Participant may elect to defer annually the receipt of a portion of the Fees and/or Shares for active service otherwise payable to him by the Company during each year or portion of a year that the Participant shall provide services to the Company.  Any Participant’s election to defer Compensation must satisfy the following conditions:

(1) Newly Eligible Participants.  A Participant who is elected as a director during a Plan Year shall have 30 days from the date of such election in which to submit the required election documents for the then-current Plan Year.  

(2) Plan Year Elections.  Each other election must be made no later than the day prior to the beginning of the Plan Year with respect to which the Compensation to be deferred is otherwise payable to the Participant or such later date as may be permitted under Code Section 409A.

(3) Minimum and Maximum Deferrals.  The minimum dollar amount of Fees that may be deferred per annum is $5,000.  The minimum percentage of Shares that may be deferred per annum is 100%.

(4) Conditions of Election.  Any deferral election must be in writing, signed by the Participant, and delivered to the Company, together with all other documents required, as determined by the Committee.  Each deferral election shall be irrevocable with respect to any Compensation covered by the election, including Compensation payable in the Plan Year in which the election suspending or modifying the prior deferral election is delivered to the Company.  Each election or discontinuance of an election will continue in force for each successive year until or unless suspended or modified by the filing of a subsequent election with the Company by the Participant in accordance with subsection (a)(2).  The election to defer Compensation shall be in the form provided by the Committee.

(b) Company Contributions.  The Company shall not be obligated to make any other contribution to the Plan on behalf of any Participant at any time.  Company may make Company Contributions to the Plan on behalf of one or more the Participants.  Company Contributions, if any, made to Cash Accounts of the Participants shall be determined in the sole and absolute discretion of the Company, and may be made without regard to whether the Participant to whose Cash Account such contribution is credited has made, or is making, deferrals.  The Company shall not be bound or obligated to apply any specific formula or basis for calculating the amount of any Company Contributions, and the Company shall have sole and absolute discretion as to the allocation of Company Contributions among Participants’ Cash Accounts.  The use of any particular formula or basis for making a Company Contribution in one year shall not bind or obligate the Company to use such formula or basis in any other year.  

(c) Accounts.  The Company shall establish on its books one or two separate Accounts for each Participant who participates in the Plan: a Stock Account and/or a Cash Account.  Fees deferred by a Participant shall be credited to the Stock Account or the Cash Account as elected by the Participant at the time the Participant elects to defer Fees.  Such election may be divided between the two Accounts in increments of 25% of the deferred Fees covered by the election.  An election between the Stock Account and the Cash Account shall be irrevocable as to the deferred Fees covered by the election and no transfers between the Stock Account and the Cash Account shall be permitted.  No special fund shall be established nor shall any notes or securities be issued by the Company with respect to a Participant’s Accounts.

The Company shall withhold the amount or percentage of Compensation specified to be deferred in equal amounts at the time or times such Compensation is or otherwise would be paid to the Participant.  The amount or percentage of Fees or Shares that a Participant elects to defer will remain constant for the Plan Year of the election and shall not be subject to change during the Plan Year.

(1) Fees.  The credit for deferred Fees shall be entered on the Company’s books of account each quarter at the time that Fees are paid to other the Participants who do not elect to defer the payment of such Fees.  

(2) Shares.  The number of Shares deferred by a Participant shall be credited to the Stock Account, including fractional shares.  The credit for deferred Shares shall be entered on the Company’s books of account as soon as practicable after the Company’s annual shareholders’ meeting of the year subject to the deferral.  With respect to Fees deferred to a Participant’s Stock Account, the Stock Account shall be credited with a number of shares equal to the deferred Fees divided by the fair market value of the shares.  Dividends payable on Shares may be used to purchase additional Shares, as determined in the sole discretion of the Trustee.

3.2 Vesting.  All deferrals elected by the Participant from Fees or Shares shall be fully vested at all times.  Notwithstanding any provision of the Plan to the contrary, Company Contributions, if any, may be subject to a substantial risk of forfeiture in accordance with the terms of a vesting schedule, which may be selected by the Company in its sole and absolute discretion.

3.3 Election of Payment Terms.

(a) Initial Election - Time of Distribution.  By the later of December 31, 2005 and the date that is 30 days after becoming eligible for the Plan, each Participant will submit an election of the time of distribution applicable to the entirety of the Participant’s Accounts.  Participants may choose among the following times for distribution in accordance with the form provided by the Committee:

(1) upon the Participant’s reaching a specified age,

(2) upon the beginning of the Plan Year following the passage of a specified number of years,

(3) upon the Participant’s Separation from Service with the Company,

(4) upon the earliest to occur of—

(A) the Participant’s reaching a specified age,

(B) the beginning of the Plan Year following the passage of a specified number of years, and

(C) the Participant’s Separation from Service with the Company,

(5) upon the later to occur of—

(A) the Participant’s reaching a specified age,

(B) the beginning of the Plan Year following the passage of a specified number of years, and

(C) the Participant’s Separation from Service.

(b) Initial Election - Method of Distribution.  By the later of December 31, 2005 and the date that is 30 days after becoming eligible for the Plan, each Participant (or Beneficiary) will submit an election of the method of distribution applicable to the Participant’s entire Account.  Participants may choose among the following methods of distribution in accordance with the form provided by the Committee:

(1) a single lump sum payment, or

(2) monthly installments over a designated period of 5 or 10 years, which shall be treated as a single payment for election purposes.

In the event the Participant fails properly to designate the method of distribution, subject to a subsequent election made under subsection (c), such amounts shall be payable in the form of a lump sum.

(c) Subsequent Elections to Change Timing or Method of Distribution.  A Participant may not accelerate the time or schedule of any payment under the Plan, except as provided in Regulations.  Any change to an election regarding the timing or method of distribution must satisfy the following conditions:

(1) the subsequent election to delay a payment must be made no later than 12 months prior to the date of the first scheduled payment; and

(2) the first payment must be deferred for a period of at least 5 years from the date the payment would otherwise have been made.

If such subsequent election does not satisfy the conditions specified in this subsection, the prior election shall be used to determine the timing and form of payment.  The last effective election accepted and acknowledged by the Committee shall govern the payment of the Participant’s Account.  Elections under this subsection will not affect the timing of distributions made on account of Disability, death or Hardship except as provided in Article 4.

ARTICLE 4.  PAYMENT OF DEFERRED COMPENSATION

4.1 Payment upon Distribution Event.  Except as otherwise provided in this article, a Participant will be entitled to receive all amounts credited to the Participant’s Accounts in accordance with the terms of his or her elections under Article 3.

4.2 Withdrawal for Hardship.  A Participant may apply for distributions from his or her Accounts to the extent that the Participant demonstrates to the reasonable satisfaction of the Committee that he or she needs the funds due to Hardship.  Any Participant receiving a distribution on account of Hardship shall be ineligible to defer any additional compensation under the Plan until the first day of the Plan Year following the second anniversary of the date of the distribution. In addition, a new election of deferral must be submitted to the Company as a condition of participation in the Plan.

4.3 Payment upon Change in Control. Notwithstanding any other provisions of this Plan, the aggregate balances credited to and held in the Participants’ Accounts shall be distributed to the Participants in a lump sum within 30 days of a Change in Control.

4.4 Payment upon Disability.  Upon a Participant’s Disability, as determined by the Committee in its sole discretion, prior to the date when payment of his or her Accounts would otherwise commence under Article 3, the Participant will be entitled to receive all amounts credited to the Accounts as of the date of Disability according to the method of payment elected by the Participant.

4.5 Payment upon Death.  Upon a Participant’s Separation from Service by reason of death, prior to the date when payment of his or her Accounts would otherwise commence under Article 3, the Participant’s Beneficiary will be entitled to receive all amounts credited to the Accounts of the Participant as of the date of death according to the method of payment elected by the Participant, or to the extent permissible under Code Section 409A, according to the method of payment elected by the Beneficiary.  Upon the death of the Participant following the commencement of distribution, but prior to complete distribution of the entire balance of the Participant’s Accounts, the balance of the Participant’s Accounts on the date of death shall continue to be paid in the elected form of payment to the Participant’s Beneficiary.

4.6 Designation of Beneficiary.  The Participant may designate a Beneficiary or Beneficiaries to receive any amount due hereunder by the Participant by written notice thereof to the Company at any time prior to his or her death and may revoke or change the Beneficiary so designated without the Beneficiary’s consent by written notice delivered to Company at any time and from time to time prior to the Participant’s death.  If the Participant is married and a resident of a community property state, one half of any amount due under the Plan which is the result of an amount contributed to the Plan during the Participant’s marriage is the community property of the Participant’s spouse and the Participant may designate a Beneficiary or Beneficiaries to receive only the Participant’s one-half interest. If the Participant shall have failed to designate a Beneficiary, or if no such Beneficiary shall survive him, then such amount shall be paid to his or her estate. Designations of Beneficiaries shall be in the form provided by the Committee.

4.7 Administration of Payments. Distribution of the lump sum or the first installment shall be made or commence within 90 days following the date of the distribution event, but in no event later than the end of the 2½ month period following the Plan Year in which occurs the distribution event.  Subsequent installments, if any, shall be made on the first day of each month following the first installment as determined by Company.  The amount of each installment shall be calculated by dividing the Cash Account balance or the number of Shares in the Stock Account as of the date of the distribution by the number of installments remaining pursuant to the Participant’s distribution election.  Each such installment, if any, shall take into account earnings credited to the balance of the Account remaining unpaid.  Benefits payable to a Participant from a Stock Account shall only be paid to the Participant as a distribution of Common Stock plus cash for fractional shares.  Benefits payable to a Participant from a Cash Account shall only be paid to the Participant in cash.

4.8 Permitted Acceleration of Payments.  To the extent permitted by Code Section 409A and related Regulations, the Company may, in the sole discretion of the Committee, commence distribution to Participant, Participant’s Beneficiary or other appropriate payee the portion of Participant’s vested Plan Benefit authorized for distribution in accordance with Code Section 409A and related Regulations, including the following:

(a) amounts payable to an individual other than the Participant under a domestic relations order approved by the Committee in its sole discretion;

(b) de minimis cashout payments that result in the termination of the entirety of a Participant’s interest in the Plan, if the payment is made on or before the later of December 31 of the Plan Year in which occurs the Participant’s Separation from Service or the date 2½ months after the Participant’s Separation from Service and the payment is not greater than $10,000;

(c) payment to Participant to pay the Federal Insurance Contributions Act tax imposed under Code Section 3101 and 3121(v)(2) on Eligible Compensation deferred under the Plan, grossed up as permitted under applicable Regulations; and

(d) payment to Participant in the event the Plan with respect to that Participant fails to meet the requirements of Code Section 409A and related Regulations in an amount not to exceed the amount required to be included in income as a result of the failure to comply with the requirements of Code Section 409A and the related Regulations.

4.9 Permitted Delay of Payments.  To the extent permitted by Code Section 409A and related Regulations, the Company shall delay distribution to Participant, Participant’s Beneficiary or other appropriate payee the portion of Participant’s vested Plan Benefit authorized for distribution to the extent—

(a) that the Committee reasonably anticipates that the Company’s deduction with respect to such payment otherwise would be limited or eliminated by application of Code Section 162(m);

(b) that the Committee reasonably anticipates that the making of the payment will violate a term of a loan agreement or other similar contract to which the Company is a party, and such violation will cause material harm to the Company;

(c) that the Committee reasonably anticipates that the making of the payment will violate federal securities laws or other applicable law;

(d) upon such other events and conditions as may be permitted under the Code and Regulations;

provided that the payment shall be made at the earliest date at which the Committee reasonably anticipates that the applicable circumstance specified above is of no further force or effect.

ARTICLE 5.  TRUST AND INVESTMENT

5.1 Accounts.  The Company shall establish separate Accounts for each Participant who participates in the Plan.  No special fund shall be established nor shall any notes or securities be issued by the Company with respect to a Participant’s Accounts.

5.2 Participants’ Rights Unsecured. The right of the Participant or his or her Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company, and neither the Participant nor his or her Beneficiary shall have any rights in or against any amount credited to his or her Cash Account or Stock Account or any other specific assets of the Company, except as otherwise provided in the Trust.  Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between the Plan and the Company or any other person.  

5.3 Trust Agreement. The Company may establish the Trust for the purpose of retaining assets set aside by the Company pursuant to the Trust Agreement for payment of all or a portion of the amounts payable pursuant to the Plan.  Any benefits not paid from the Trust shall be paid solely from the Company’s general funds, and any benefits paid from the Trust shall be credited against and reduced by a corresponding amount the Company’s liability to the Participants under the Plan.  No special or separate fund, other than the Trust Agreement, shall be established and no other segregation of assets shall be made to assure the payment of any benefits hereunder.  All Trust Funds shall be subject to the claims of general creditors of the Company in the event the Company is insolvent (as that term is defined in the Trust Agreement).  The obligations of the Company to pay benefits under the Plan constitute an unfunded, unsecured promise to pay and Participants shall have no greater rights than general creditors of the Company.  Trust assets shall not, at any time, be located outside of the United States or be transferred outside of the United States, whether or not such assets are available to satisfy claims of general creditors.

5.4 Investment of Contribution.

(a) The investment options available to each Participant shall be determined by the Company and set forth in a separate written document, a copy of which shall be attached hereto and by this reference is incorporated herein.  Each Participant shall have the right to direct the Trustee as to the investment of his or her Cash Account in accordance with policies and procedures implemented by the Trustee.  The Company shall not be liable for any investment decision made by any Participant while the funds attributable to the Participant’s Accounts are held by the Trustee.

(b) Cash Accounts shall be credited with the actual financial performance or earnings generated by such investments directed by the Participant and made by the Trustee, until the Cash Account has been fully distributed to the Participant or to the Participant’s Beneficiary.  Stock Accounts shall only be credited with any dividends or other distributions received in respect of the Shares.  

(c) Notwithstanding any provision of the Plan to the contrary, the Committee or the Trustee may determine not to take into account the Participant’s designated investments and may invest the Participant’s Account in any other manner as the Committee or the Trustee shall determine.

5.5 Voting of Shares Held in Stock Accounts.  At the time of mailing of notice of each annual or special stockholders’ meeting of the Company, the Company shall send a copy of the notice and all proxy solicitation materials to each Participant who has Shares held in a Stock Account, together with a voting direction form for return to the proxy holder or its designee.  The Participant shall have the right to direct the proxy holder as to the manner in which the proxy holder is to vote the Shares credited to the Participant’s Stock Account.  The Trustee, in its sole discretion, shall have the right to vote shares for which it has received no directions from the Participant.  With respect to all rights other than the right to vote, the Company shall follow the directions of the Committee.

ARTICLE 6.  AMENDMENT AND TERMINATION

The Committee shall have the right to amend the Plan at any time and from time to time, including a retroactive amendment.  Any such amendment shall become effective upon the date stated therein, and shall be binding on all Participants, except as otherwise provided in such amendment; provided, however, that said amendment shall not affect adversely benefits payable to an affected Participant without the Participant’s written approval.

ARTICLE 7.  ADMINISTRATION

7.1 Administration.  The Committee shall administer and interpret the Plan in accordance with the provisions of the Plan and the Trust Agreement.  Any determination or decision by the Committee shall be conclusive and binding on all persons who at any time have or claim to have any interest whatever under the Plan.  To the extent required to avoid penalties under section 409A of the Internal Revenue Code, the Committee intends to interpret and operate the Plan in all respects in compliance with Code Section 409A and related Regulations.

7.2 Applying for Benefits.  The following claims procedures are generally applicable to claims filed under the Plan.  To the extent required by law and to the extent the Administrator is ruling on a claim for benefits on account of a disability, the Plan will follow, with respect to that claim, claims procedures required by law for plans providing disability benefits.

(a) General Procedures.  Subject to the provisions of subsection (b), the following procedures shall apply in the determination of claims under the Plan.

(1) Filing a Claim.  All applications and claims for benefits shall be filed in writing by the Participant, his or her Beneficiary, or the authorized representative of the claimant, by completing the procedures required by the Committee.  The procedures shall be reasonable and may include the completion of forms and the submission of documents and additional information.

(2) Review of Claim.  The Committee shall review all applications and claims for benefits and shall decide whether to approve or deny the claim in whole or in part.  If a claim is denied in whole or in part, the Committee shall provide written notice of denial to the claimant within a reasonable period of time no later than 90 days after the Committee receives the claim, unless special circumstances require an extension of time for processing the claim.  If an extension is required, the Committee shall notify the claimant in writing (including by electronic media) by the end of the initial 90-day period and indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render a decision on the claim.  The extension shall not exceed an additional 90 days.  The notice of denial shall be written (including in electronic media) in a manner calculated to be understood by the claimant and shall include the following:

(A) specific reasons for the denial;

(B) specific references to pertinent Plan provisions;

(C) description of any additional material or information necessary for the claimant to perfect his or her claim and an explanation of why such material or information is necessary; and

(D) appropriate information as to the steps the claimant should take if he or she wishes to submit the denied claim for review, including any applicable time limits.

(3) Appealing a Claims Denial.  If the claimant wishes a review of the denied claim, he or she shall notify the Committee in writing within 60 days of the claimant’s receipt of notification of the denied claim.  The claimant or the claimant’s representative may review pertinent Plan documents and may submit issues or comments to the Committee in writing.  The claimant or the claimant’s representative may provide the Committee with a written statement of the claimant’s position and with written materials in support of his or her position, including documents, records and other information relating to the claim.  The claimant or the claimant’s representative may have, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim.  A document, record or other information shall be considered relevant to the claim if such document, record or other information (A) was relied upon in making the benefit determination, (B) was submitted, considered or generated in the course of making the benefit determination, without regard to whether such document, record or other information was relied upon in making the benefit determination, or (C) demonstrates compliance with the administrative processes and safeguards designed to ensure and verify that benefit claim determinations are made in accordance with the Plan and that, where appropriate, the Plan provisions have been applied consistently with respect to similarly situated claimants.

(4) Review of Appeal.  The Committee shall forward all requests for review of a denied claim together with all associated documents to the Chairman of the Committee promptly after receipt.  The Committee shall make its decision on review solely on the basis of the written record, including documents and written materials submitted by the claimant and/or the claimant’s representative.  The Committee shall make a decision on review within a reasonable period of time, not later than 60 days after the Committee receives the claimant’s written request for review unless special circumstances require additional time for review of the claim.  If the Committee needs an extension of time to review the claim, it shall notify the claimant in writing before the end of the initial 60-day period, and shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the determination on review.  The extension shall not be longer than an additional 60 days.  The decision on review will be written in a manner calculated to be understood by the claimant.  If the claim is denied, the written noticed shall include specific reasons for the decision as well as specific references to pertinent Plan provisions on which the decision is based and a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant’s claim for benefits, with “relevant” defined as provided in the previous subsection.  

(b) Determination of Disability.  To the extent the Committee is determining a claims for benefits under the Plan on account of disability, the following procedures shall apply.

(1) Notice of Denial.  If any person claiming benefits under the Plan on account of disability is denied such benefits by the Committee, no later than 45 days after receipt of the claim by the Committee (or within 75 days if special circumstances require an extension and if written (including electronic) notice of such extension and circumstances is given to such person within the initial 45-day period), he or she shall be furnished with written notification from the Committee stating the following: The notice of denial shall be written (including in electronic media) in a manner calculated to be understood by the claimant and shall include the following:

(A) specific reasons for the denial;

(B) specific references to pertinent Plan provisions on which the adverse determination is based;

(C) description of the Plan’s review procedures and time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review;

(D) if an internal rule, guideline, protocol or other similar criterion (a “Guideline”) was relied upon in making the adverse determination, either (A) a copy of the Guideline, or (B) a statement that such Guideline was relied upon in making the adverse determination and a statement that a copy of such Guideline will be provided free of charge to the claimant upon request; and

(E) if the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the Plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request.

In the case of any extension, the notice of extension shall specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues, and the claimant shall be afforded at least 45 days within which to provide the specified information.

In the event that a period of time is extended due to a claimant’s failure to submit necessary information, the period for making the benefit determination shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.

(2) Appeal Process.  A claimant shall have 180 days following receipt of a notification of an adverse benefit determination within which to appeal the determination.  A claimant shall be entitled to submit on appeal written comments, documents, records and other information relating to the claim.  During the time the claimant has for filing an appeal, the claimant shall be provided, upon request and free of charge, reasonable access to and copies of all documents, records and other information relevant to the claim.  The Committee shall forward all requests for review of a denied claim together with all associated documents to the Chair of the Committee promptly after receipt.  The Committee’s review of the claim shall take into account all comments, documents, records and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.  The review shall not give deference to the initial adverse benefit determination.  If the initial benefit determination was, in whole or in part, based on medical judgment (including determinations with regard to whether a particular treatment, drug or other item is experimental, investigational, or not medically necessary or appropriate), in deciding the appeal the Committee shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment.  Such professional shall be an individual who is neither an individual who was consulted in connection with the adverse benefit determination that is the subject of the appeal, nor the subordinate of any such individual.  If the Plan obtained advice from any medical or vocational experts in making the initial benefit determination, the Committee shall identify such experts to the claimant, regardless of whether the advice was relied upon in making the initial benefit determination.

The Committee shall notify the claimant of the benefit determination on review within a reasonable period of time, not to exceed 45 days after receipt by the Plan of the claimant’s request for review, unless the Committee determines that special circumstances (such as the need to hold a hearing, if the Plan’s procedures provide for a hearing) require an extension of time for processing the claim.  If the Committee determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 45-day period.  In no event shall such extension exceed a period of 45 days from the end of the initial period.  The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan expects to render the determination on review.

Notwithstanding the previous paragraph, if the Committee holds regularly scheduled meetings at least quarterly, the Committee shall instead make a benefit determination no later than the date of such meeting that immediately follows the Plan’s receipt of a request for review, unless the request for review is filed within 30 days preceding the date of such meeting.  In such case, a benefit determination may be made by no later than the date of the second meeting following the Plan’s receipt of the request for review.  If special circumstances (such as the need to hold a hearing, if the Plan’s procedures provide for a hearing) require a further extension of time for processing, a benefit determination shall be rendered not later than the third meeting of the Committee following the Plan’s receipt of the request for review.  If such an extension of time for review is required because of special circumstances, the Committee shall provide the claimant with written notice of the extension, describing the special circumstances and the date as of which the benefit determination will be made, prior to the commencement of the extension. The Committee shall notify the claimant of the benefit determination as soon as possible, but not later than 5 days after the benefit determination is made.

The period of time within which a benefit determination on review is required to be made shall begin at the time an appeal is filed in accordance with the reasonable procedures of the Plan, without regard to whether all the information necessary to make a benefit determination on review accompanies the filing.  In the event that a period of time is extended due to a claimant’s failure to submit information necessary to decide a claim, the period for making the benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.

(3) Notification of Benefit Determination on Review.  The Committee shall provide the claimant with written notification of the Plan’s benefit determination on review.  If on review the initial denial of benefits is affirmed, the notification shall set forth, in a manner calculated to be understood by the claimant, the following:

(A) specific reason for the adverse determination;

(B) specific references to pertinent Plan provisions on which the adverse determination is based;

(C) statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits;

(D) statement describing the Plan’s voluntary appeal procedures, if any, and describing the claimant’s right to obtain the information about such procedures, and a statement of the claimant’s right to bring an action under ERISA Section 502(a);

(E) if a Guideline was relied upon in making the adverse determination, either (A) a copy of the Guideline, or (B) a statement that such Guideline was relied upon in making the adverse determination and a statement that a copy of such Guideline will be provided free of charge to the claimant upon request;

(F) if the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the Plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request; and

(G) the following statement: “You and your Plan may have other voluntary alternative dispute resolution options, such as mediation.  One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency.”

(c) The Committee shall have full discretionary authority to consider claims filed under the Plan and to determine eligibility, status and rights of all individuals under the Plan and to construe any and all terms of the Plan.

(d) Following the approval of a claim for benefits under the Plan, pursuant to the claims procedure set forth in this section, the Committee shall have the authority to construe and administer the Plan in a manner that is consistent with the payment of benefits in accordance with the approved claim.

7.3 Liability of Committee; Indemnification.  To the extent permitted by law, the Committee shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan unless attributable to his or her own bad faith or willful misconduct.  The Committee may employ legal counsel, consultants, actuaries and agents as they may deem desirable in the administration of the Plan and may rely on the opinion of such counsel or the computations of such consultant or other agent.  The Committee shall provide for the keeping of detailed written minutes of its actions hereunder, which shall be reviewed by the legal counsel or the consultant engaged by the Committee prior to their finalization.

7.4 Expenses.  The costs of the establishment of the Plan and the adoption of the Plan by the Company, including but not limited to legal and accounting fees, shall be borne by the Company.  The expenses of administering the Plan shall be borne by the Trust; provided, however, that the Company shall bear, and shall not be reimbursed by, the Trust for any tax liability of the Company associated with the investment of assets by the Trust.  All taxes associated with participation in the Plan, including any tax liability under Code Section 409A, shall be the borne by the Participant.

ARTICLE 8.  GENERAL AND MISCELLANEOUS

8.1 Rights Against the Company. Except as expressly provided by the Plan, the establishment of the Plan shall not be construed as giving to any Participant or to any person whomsoever, any legal, equitable or other rights against the Company, or against its officers, directors, agents or shareholders, or as giving to any Participant or Beneficiary any equity or other interest in the assets, business or shares of Company stock or giving any Participant the right to continue rendering services to or for the benefit of the Company. Neither the Plan nor any action taken hereunder shall be construed as giving to any Participant the right to continue rendering services to or for the benefit of the Company or as affecting the right of the Company to dismiss any Participant.  Any benefit payable under the Plan shall not be deemed salary or other compensation for the purpose of computing benefits under any Participant benefit plan or other arrangement of the Company for the benefit of its Participants.

8.2 Assignment or Transfer. No right, title or interest of any kind in the Plan shall be transferable or assignable by any Participant or Beneficiary or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts of the Participant or Beneficiary. Any attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or dispose of any interest in the Plan shall be void.

8.3 Severability. If any provision of the Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of the Plan but shall be fully severable, and this Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein.

8.4 Construction. The article and section headings and numbers are included only for convenience of reference and are not to be taken as limiting or extending the meaning of any of the terms and provisions of the Plan.  Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular.  When used herein, the masculine gender includes the feminine gender.

8.5 Governing Law. The validity and effect of this Plan and the rights and obligations of all persons affected hereby shall be construed and determined in accordance with the laws of the State of Delaware unless superseded by federal law, which shall govern correspondingly.

8.6 Payment Due to Incompetence. If the Committee receives evidence that a Participant or Beneficiary entitled to receive any payment under the Plan is physically or mentally incompetent to receive such payment, the Committee may, in its sole and absolute discretion, direct the payment to any other person or trust which has been legally appointed by the courts or to any other person determined by the Company to be a proper recipient on behalf of such person otherwise entitled to payment, or any of them, in such manner and proportion as the Company may deem proper.  Any such payment shall be in complete discharge of the Company’s obligations under the Plan.

8.7 Taxes. The Company may withhold from any benefits payable under this Plan, all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

8.8 Insurance.  In the event that any Participant elects, in his or her discretion, to independently purchase an insurance policy covering the inability of the Plan or the Trust to make any payments to which Participant is entitled under the Plan or the Trust, the Company shall use its best efforts to facilitate the payment by Participant of any applicable excise taxes which become due as the result of the payment of premiums under such policy.  Nothing contained herein shall be construed as an endorsement by the Company of the purchase of such a policy or a recommendation by the Company that the purchase of such a policy is necessary or desirable as the result of Participant’s participation in the Plan.  In the event that such insurance would result in adverse tax consequences to the Participant, the Participant shall terminate such insurance.

8.9 Attorney’s Fees. The Company shall pay the reasonable attorney’s fees incurred by any Participant in an action brought against the Company to enforce the Participant’s rights under the Plan, provided that such fees shall only be payable in the event that the Participant prevails in such action.

8.10 Plan Binding on Successors and Assignees. The Plan shall be binding upon and inure to the benefit of the Company and its successor and assigns and the Participant and the Participant’s designee and estate.

Acknowledgment

The undersigned Participant hereby acknowledges that the Company has selected him or her as a participant in the Building Materials Holding Corporation 2005 Deferred Compensation Plan for Directors, as amended from time to time, subject to all terms and conditions of the Plan, a copy of which has been received, read, and understood by the Participant in conjunction with executing this Acknowledgment.  The Participant acknowledges that he or she has had satisfactory opportunity to ask questions regarding his or her participation in the Plan and has received satisfactory answers to any questions asked.  The Participant also acknowledges that he or she has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of participation in the Plan.  The Participant understands that his or her participation in the Plan shall not begin until this Acknowledgment has been signed by the Participant and returned to the Company.

Building Materials Holding Corporation	Participant
By: ________________________________	Signature: ________________________________
Title: _______________________________	Name: ___________________________________
Date: ______________________________	Date: ____________________________________

Distribution Election

Pursuant to Section 3.3 of the Building Materials Holding Corporation 2005 Deferred Compensation Plan for Directors, as amended from time to time (the “Plan”), I hereby elect to have all amounts credited to my Account during the period of my participation in the Plan, together with any interest or other earnings credited thereon, distributed to me on the terms elected below:

Timing of Payment.  I elect to have any distributions of money covered by this election paid to me:

______ upon reaching age ___________

______ upon the passage of _____ years

______ upon my Separation from Service with the Company

______ upon the earliest of the above to occur

______ upon the latest of the above to occur

Method of Payment.  I elect to have any distributions of money covered by this election paid to me:

______ Lump sum payment

______ Installments for 60 months

______ Installments for 120 months

Each monthly installment to be paid under an annuity arrangement will be determined as of each installment date by dividing the entire amount in my Account (including interest and other earnings) by the number of installments then remaining to be paid.

Notwithstanding the above election, I elect to have distribution of my Stock Account paid to me in:

______ Lump sum payment

______ Installments of stock certificates annually for a period of up to 5 years

This election shall take effect for amounts deferred by me with respect to the Plan Year beginning January 1, 20__.  The distribution of amounts from my Account pursuant to this election is subject to all of the terms and conditions of the Building Materials Holding Corporation 2005 Deferred Compensation Plan for Directors, a copy of which I have been given by the Employer, and which I have read and understood.

Participant

Signature: _____________________________________	Date: _________________________
Name: ________________________________________

Director Election of Deferral

I understand that, under Section 3.1 of the Building Materials Holding Corporation 2005 Deferred Compensation Plan for Directors (the “Plan”), the minimum annual deferral amount is $5,000 of Compensation for the Plan Year in question.  I elect, pursuant to Section 3.1 of the Plan, to make the following deferral(s) with respect to Compensation earned during the Plan Year beginning January 1, 20___ and ending December 31, 20___:

$_________________ Quarterly as director fee’s are paid (minimum annual = $5,000)

YES_____ / NO_____ Annual director Stock grant

This election shall take effect for the Plan Year beginning January 1, 20__.  It may be terminated or modified by me only with written notice.  The election shall remain in effect for each successive Plan Year until a termination, modification or subsequent election is submitted.  The deferral of Compensation hereby elected is subject to all of the terms and conditions of the Plan and of the Building Materials Holding Corporation 2005 Deferred Compensation Plan for Directors, a copy of which I have been given by the Company, and which I have read and understood.

Participant

Signature: _____________________________________	Date: _________________________
Name: ________________________________________

Beneficiary Designation

In the event I should die prior to the receipt of all money accrued to my credit under this election, I elect to have the balance paid to the following named individual(s) in the following percentages(s) (Complete A if you are a resident of a community property state.  Complete B if the state in which you reside is not a community property state.):

A.	50%	[Spouse]
	______%	_________________________________________________________________
	______%	_________________________________________________________________
	______%	_________________________________________________________________
B.	______%	_________________________________________________________________
	______%	_________________________________________________________________
	______%	_________________________________________________________________
	______%	_________________________________________________________________

Participant

Signature: _____________________________________	Date: _________________________
Name: ________________________________________

To be completed only if any above named beneficiary is not my spouse:

I, as the spouse of _________________________________________________________________________________
_________________________________, do hereby consent to designation of any beneficiary that might in any way impair my rights under applicable state law, including but not limited to, laws relating to Community Property, Wills, Trusts, and Intestacy.

Spouse

Signature: _____________________________________	Date: ____________________
Name: ________________________________________

EX-10.44

Exhibit 10.44

Building Materials Holding Corporation

2005 Deferred Compensation Plan

for Executives

(Effective as of January 1, 2005)

Table of Contents

Page

ARTICLE 1. DEFINITIONS		51
1.1	Account	51
1.2	Beneficiary	51
1.3	Change in Control	51
1.4	Code	52
1.5	Committee	52
1.6	Company	52
1.7	Company Contributions	52
1.8	Disability	52
1.9	Effective Date	52
1.10	Eligible Compensation	52
1.11	Hardship	53
1.12	Key Employee	53
1.13	LTIP	53
1.14	Participant	53
1.15	Plan	53
1.16	Plan Year	53
1.17	Regulations	54
1.18	Separation from Service	54
1.19	Trust or Trust Agreement	54
1.20	Trust Fund	54
1.21	Trustee	54
ARTICLE 2. ELIGIBILITY		54
ARTICLE 3. DEFERRED COMPENSATION		54
3.1	Deferral Elections	54
3.2	Vesting	56
3.3	Election of Payment Terms	56
ARTICLE 4. PAYMENT OF DEFERRED COMPENSATION		58
4.1	Payment upon Distribution Event	58
4.2	Withdrawal for Hardship	58
4.3	Payment upon Change in Control	58
4.4	Payment upon Disability	58
4.5	Payment upon Death	58
4.6	Designation of Beneficiary	59
4.7	Administration of Payments	59
4.8	Permitted Acceleration of Payments	59
ARTICLE 5. TRUST AND INVESTMENT		60
5.1	Accounts	60
5.2	Participants’ Rights Unsecured	60
5.3	Trust Agreement	60
5.4	Investment of Contribution	60

ARTICLE 6. AMENDMENT AND TERMINATION		61
ARTICLE 7. ADMINISTRATION		61
7.1	Administration	61
7.2	Applying for Benefits	61
7.3	Liability of Committee; Indemnification	67
7.4	Expenses	67
ARTICLE 8. GENERAL AND MISCELLANEOUS		67
8.1	Rights Against Company	67
8.2	Assignment or Transfer	68
8.3	Severability	68
8.4	Construction	68
8.5	Governing Law	68
8.6	Payment Due to Incompetence	68
8.7	Taxes	68
8.8	Insurance	69
8.9	Attorney’s Fees	69
8.10	Plan Binding on Successors and Assignees	69

Appendices	Acknowledgment
	Distribution Election
	Executive Election of Deferral
	Beneficiary Designation

BUILDING MATERIALS HOLDING CORPORATION

2005 DEFERRED COMPENSATION PLAN

FOR EXECUTIVES

Building Materials Holding Corporation, a Delaware corporation (the “Company”) hereby establishes an unfunded plan for the purpose of providing deferred compensation for a select group of management and highly compensated employees in compliance with Section 409A of the Internal Revenue Code, as amended (the “Code”).

RECITALS

WHEREAS, the Participants identified by the Compensation Committee of the Board of Directors of the Company, or any other committee designated by the Board of Directors of the Company to administer the Plan in accordance with Article 8 of the Plan (the “Committee”), as eligible to participate in the Plan (each a “Participant,” or collectively the “Participants”) provide services to the Company; and

WHEREAS, the Company desires to adopt an unfunded deferred compensation plan and the Participants desire the Company to pay certain deferred compensation and/or related benefits to or for the benefit of the Participants, or a designated Beneficiary, or both;

NOW, THEREFORE, the Company hereby establishes this deferred compensation plan to take the place of the 1999 Deferred Compensation Plan for Executives with respect to any compensation earned on or after January 1, 2005.

ARTICLE 1.  DEFINITIONS

1.1 Account. means the separate account(s) established under the Plan and the Trust for each participating Participant.  The Company shall furnish each Participant with an annual statement of his or her Account balance.

1.2 Beneficiary. means the beneficiary designated by the Participant to receive the Participant’s deferred compensation benefits in the event of his or her death.

1.3 Change in Control. means the occurrence of any of the following, limited to the extent any such occurrence is consistent with the definition of a “change in control event” described in Code Section 409A or related Regulations:

(a) when any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 as amended (“Exchange Act”) (other than the Company, a Subsidiary or a Company benefit plan, including any trustee of such plan acting as trustee) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities, where such person’s beneficial ownership of the Company’s securities was not initiated by the Company or approved by the Company’s Board of Directors; or

(b) the occurrence of a transaction requiring shareholder approval, and involving the sale of all or substantially all of the assets of the Company or the merger of the Company with or into another corporation, where such merger was not initiated by the Company and in which Company is not the surviving parent entity; or

(c) a change in the composition of the Board of Directors of the Company during any 12-month period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(d) any liquidation or dissolution of the Company.

1.4 Code. means the Internal Revenue Code of 1986, as amended from time to time.  Reference to any Code section shall include any successor or comparable provision of the Code or application Regulations.

1.5 Committee. means the Compensation Committee of the Board of Directors of the Company or any other committee designated by the Board of Directors of the Company to administer the Plan in accordance with Article 8.

1.6 Company. means Building Materials Holding Corporation, a Delaware Corporation, any successor organization thereto, and any corporation or other entity that must be aggregated with Building Materials Holding Corporation pursuant to the Code or Regulations.

1.7 Company Contributions. means the Company’s discretionary contribution, if any, pursuant to Section 3.1(b).

1.8 Disability. means—

(a) the condition of being unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

(b) by reason of suffering from any medically determinable physical or mental impairment that is expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company

1.9 Effective Date. means January 1, 2005.

1.10 Eligible Compensation. means projected annual compensation, determined on an annual basis by the Company at or before the beginning of the Plan Year, which may consist of salary, bonus, and/or other cash-based or stock-based incentive payments, but which shall not include any special or non-recurring compensatory payments such as hiring bonuses, moving or relocation bonuses or automobile allowances.

1.11 Hardship. refers to a distribution made on account of an unforeseeable immediate and heavy financial need of the Participant and that is necessary to satisfy that financial need in accordance with Code Section 409A and the related Regulations.

(a) Amount.  The amounts distributed with respect to an emergency cannot exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

(b) Circumstances.  Whether a Participant has an immediate and heavy financial need shall be determined by the Committee based on all relevant facts and circumstances, and shall refer to a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152(a)) of the Participant; loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

1.12 Key Employee. means—

(a) an officer of the Company having an annual compensation greater than $130,000 (as adjusted),

(b) a 5% owner of the Company, or

(c) a 1% owner of the Company having annual compensation from the Company of more than $150,000.

For purposes of subsection (a), no more than 50 employees (or, if lesser, the greater of 3 employees or 10% of the employees) shall be treated as officers.

1.13 LTIP. means an incentive program designated by the Company from time to time as the Building Materials Holding Corporation Long Term Incentive Plan, as amended from time to time.

1.14 Participant. means each employee of the Company designated by the Company to be entitled to defer compensation pursuant to the Plan and includes a Participant’s Beneficiary where the context so requires.  

1.15 Plan. means the Building Materials Holding Corporation 2005 Deferred Compensation Plan for Executives, as amended from time to time.

1.16 Plan Year. means the year beginning each January 1 and ending December 31.

1.17 Regulations. means the rules, regulations, interpretations and procedures promulgated under the Code, as modified from time to time.

1.18 Separation from Service. means the termination of employment or association of the Participant as an employee or director of the Company eligible for participation in a deferred compensation plan, and includes termination by way of resignation, removal or Disability.  A Participant who is on temporary leave of absence, whether with or without pay, shall be deemed not to have terminated employment or association.  “Separation from Service” shall be interpreted in accordance with the meaning of “separation from service” or similar term under Code Section 409A and related Regulations.

1.19 Trust or Trust Agreement. means the Trust Agreement applicable to the Plan, as amended from time to time, entered into between the Company and the Trustee to carry out the provisions of the Plan.

1.20 Trust Fund. means the cash and other assets and/or properties held and administered by Trustee pursuant to the Trust to carry out the provisions of the Plan.

1.21 Trustee. means the designated Trustee acting at any time under the Trust.  

ARTICLE 2.  ELIGIBILITY

For any Plan Year, eligibility to participate in the Plan shall be limited to key management employees of the Company who have Eligible Total Compensation in excess of $100,000 for the prior or estimated upcoming Plan Year.  To the extent that the number of Participants eligible to participate in the Plan exceeds 2% of the Company’s total employee population, those eligible to be Participants who have the lowest Eligible Compensation in the prior Plan Year shall not be eligible for the following Plan Year.  

The Committee shall designate Participants who shall be covered by the Plan in a separate Acknowledgment (in the form provided by the Committee) for each such Participant.  Participation in the Plan shall commence as of the date such Acknowledgment is signed by the Participant and delivered to the Company, provided that deferral of compensation under the Plan shall not commence until the Participant has complied with the election procedures set forth in Article 3.  Nothing in the Plan or in the Acknowledgment should be construed to require any contributions to the Plan on behalf of the Participant by the Company.

ARTICLE 3.  DEFERRED COMPENSATION

3.1 Deferral Elections.

(a) Election to Defer Compensation.  Each eligible Participant may elect to defer annually the receipt of a portion of the Eligible Compensation for active service otherwise payable to him by the Company during each Plan Year or portion of a Plan Year that the Participant shall provide services to the Company.  Any Participant’s election to defer Eligible Compensation must satisfy the following conditions:

(1) Newly Eligible Participants.  An employee who first becomes a Participant during a Plan Year shall have 30 days from the date of becoming a Participant to submit the required election documents for the then-current Plan Year.  

(2) Plan Year Elections.  Each other election must be made no later than the day prior to the beginning of the Plan Year with respect to which the Compensation to be deferred is otherwise payable to the Participant or such later date as may be permitted under Code Section 409A.

(3) Minimum and Maximum Deferrals.  The minimum annual deferral amount, which must be withheld from base salary, is $5,000.  The maximum deferral percentage is 80% of Eligible Compensation.

(4) Conditions of Election.  Any deferral election must be in writing, signed by the Participant, and delivered to the Company, together with all other documents required, as determined by the Committee.  Each deferral election shall be irrevocable with respect to any Eligible Compensation covered by the election, including Compensation payable in the Plan Year in which the election suspending or modifying the prior deferral election is delivered to the Company.  Each election or discontinuance of an election will continue in force for each successive year until or unless suspended or modified by the filing of a subsequent election with the Company by the Participant in accordance with subsection (a)(2).  The election to defer Eligible Compensation shall be in the form provided by the Committee.

(b) Company Contributions.  The Company shall not be obligated to make any other contribution to the Plan on behalf of any Participant at any time.  Company may make Company Contributions to the Plan on behalf of one or more the Participants.  Company Contributions, if any, made to Participant Accounts shall be determined in the sole and absolute discretion of the Company, and may be made without regard to whether the Participant to whose Account such contribution is credited has made, or is making, deferrals.  The Company shall not be bound or obligated to apply any specific formula or basis for calculating the amount of any Company Contributions, and the Company shall have sole and absolute discretion as to the allocation of Company Contributions among Participants’ Accounts.  The use of any particular formula or basis for making a Company Contribution in one year shall not bind or obligate the Company to use such formula or basis in any other year.

(c) LTIP.  Participants who are eligible for the LTIP may elect to defer monies received as a result of the LTIP through the Plan.  Such deferral determination must be made no later than the latest date permitted in accordance with Code Section 409A and related Regulations.  An employee may also decide to convert all, or a portion of, their pay out to Company common stock which will be issued in the Participant’s name in an amount based on the market price on the day that the Committee approves the pay out.  Such decision to convert part of the deferral to stock must also be made prior to the final Fiscal Year of the cycle.   Distribution election for the stock must be for the entire amount of stock deferred for that year following at least one year of deferral.

(d) Administration of Deferral Elections.  The Company shall withhold the amount or percentage of base salary specified to be deferred in equal amounts for each payroll period and shall withhold the amount or percentage of cash bonus specified to be deferred at the time or times such bonus is or otherwise would be paid to the Participant.  The amount or percentage of base salary and bonus, as applicable, that a Participant elects to defer will remain constant for the Plan Year of the election and shall not be subject to change during the Plan Year.  “Base salary” means a Participant’s regular annual compensation for a Plan Year, determined as of the first day of that year, excluding bonuses, commissions, overtime, incentive payments, non-monetary awards, and other special compensation, before reduction for compensation deferred pursuant to all qualified and non-qualified plans of the Company.  “Cash bonus” means amounts (if any) awarded under the annual bonus policy maintained by the Company, any commissions earned on sales and any payments made under the Company’s LTIP.

3.2 Vesting.  All deferrals from Eligible Compensation elected by the Participant shall be fully vested at all times.  Notwithstanding any provision of the Plan to the contrary, Company Contributions, if any, may be subject to a substantial risk of forfeiture in accordance with the terms of a vesting schedule, which may be selected by the Company in its sole and absolute discretion.

3.3 Election of Payment Terms.

(a) Initial Election - Time of Distribution.  By the later of December 31, 2005 and the date that is 30 days after becoming eligible for the Plan, each Participant will submit an election of the time of distribution applicable to the Participant’s entire Account.  Participants may choose among the following times for distribution in accordance with the form provided by the Committee:

(1) upon the Participant’s reaching a specified age,

(2) upon the passage of a specified number of years,

(3) upon the Participant’s Separation from Service with the Company or, in the case of Key Employees, a date that is 6 months after the date of Separation from Service (or, if earlier, the Participant’s date of death), or

(4) upon the earliest to occur of—

(A) the Participant’s reaching a specified age,

(B) the passage of a specified number of years, and

(C) the Participant’s Separation from Service with the Company or, in the case of Key Employees, a date that is 6 months after the date of Separation from Service (or, if earlier, the Participant’s date of death),

(5) upon the latest to occur of—

(A) the Participant’s reaching a specified age,

(B) the passage of a specified number of years, and

(C) the Participant’s Separation from Service with the Company or, in the case of Key Employees, a date that is 6 months after the date of Separation from Service (or, if earlier, the Participant’s date of death).

(b) Initial Election - Method of Distribution.  By the later of December 31, 2005 and the date that is 30 days after becoming eligible for the Plan, each Participant (or Beneficiary) will submit an election of the method of distribution applicable to the Participant’s entire Account.  Participants may choose among the following methods of distribution in accordance with the form provided by the Committee:

(1) a lump sum payment, or

(2) monthly installments over a designated period of 5 or 10 years.

In the event the Participant fails properly to designate the method of distribution, subject to a subsequent election made under subsection (c), such amounts shall be payable in the form of a lump sum.

(c) Subsequent Elections to Change Timing or Method of Distribution.  A Participant may not accelerate the time or schedule of any payment under the Plan, except as provided in Regulations.  Any change to an election regarding the timing or method of distribution must satisfy the following conditions:

(1) the subsequent election to delay a payment must be made no later than 12 months prior to the date of the first scheduled payment; and

(2) the first payment must be deferred for a period of at least 5 years from the date the payment would otherwise have been made.

If such subsequent election does not satisfy the conditions specified in this subsection, the prior election shall be used to determine the timing and form of payment.  The last effective election accepted and acknowledged by the Committee shall govern the payment of the Participant’s Account.  Elections under this subsection will not affect the timing of distributions made on account of Disability, death or Hardship except as provided in Article 4.

ARTICLE 4.  PAYMENT OF DEFERRED COMPENSATION

4.1 Payment upon Distribution Event.  Except as otherwise provided in this article, a Participant will be entitled to receive all amounts credited to the Participant’s Account in accordance with the terms of his or her elections under Article 3.

4.2 Withdrawal for Hardship.  A Participant may apply for distributions from his or her Account to the extent that the Participant demonstrates to the reasonable satisfaction of the Committee that he or she needs the funds due to Hardship.  Any Participant receiving a distribution on account of Hardship shall be ineligible to defer any additional compensation under the Plan until the first day of the Plan Year following the second anniversary of the date of the distribution. In addition, a new election of deferral must be submitted to the Company as a condition of participation in the Plan.

4.3 Payment upon Change in Control. Notwithstanding any other provisions of this Plan, the aggregate balances credited to and held in the Participants’ Accounts shall be distributed to the Participants in a lump sum within 30 days of a Change in Control or such longer period as may be required by the Code or Regulations; provided that, in the case of a Key Employee, any payment made on account of a Separation of Service following a Change in Control shall not be made until a date that is 6 months after the date of Separation from Service.

4.4 Payment upon Disability.  Upon a Participant’s Disability, as determined by the Committee in its sole discretion, prior to the date when payment of his or her Accounts would otherwise commence under Article 3, the Participant will be entitled to receive all amounts credited to the Accounts as of the date of Disability according to the method of payment elected by the Participant.

4.5 Payment upon Death.  Upon a Participant’s Separation from Service by reason of death, prior to the date when payment of his or her Accounts would otherwise commence under Article 3, the Participant’s Beneficiary will be entitled to receive all amounts credited to the Accounts of the Participant as of the date of death according to the method of payment elected by the Participant, or to the extent permissible under Code Section 409A, according to the method of payment elected by the Beneficiary.  Upon the death of the Participant following the commencement of distribution, but prior to complete distribution of the entire balance of the Participant’s Accounts, the balance of the Participant’s Accounts on the date of death shall continue to be paid in the elected form of payment to the Participant’s Beneficiary.

4.6 Designation of Beneficiary.  The Participant may designate a Beneficiary or Beneficiaries to receive any amount due hereunder by the Participant by written notice thereof to the Company at any time prior to his or her death and may revoke or change the Beneficiary so designated without the Beneficiary’s consent by written notice delivered to Company at any time and from time to time prior to the Participant’s death.  If the Participant is married and a resident of a community property state, one half of any amount due under the Plan which is the result of an amount contributed to the Plan during the Participant’s marriage is the community property of the Participant’s spouse and the Participant may designate a Beneficiary or Beneficiaries to receive only the Participant’s one-half interest. If the Participant shall have failed to designate a Beneficiary, or if no such Beneficiary shall survive him, then such amount shall be paid to his or her estate. Designations of Beneficiaries shall be in the form provided by the Committee.

4.7 Administration of Payments.  Distribution of the lump sum or the first installment shall be made or commence within 90 days following the date of the distribution event.  Subsequent installments, if any, shall be made on the first day of each month following the first installment as determined by Company.  The amount of each installment shall be calculated by dividing the Account balance as of the date of the distribution by the number of installments remaining pursuant to the Participant’s distribution election.  Each such installment, if any, shall take into account earnings credited to the balance of the Account remaining unpaid.

4.8 Permitted Acceleration of Payments.  To the extent permitted by Code Section 409A and related Regulations, the Company may, in the sole discretion of the Committee, commence distribution to Participant, Participant’s Beneficiary or other appropriate payee the portion of Participant’s Account authorized for distribution in accordance with Code Section 409A and related Regulations, including the following:

(a) amounts payable to an individual other than the Participant under a domestic relations order approved by the Committee in its sole discretion;

(b) de minimis cashout payments that result in the termination of the entirety of a Participant’s interest in the Plan, if the payment is made on or before the later of December 31 of the Plan Year in which occurs the Participant’s Separation from Service or the date 2½ months after the Participant’s Separation from Service and the payment is not greater than $10,000.  Such an amendment may be made with respect to previously deferred amounts under the plan as well as amounts to be deferred in the future; and

(c) payment to Participant to pay the Federal Insurance Contributions Act tax imposed under Code Section 3101 and 3121(v)(2) on Eligible Compensation deferred under the Plan, grossed up as permitted under applicable Regulations.

ARTICLE 5.  TRUST AND INVESTMENT

5.1 Accounts.  The Company shall establish separate Accounts for each Participant who participates in the Plan.  No special fund shall be established nor shall any note or security be issued by the Company with respect to a Participant’s Accounts.

5.2 Participants’ Rights Unsecured.  The right of the Participant or his or her Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company, and neither the Participant nor his or her Beneficiary shall have any rights in or against any amount credited to his or her Account or any other specific assets of the Company, except as otherwise provided in the Trust.  Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between the Plan and the Company or any other person.  

5.3 Trust Agreement.  The Company may establish the Trust for the purpose of retaining assets set aside by the Company pursuant to the Trust Agreement for payment of all or a portion of the amounts payable pursuant to the Plan.  Any benefits not paid from the Trust shall be paid solely from the Company’s general funds, and any benefits paid from the Trust shall be credited against and reduced by a corresponding amount the Company’s liability to the Participants under the Plan.  No special or separate fund, other than the Trust Agreement, shall be established and no other segregation of assets shall be made to assure the payment of any benefits hereunder.  All Trust Funds shall be subject to the claims of general creditors of the Company in the event the Company is insolvent (as that term is defined in the Trust Agreement).  The obligations of the Company to pay benefits under the Plan constitute an unfunded, unsecured promise to pay and Participants shall have no greater rights than general creditors of the Company.  Trust assets shall not, at any time, be located outside of the United States or be transferred outside of the United States, whether or not such assets are available to satisfy claims of general creditors.

5.4 Investment of Contribution.

(a) The investment options available to each Participant shall be determined by the Company and set forth in a separate written document, a copy of which shall be attached hereto and by this reference is incorporated herein.  Each Participant shall have the right to direct the Trustee as to the investment of his or her Account in accordance with policies and procedures implemented by the Trustee.  The Company shall not be liable for any investment decision made by any Participant while the funds attributable to the Participant’s Account are held by the Trustee.

(b) Accounts shall be credited with the actual financial performance or earnings generated by such investments directed by the Participant and made by the Trustee, until the Account has been fully distributed to the Participant or to the Participant’s Beneficiary.

(c) Notwithstanding any provision of the Plan to the contrary, the Committee or the Trustee may determine not to take into account the Participant’s designated investments and may invest the Participant’s Account in any other manner as the Committee or the Trustee shall determine.

ARTICLE 6.  AMENDMENT AND TERMINATION

The Committee shall have the right to amend the Plan at any time and from time to time, including a retroactive amendment.  Any such amendment shall become effective upon the date stated therein, and shall be binding on all Participants, except as otherwise provided in such amendment; provided, however, that said amendment shall not affect benefits adversely to the affected Participant without the Participant’s written approval.  Benefits accruing to a Participant pursuant to any employment agreement in effect between the Company and the Participant that entitles the Participant to participate in and to certain rights under the Plan shall not be affected by an amendment of the Plan.

ARTICLE 7.  ADMINISTRATION

7.1 Administration.  The Committee shall administer and interpret the Plan in accordance with the provisions of the Plan and the Trust Agreement.  Any determination or decision by the Committee shall be conclusive and binding on all persons who at any time have or claim to have any interest whatever under the Plan.  To the extent required to avoid penalties under section 409A of the Internal Revenue Code, the Committee intends to interpret and operate the Plan in all respects in compliance with Code Section 409A and related Regulations.

7.2 Applying for Benefits.  The following claims procedures are generally applicable to claims filed under the Plan.  To the extent required by law and to the extent the Committee is ruling on a claim for benefits on account of a disability, the Plan will follow, with respect to that claim, claims procedures required by law for plans providing disability benefits.

(a) General Procedures.  Subject to the provisions of subsection (b), the following procedures shall apply in the determination of claims under the Plan.

(1) Filing a Claim.  All applications and claims for benefits shall be filed in writing by the Participant, his or her Beneficiary, or the authorized representative of the claimant, by completing the procedures required by the Committee.  The procedures shall be reasonable and may include the completion of forms and the submission of documents and additional information.

(2) Review of Claim.  The Committee shall review all applications and claims for benefits and shall decide whether to approve or deny the claim in whole or in part.  If a claim is denied in whole or in part, the Committee shall provide written notice of denial to the claimant within a reasonable period of time no later than 90 days after the Committee receives the claim, unless special circumstances require an extension of time for processing the claim.  If an extension is required, the Committee shall notify the claimant in writing (including by electronic media) by the end of the initial 90-day period and indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render a decision on the claim.  The extension shall not exceed an additional 90 days.  The notice of denial shall be written (including in electronic media) in a manner calculated to be understood by the claimant and shall include the following:

(A) specific reasons for the denial;

(B) specific references to pertinent Plan provisions;

(C) description of any additional material or information necessary for the claimant to perfect his or her claim and an explanation of why such material or information is necessary; and

(D) appropriate information as to the steps the claimant should take if he or she wishes to submit the denied claim for review, including any applicable time limits and including a statement of the claimant’s right to bring a civil action under ERISA § 502(a) following a denied claim on review.

(3) Appealing a Claims Denial.  If the claimant wishes a review of the denied claim, he or she shall notify the Committee in writing within 60 days of the claimant’s receipt of notification of the denied claim.  The claimant or the claimant’s representative may review pertinent Plan documents and may submit issues or comments to the Committee in writing.  The claimant or the claimant’s representative may provide the Committee with a written statement of the claimant’s position and with written materials in support of his or her position, including documents, records and other information relating to the claim.  The claimant or the claimant’s representative may have, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim.  A document, record or other information shall be considered relevant to the claim if such document, record or other information (A) was relied upon in making the benefit determination, (B) was submitted, considered or generated in the course of making the benefit determination, without regard to whether such document, record or other information was relied upon in making the benefit determination, or (C) demonstrates compliance with the administrative processes and safeguards designed to ensure and verify that benefit claim determinations are made in accordance with the Plan and that, where appropriate, the Plan provisions have been applied consistently with respect to similarly situated claimants.

(4) Review of Appeal.  The Committee shall forward all requests for review of a denied claim together with all associated documents to the Chairman of the Committee promptly after receipt.  The Committee shall make its decision on review solely on the basis of the written record, including documents and written materials submitted by the claimant and/or the claimant’s representative.  The Committee shall make a decision on review within a reasonable period of time, not later than 60 days after the Committee receives the claimant’s written request for review unless special circumstances require additional time for review of the claim.  If the Committee needs an extension of time to review the claim, it shall notify the claimant in writing before the end of the initial 60-day period, and shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the determination on review.  The extension shall not be longer than an additional 60 days.  The decision on review will be written in a manner calculated to be understood by the claimant.  If the claim is denied, the written noticed shall include specific reasons for the decision as well as specific references to pertinent Plan provisions on which the decision is based, a statement of the claimant’s right to bring an action under ERISA § 502(a) and a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant’s claim for benefits, with “relevant” defined as provided in the previous subsection.  

(b) Determination of Disability.  To the extent the Committee is determining a claims for benefits under the Plan on account of disability, the following procedures shall apply.

(1) Notice of Denial.  If any person claiming benefits under the Plan on account of disability is denied such benefits by the Committee, no later than 45 days after receipt of the claim by the Committee (or within 75 days if special circumstances require an extension and if written (including electronic) notice of such extension and circumstances is given to such person within the initial 45-day period), he or she shall be furnished with written notification from the Committee stating the following: The notice of denial shall be written (including in electronic media) in a manner calculated to be understood by the claimant and shall include the following:

(A) specific reasons for the denial;

(B) specific references to pertinent Plan provisions on which the adverse determination is based;

(C) description of the Plan’s review procedures and time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review;

(D) if an internal rule, guideline, protocol or other similar criterion (a “Guideline”) was relied upon in making the adverse determination, either (A) a copy of the Guideline, or (B) a statement that such Guideline was relied upon in making the adverse determination and a statement that a copy of such Guideline will be provided free of charge to the claimant upon request; and

(E) if the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the Plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request.

In the case of any extension, the notice of extension shall specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues, and the claimant shall be afforded at least 45 days within which to provide the specified information.

In the event that a period of time is extended due to a claimant’s failure to submit necessary information, the period for making the benefit determination shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.

(2) Appeal Process.  A claimant shall have 180 days following receipt of a notification of an adverse benefit determination within which to appeal the determination.  A claimant shall be entitled to submit on appeal written comments, documents, records and other information relating to the claim.  During the time the claimant has for filing an appeal, the claimant shall be provided, upon request and free of charge, reasonable access to and copies of all documents, records and other information relevant to the claim.  The Committee shall forward all requests for review of a denied claim together with all associated documents to the Chair of the Committee promptly after receipt.  The Committee’s review of the claim shall take into account all comments, documents, records and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.  The review shall not give deference to the initial adverse benefit determination.  If the initial benefit determination was, in whole or in part, based on medical judgment (including determinations with regard to whether a particular treatment, drug or other item is experimental, investigational, or not medically necessary or appropriate), in deciding the appeal the Committee shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment.  Such professional shall be an individual who is neither an individual who was consulted in connection with the adverse benefit determination that is the subject of the appeal, nor the subordinate of any such individual.  If the Plan obtained advice from any medical or vocational experts in making the initial benefit determination, the Committee shall identify such experts to the claimant, regardless of whether the advice was relied upon in making the initial benefit determination.

The Committee shall notify the claimant of the benefit determination on review within a reasonable period of time, not to exceed 45 days after receipt by the Plan of the claimant’s request for review, unless the Committee determines that special circumstances (such as the need to hold a hearing, if the Plan’s procedures provide for a hearing) require an extension of time for processing the claim.  If the Committee determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 45-day period.  In no event shall such extension exceed a period of 45 days from the end of the initial period.  The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan expects to render the determination on review.

Notwithstanding the previous paragraph, if the Committee holds regularly scheduled meetings at least quarterly, the Committee shall instead make a benefit determination no later than the date of such meeting that immediately follows the Plan’s receipt of a request for review, unless the request for review is filed within 30 days preceding the date of such meeting.  In such case, a benefit determination may be made by no later than the date of the second meeting following the Plan’s receipt of the request for review.  If special circumstances (such as the need to hold a hearing, if the Plan’s procedures provide for a hearing) require a further extension of time for processing, a benefit determination shall be rendered not later than the third meeting of the Committee following the Plan’s receipt of the request for review.  If such an extension of time for review is required because of special circumstances, the Committee shall provide the claimant with written notice of the extension, describing the special circumstances and the date as of which the benefit determination will be made, prior to the commencement of the extension. The Committee shall notify the claimant of the benefit determination as soon as possible, but not later than 5 days after the benefit determination is made.

The period of time within which a benefit determination on review is required to be made shall begin at the time an appeal is filed in accordance with the reasonable procedures of the Plan, without regard to whether all the information necessary to make a benefit determination on review accompanies the filing.  In the event that a period of time is extended due to a claimant’s failure to submit information necessary to decide a claim, the period for making the benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.

(3) Notification of Benefit Determination on Review.  The Committee shall provide the claimant with written notification of the Plan’s benefit determination on review.  If on review the initial denial of benefits is affirmed, the notification shall set forth, in a manner calculated to be understood by the claimant, the following:

(A) specific reason for the adverse determination;

(B) specific references to pertinent Plan provisions on which the adverse determination is based;

(C) statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits;

(D) statement describing the Plan’s voluntary appeal procedures, if any, and describing the claimant’s right to obtain the information about such procedures, and a statement of the claimant’s right to bring an action under ERISA Section 502(a);

(E) if a Guideline was relied upon in making the adverse determination, either (A) a copy of the Guideline, or (B) a statement that such Guideline was relied upon in making the adverse determination and a statement that a copy of such Guideline will be provided free of charge to the claimant upon request;

(F) if the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the Plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request; and

(G) the following statement: “You and your Plan may have other voluntary alternative dispute resolution options, such as mediation.  One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency.”

(c) The Committee shall have full discretionary authority to consider claims filed under the Plan and to determine eligibility, status and rights of all individuals under the Plan and to construe any and all terms of the Plan.

(d) Following the approval of a claim for benefits under the Plan, pursuant to the claims procedure set forth in this section, the Committee shall have the authority to construe and administer the Plan in a manner that is consistent with the payment of benefits in accordance with the approved claim.

7.3 Liability of Committee; Indemnification.  To the extent permitted by law, the Committee shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan unless attributable to his or her own bad faith or willful misconduct.  The Committee may employ legal counsel, consultants, actuaries and agents as they may deem desirable in the administration of the Plan and may rely on the opinion of such counsel or the computations of such consultant or other agent.  The Committee shall provide for the keeping of detailed written minutes of its actions hereunder, which shall be reviewed by the legal counsel or the consultant engaged by the Committee prior to their finalization.

7.4 Expenses.  The costs of the establishment of the Plan and the adoption of the Plan by the Company, including but not limited to legal and accounting fees, shall be borne by the Company.  The expenses of administering the Plan shall be borne by the Trust; provided, however, that the Company shall bear, and shall not be reimbursed by, the Trust for any tax liability of the Company associated with the investment of assets by the Trust.  All taxes associated with participation in the Plan, including any tax liability under Code Section 409A, shall be borne by the Participant.

ARTICLE 8.  GENERAL AND MISCELLANEOUS

8.1 Rights Against the Company.  Except as expressly provided by the Plan, the establishment of the Plan shall not be construed as giving to any Participant or to any person whomsoever, any legal, equitable or other rights against the Company, or against its officers, directors, agents or shareholders, or as giving to any Participant or Beneficiary any equity or other interest in the assets, business or shares of Company stock or giving any Participant the right to be retained in the employment of the Company.  All Participants shall be subject to discharge (with or without cause) to the same extent they would have been if the Plan had never been adopted.  The rights of a Participant hereunder shall be solely those of an unsecured general creditor of the Company.  Neither the Plan nor any action taken hereunder shall be construed as giving to any Participant the right to continue rendering services to or for the benefit of the Company or as affecting the right of the Company to dismiss any Participant.  Any benefit payable under the Plan shall not be deemed salary or other compensation for the purpose of computing benefits under any Participant benefit plan or other arrangement of the Company for the benefit of its Participants.

8.2 Assignment or Transfer.  No right, title or interest of any kind in the Plan shall be transferable or assignable by any Participant or Beneficiary or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts of the Participant or Beneficiary.  Any attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or dispose of any interest in the Plan shall be void.  

8.3 Severability.  If any provision of the Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of the Plan but shall be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein.  

8.4 Construction.  The article and section headings and numbers are included only for convenience of reference and are not to be taken as limiting or extending the meaning of any of the terms and provisions of the Plan.  Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular.  When used herein, the masculine gender includes the feminine gender.  

8.5 Governing Law.  The validity and effect of the Plan and the rights and obligations of all persons affected hereby shall be construed and determined in accordance with the laws of the State of Delaware unless superseded by federal law, which shall govern correspondingly.

8.6 Payment Due to Incompetence.  If the Committee receives evidence that a Participant or Beneficiary entitled to receive any payment under the Plan is physically or mentally incompetent to receive such payment, the Committee may, in its sole and absolute discretion, direct the payment to any other person or Trust which has been legally appointed by the courts or to any other person determined by the Company to be a proper recipient on behalf of such person otherwise entitled to payment, or any of them, in such manner and proportion as the Company may deem proper.  Any such payment shall be in complete discharge of the Company’s obligations under the Plan.  

8.7 Taxes.  All amounts payable hereunder shall be reduced by any and all federal, state, and local taxes imposed upon Participant or his or her Beneficiary, which are required to be paid or withheld by Company.  The determination of Company regarding applicable income and employment tax withholding requirements shall be final and binding on Participant.

8.8 Insurance.  In the event that any Participant elects, in his or her discretion, to independently purchase an insurance policy covering the inability of the Plan or the Trust to make any payments to which Participant is entitled under the Plan or the Trust, the Company shall use its best efforts to facilitate the payment by Participant of any applicable excise taxes which become due as the result of the payment of premiums under such policy.  Nothing contained herein shall be construed as an endorsement by the Company of the purchase of such a policy or a recommendation by the Company that the purchase of such a policy is necessary or desirable as the result of Participant’s participation in the Plan.  In the event that such insurance would result in adverse tax consequences to the Participant, the Participant shall terminate such insurance.

8.9 Attorney’s Fees.  Company shall pay the reasonable attorney’s fees incurred by any Participant in an action brought against Company to enforce Participant’s rights under the Plan, provided that such fees shall only be payable in the event that the Participant prevails in such action.

8.10 Plan Binding on Successors and Assignees. The Plan shall be binding upon and inure to the benefit of the Company and its successor and assigns and the Participant and the Participant’s designee and estate.

ACKNOWLEDGMENT

The undersigned Employee hereby acknowledges that Employer has selected him or her as a participant in the Building Materials Holding Corporation 2005 Deferred Compensation Plan as amended, subject to all terms and conditions of the Plan, a copy of which has been received, read, and understood by the Employee in conjunction with executing this Acknowledgment.  Employee acknowledges that he or she has had satisfactory opportunity to ask questions regarding his or her participation in the Plan and has received satisfactory answers to any questions asked.  Employee also acknowledges that he or she has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of participation in the Plan.  Employee understands that his or her participation in the Plan shall not begin until this Acknowledgment has been signed by Employee and returned to Employer.

Dated:	____________________________________________
Print Name:	____________________________________________
Signed:	____________________________________________
	Employee
Dated:	____________________________________________
	BUILDING MATERIALS HOLDING CORPORATION
Signed:	____________________________________________
	[Officer]

r I waive enrollment in the 2005 Executive Deferred Compensation Plan for the Plan year 2006.

DISTRIBUTION ELECTION

Pursuant to the Building Materials Holding Corporation 2005 Deferred Compensation Plan as amended (the "Plan"), I hereby elect to have all amounts credited to my Account during the period of my participation in the Plan, together with any interest or other earnings credited thereon, distributed to me on the terms elected below:

I elect to have any distributions of money covered by this election paid to me:

oupon reaching age: _____

oupon the passage of ______ years

oupon termination of employment

oupon the earlier to occur of termination of association with Company or passage of ___years

oupon the later to occur of termination of association with Company or passage of ____years

I elect to have any distribution of money covered by this election to receive distribution paid to me in:

oA lump sum

oAn annuity of sixty (60) monthly installments determined as of each installment date by dividing the entire amount in my Account (including interest and other earnings) by the number of installments then remaining to be paid.

oAn annuity of one hundred twenty (120) monthly installments determined as of each installment date by dividing the entire amount in my Account (including interest and other earnings) by the number of installments then remaining to be paid.

Dated: _________________________________________

Print Name: ____________________________________

Signed: _______________________________________

ELECTION OF DEFERRAL

I elect, pursuant to the Building Materials Holding Corporation 2005 Deferred Compensation Plan (the "Plan"), to make the following deferral(s) with respect to compensation earned during the Plan Year beginning January 1, 200_ and ending December 31, 200_:
	o  I waive enrollment in the 2005 Executive Deferred Compensation Plan for Plan year 2006 OR:
Deferred Compensation Plan
	o  _____%	of base salary (even %)
	o  _____%	of any mid year cash bonus (even %) paid to me by Employer for 2006 (payout in mid-2006; must be elected by December 31, 2005) and
	o  _____%	of any year end bonus (even %) paid to me by Employer for 2006 (payout in 2007; must be elected by June 30, 2006)
	OR
	o  $_____	of any mid year cash bonus paid to me by Employer for 2006 (payout in mid-2006, must be elected by December 31, 2005) and
	o  $_____	of any year end bonus paid to me by Employer for 2006 (payout in 2007; must be elected by June 30, 2006)
	o  OR
	o  $ALL	of my cash bonus paid to me by Employer over $________
	Long-Term Incentive Plan (2007 Payout)
	o  $_____ or _____% of any payment from a Long Term Incentive Plan and/or
	o  $_____ or _____% of any payment from a Long Term Incentive Plan that I wish to have converted to BMHC stock and deferred in accordance with my instructions.

This election shall take effect for the Plan Year beginning January 1, 200_.  It may be terminated or modified by me only with written notice.  If termination is not submitted by the last day of any Plan Year, the election shall take effect for the Plan Year following. The deferral of compensation hereby elected is subject to all of the terms and conditions of the Plan and of the Building Materials Holding Corporation 2005 Deferred Compensation Plan Trust Agreement as amended, copies of which the Employer has given me, and which I have read and understood.

Dated:           _____________________________________

Print Name: _____________________________________

Signed:         _____________________________________

Beneficiary Designation

In the event I should die prior to the receipt of all money accrued to my credit under the Building Materials Holding Corporation 2005 Deferred Compensation Plan (the “Plan”), I elect to have the balance paid to the following named individual(s) in the following percentages(s) (Complete A if you are a resident of a community property state.  Complete B if the state in which you reside is not a community property state.):

A.	50%	[Spouse]
	_______%	________________________________________________________________
	_______%	________________________________________________________________
	_______%	________________________________________________________________
B.	_______%	________________________________________________________________
	_______%	________________________________________________________________
	_______%	________________________________________________________________
	_______%	________________________________________________________________

Participant

Signature: _____________________________________	Date: ____________________
Name: ________________________________________

To be completed only if any above named beneficiary is not my spouse:

I, as the spouse of ____________________________________________________________________________

________________, do hereby consent to designation of any beneficiary that might in any way impair my rights under applicable state law, including but not limited to, laws relating to Community Property, Wills, Trusts, and Intestacy.

Spouse

Signature: _____________________________________	Date: ____________________
Name: ________________________________________

EX-10.45

Exhibit 10.45

BUILDING MATERIALS HOLDING CORPORATION

GENERAL TERMS AND CONDITIONS

BMHC OFFICERS

&

BMHC KEY MANAGEMENT

LONG-TERM CASH INCENTIVE PLAN

1. Definitions.

1.1       "Award" means a cash award pursuant to the provisions of the Plan, expressed as a percentage of a Participant's Base Salary during a Performance Cycle.

1.2       "Award Measures" means the sum of the EBITDA component and the ROCE component.

1.3       "Base Salary" means the annual base salary of a Participant at the beginning of a Performance Cycle.

1.4       "Board" means the Board of Directors of the Company, as from time to time constituted.

1.5       "Change of Control" means the occurrence of any of the following events: (i) there shall be consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the transaction or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (ii) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company; or (iii) any 'person' (as defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") shall become the 'beneficial owner' (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of fifty percent (50%) or more of the Company's outstanding Common Stock or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors shall cease for any reason to constitute a majority thereof, unless the election or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.  

1.6       "Code" means the Internal Revenue Code of 1986, as amended.  Reference to a specific section of the Code shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.

1.7       "Committee" means the Compensation Committee of the Company's Board.

1.8       "Company" means Building Materials Holding Corporation, a Delaware corporation and its successors and assigns.

1.9       "Disability" means such time at which a Participant becomes physically or mentally incapacitated or disabled such that the Participant is unable to perform for the Company substantially the same services that the Participant performed prior to incurring such incapacity or disability.

1.10       "EBITDA" means earnings before income taxes, depreciation and amortization.  Three year annualized EBITDA growth shall be calculated using the following formula:

	[(Ey3/EYo) ^ (1/3)] - 1
Where	Ey3 = EBITDA for the third fiscal year of the Performance Cycle
	EYo= EBITDA for the fiscal year end directly preceding the Performance Cycle commencement.

1.11       "Executive" means an officer or key manager employed by the Company.

1.12       "Net Income" means net income including extraordinary items determined in accordance with generally accepted accounting principles except that may be modified by the committee.

1.13       "Participant" means an Executive who is eligible to become a Participant in the Plan pursuant to Section 3 and has not ceased to be a Participant pursuant to Section 6.5.

1.14       “Participant Grant” means the grant to the Executive authorized by the Board or the Committee which sets forth the Participation Level of the Executive in the Plan.

1.15       "Participation Level" means that level in which a Participant is eligible.  The Participation Levels for each Performance Cycle shall be determined by the Board or the Committee and shall be described in the Participant Grant.  

1.16       "Performance Cycle" means a period of three consecutive years.  More than one Performance Cycle may be in progress at any one time.  The second Performance Cycle shall begin on January 1, 2003 and shall end on December 31, 2005.  A new Performance Cycle may, subject to Board or Committee approval, begin on January 1 of each subsequent year.

1.17.       "Performance Targets" means the threshold, target and maximum levels of three-year average ROCE and EBITDA growth components for a particular Performance Cycle.  The Performance Targets for each Performance Cycle shall be determined by the Committee.  The Performance Targets for the first Performance Cycle are set forth below.  Each of the ROCE and EBITDA components are to be equally weighted.

1.18       "Plan" means this Building Materials Holding Corporation Executive Long-Term Cash Incentive Plan, as set forth in this instrument and as hereafter amended from time to time.

1.19       "Return on Capital Employed" or "ROCE" equals Net Income divided by Total Invested Capital.  The three year average ROCE shall be calculated using the following formula:

(ROCE_y1 + ROCE_Y2 + ROCE_Y3)/3)

1.20       "Termination Date" means the date of a Participant's termination of employment with the Company.

1.21       "Total Invested Capital" equals total long-term debt plus preferred stock plus minority interest plus total common equity.

2.       Objectives.  This Plan is intended to provide a long-term cash incentive program for Executives which will:

· encourage improved profitability, return on investment and growth of the Company;

· reinforce economic profit and the balance between growth and efficiency; and

· attract, retain and motivate senior management.

[This Plan is intended to qualify as "performance-based compensation" under Code Section 162(m).]

3. Eligibility.  

Prior to the beginning of each Performance Cycle, the Chairman, President and Chief Executive Officer and the Committee shall approve the Participants and the Participation Level for each Participant for that Performance Cycle.  Participation in the Plan and Participation Level is on a Performance Cycle basis and in the discretion of the Committee.  Thus, an Executive who is selected for participation in a given Performance Cycle is not guaranteed to be selected for participation in any subsequent Performance Cycle.

4. Administration of the Plan.

4.1       Administrator.  The Plan shall be administered by the Committee.  

4.2       Actions by the Committee.  Each decision of a majority of the members of the Committee then in office shall constitute the final and binding act of the Committee.  The Committee may act with or without a meeting being called or held and shall keep minutes of all meetings held and a record of all actions taken by written consent.

4.3       Powers of the Committee.  The Committee shall have all the powers and discretion necessary or appropriate to supervise the administration of the Plan and to control its operation in accordance with its terms, including, but not limited to, the following discretionary powers:

(A)       To interpret and determine the meaning and validity of the provisions of the Plan and to determine any question arising under, or in connection with, the administration, operation or validity of the Plan or any amendment thereto;

(B)       To establish such rules, regulations, agreements, guidelines and procedures for the administration of the Plan;

(C)       To make Participant Grants, establish Participation Levels, set the Performance Cycle, establish Performance Targets, and take such other action as necessary to fulfill the terms of the Plan.

(D)       To determine any and all considerations affecting the eligibility of any Executive to become a Participant or remain a Participant in the Plan;

(E)       To establish and revise any accounting method or formula for the Plan, as provided in Section 1;

(F)       To determine the manner and form in which any payout is to be made under the Plan;

(G)       To employ such counsel, agents and advisers, and to obtain such legal, clerical and other services, as it may deem necessary or appropriate in carrying out the provisions of the Plan;

(H)       To establish, from time to time, rules for the performance of its powers and duties and for the administration of the Plan; and

(I)         To delegate to any one or more of its members or to any other person, severally or jointly, the authority to perform for and on behalf of the Committee one or more of the functions of the Committee under the Plan.

4.4       Decisions of Committee.  All actions, interpretations, and decisions of the Committee or the Board shall be conclusive and binding on all persons, and shall be given the maximum possible deference allowed by law.

5. Determination of Awards.

5.1       Valuation.  At the beginning of each Performance Cycle, the Board or the Committee shall establish the Performance Targets for the Performance Cycle and the Participation Levels for each Participant, which shall be communicated to each Participant through the Participant Grant at the time the Performance Targets are set and any other time during the Performance Cycle, as needed.

5.2       Participation Levels.  At the beginning of each Performance Cycle, the Committee shall (i) assign each Participant a Participation Level, which will determine the Participant's potential Award.  The threshold amount shall be set at 25% of the target amount.  The maximum Award payable with respect to any Performance Cycle shall be 200% of the target amount

5.3       Performance Targets.  At the beginning of each Performance Cycle, the Committee shall determine the Performance Targets for such Performance Cycle.   Awards shall be payable only if a threshold, target or maximum Performance Target objectives is met.  

6. Determination and Payout of Awards.

6.1       Calculation of Award Measures.  At the end of each Performance Cycle, the Committee, or its designee, shall calculate the three-year average annualized EBITDA growth and the three-year average ROCE using the formulas set forth in this Plan.

6.2       Payout Value.  The Award payout shall be determined as follows:

(a) Determine whether the threshold, target or maximum Performance Target is met for the EBITDA Component and the ROCE component.  

(b) In the case of the EBITDA component divide the actual EBITDA growth percentage achieved by the applicable Performance Target for the EBITDA component and multiple the result by 50% (the "EBITDA Award Measure".  In the case of the ROCE component, divide the actual ROCE percentage achieved by the applicable ROCE Performance Level for the ROCE component and multiply the result by 50% (the "ROCE Award Measure").  

(c) Add the EBITDA Award Measure and the ROCE Award Measure and multiply the resulting sum by the applicable Participation Level (threshold, target or maximum).

(d) Multiply the result of the calculation in (c) by the Base Salary of the Participant at the start of the cycle.

A sample calculation will be distributed to each Participant.  No Awards shall be paid to a Participant for a Performance Cycle unless the threshold for either the EBTIDA component or the ROCE component is achieved.

6.3       Award Payment.  Awards shall be paid in cash following the conclusion of each Performance Cycle as soon as reasonably practicable following completion of the audit of the Company's financial statements for the end of the last year in a Performance Cycle.  Subject to approval of the Committee, awards may be deferred into a capital accumulation plan as provided for in an irrevocable deferred compensation election during the second year of the Performance Cycle.  If the Committee, in its discretion, so determines, payment of all or part of an Award to one or more Participants may be deferred in cash or stock for a period provided in the Company’s Deferred Compensation Plan.  Any such deferral shall be subject to such rules and procedures for payment as provided in the Deferred Compensation Plan.

6.4       Termination of Employment.  Upon a Participant's termination of employment with the Company, other than by reason of death, Disability, or retirement after age 55 with at least 5 years of service with the Company, the Participant's right to an Award shall be forfeited.  Upon a termination of employment with the Company by reason of a Participant's death, Disability, or retirement after age 55 with at least 5 years of service with the Company, the Participant's Award will become fully vested and will be prorated to the Termination Date based on the number of days during the Performance Cycle a Participant was employed.  The Award will be paid to the terminated Participant at the end of the Performance Cycle.

6.5       Change of Control.  In the event of a Change of Control during a Performance Cycle, the Performance Cycle will be deemed to have ended at the end of the month immediately preceding the consummation of the Change of Control transaction.  All Participants shall become fully vested.  The Awards shall be calculated based on a deemed achievement of the greater of (1) the Performance Target at the target level or (2) an amount calculated assuming that results achieved through the deemed termination date of the Performance Cycle were achieved for the full Performance Cycle.  The amount of the Award to be paid to each Participant shall be prorated by multiplying the calculated Award by a fraction, the numerator or which shall be the actual number of days which have elapsed during the Performance Cycle (through the deemed termination date) and the denominator of which shall be the total number of days in the Performance Cycle.  Awards shall be determined and paid based on such calculations within 30 days after the consummation of a Change of Control transaction.

6.6       Taxes.  The Company shall withhold all applicable income and other taxes from any Award payment to any Participant.

6.7       Plan Unfunded.  This Plan shall be unfunded. The Company shall not be required to establish any special segregation of assets to assure the payment of Awards.

7. Amendment or Termination of the Plan.  The Plan is voluntary on the part of the Company, and the Company does not guarantee to continue the Plan beyond any Performance Cycle.  The Board may alter, amend or terminate this Plan at any time for any reason.  Any alteration, amendment or termination shall take effect upon the date indicated in the document embodying such alteration, amendment or termination.  No termination shall impair a Participant's right to a previously granted Award, provided that the conditions to payment of the Award are satisfied.

8. Miscellaneous Provisions.

   8.1       Interests Not Transferable.  In no event may either a Participant, a former Participant or his or her beneficiary, spouse or estate sell, transfer, anticipate, assign, hypothecate, or otherwise dispose of any right or interest under the Plan; and such rights and interests shall not at any time be subject to the claims of creditors nor be liable to attachment, execution or other legal process.

8.2       Notices.  All notices or other communications by a Participant to the Company or the Committee under or in connection with this Plan shall be deemed to have been duly given when received by the Committee, in such form specified by the Committee, or by the person, designated by the Committee for that purpose.

8.3       Rights and Duties.  Neither the Company, the Board nor the Committee shall be subject to any liability or duty under the Plan except as expressly provided in the Plan, or for any action taken, omitted or suffered in good faith.

8.4       No Employment Rights.  Nothing in this Plan shall confer upon any Participant the right to continue in the employ of the Company or shall interfere with or restrict in any way the rights of the Company to discharge or change the terms of employment of any Participant at any time for any reason whatsoever, with or without cause.

8.5       Applicable Law.  The provisions of this Plan shall be construed, administered and enforced in accordance with the laws of the State of Delaware.

8.6       Severability.  If any provision of this Plan is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provisions of this Plan, and in lieu of each provision which is held invalid or unenforceable, there shall be added as part of this Plan a provision that shall be as similar in terms to such invalid or unenforceable provision as may be possible and be valid, legal, and enforceable.

8.7       Captions. The captions contained in this Plan are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge or describe the scope or intent of this Plan nor in any way shall affect the construction of any provision of this Plan

9.Effective Date.The effective date of the Plan is January 1, 2003.

EX-10.46

Exhibit 10.46

BUILDING MATERIALS HOLDING CORPORATION

GENERAL TERMS AND CONDITIONS

BMHC OFFICERS

&

BMHC KEY MANAGEMENT

LONG-TERM CASH INCENTIVE PLAN

1. Definitions.

1.1       "Award" means a cash award pursuant to the provisions of the Plan, expressed as a percentage of a Participant's Base Salary during a Performance Cycle.

1.2       "Award Measures" means the sum of the EBITDA component and the ROCE component.

1.3       "Base Salary" means the annual base salary of a Participant at the beginning of a Performance Cycle.

1.4       "Board" means the Board of Directors of the Company, as from time to time constituted.

1.5       "Change of Control" means the occurrence of any of the following events: (i) there shall be consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the transaction or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (ii) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company; or (iii) any 'person' (as defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") shall become the 'beneficial owner' (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of fifty percent (50%) or more of the Company's outstanding Common Stock or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors shall cease for any reason to constitute a majority thereof, unless the election or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.  

1.6       "Code" means the Internal Revenue Code of 1986, as amended.  Reference to a specific section of the Code shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.

1.7       "Committee" means the Compensation Committee of the Company's Board.

1.8       "Company" means Building Materials Holding Corporation, a Delaware corporation and its successors and assigns.

1.9       "Disability" means such time at which a Participant becomes physically or mentally incapacitated or disabled such that the Participant is unable to perform for the Company substantially the same services that the Participant performed prior to incurring such incapacity or disability.

1.10       "EBITDA" means earnings before income taxes, depreciation and amortization.  Three year annualized EBITDA growth shall be calculated using the following formula:

	[(Ey3/EYo) ^ (1/3)] - 1
Where	Ey3 = EBITDA for the third fiscal year of the Performance Cycle
	EYo= EBITDA for the fiscal year end directly preceding the Performance Cycle commencement.

1.11       "Executive" means an officer or key manager employed by the Company.

1.12       "Net Income" means net income including extraordinary items determined in accordance with generally accepted accounting principles except that may be modified by the committee.

1.13       "Participant" means an Executive who is eligible to become a Participant in the Plan pursuant to Section 3 and has not ceased to be a Participant pursuant to Section 6.5.

1.14       “Participant Grant” means the grant to the Executive authorized by the Board or the Committee which sets forth the Participation Level of the Executive in the Plan.

1.15       "Participation Level" means that level in which a Participant is eligible.  The Participation Levels for each Performance Cycle shall be determined by the Board or the Committee and shall be described in the Participant Grant.  

1.16       "Performance Cycle" means a period of three consecutive years.  More than one Performance Cycle may be in progress at any one time.  This Performance Cycle shall begin on January 1, 2004 and shall end on December 31, 2006.  A new Performance Cycle may, subject to Board or Committee approval, begin on January 1 of each subsequent year.

1.17.       "Performance Targets" means the threshold, target and maximum levels of three-year average ROCE and EBITDA growth components for a particular Performance Cycle.  The Performance Targets for each Performance Cycle shall be determined by the Committee.  The Performance Targets for the first Performance Cycle are set forth below.  Each of the ROCE and EBITDA components are to be equally weighted.

1.18       "Plan" means this Building Materials Holding Corporation Executive Long-Term Cash Incentive Plan, as set forth in this instrument and as hereafter amended from time to time.

1.19       "Return on Capital Employed" or "ROCE" equals Net Income divided by Total Invested Capital.  The three year average ROCE shall be calculated using the following formula:

(ROCE_y1 + ROCE_Y2 + ROCE_Y3)/3)

1.20       "Termination Date" means the date of a Participant's termination of employment with the Company.

1.21       "Total Invested Capital" equals total long-term debt plus preferred stock plus minority interest plus total common equity.

2.       Objectives.  This Plan is intended to provide a long-term cash incentive program for Executives which will:

· encourage improved profitability, return on investment and growth of the Company;

· reinforce economic profit and the balance between growth and efficiency; and

· attract, retain and motivate senior management.

[This Plan is intended to qualify as "performance-based compensation" under Code Section 162(m).]

3. Eligibility.  

Prior to the beginning of each Performance Cycle, the Chairman, President and Chief Executive Officer and the Committee shall approve the Participants and the Participation Level for each Participant for that Performance Cycle.  Participation in the Plan and Participation Level is on a Performance Cycle basis and in the discretion of the Committee.  Thus, an Executive who is selected for participation in a given Performance Cycle is not guaranteed to be selected for participation in any subsequent Performance Cycle.

4. Administration of the Plan.

4.1       Administrator.  The Plan shall be administered by the Committee.  

4.2       Actions by the Committee.  Each decision of a majority of the members of the Committee then in office shall constitute the final and binding act of the Committee.  The Committee may act with or without a meeting being called or held and shall keep minutes of all meetings held and a record of all actions taken by written consent.

4.3       Powers of the Committee.  The Committee shall have all the powers and discretion necessary or appropriate to supervise the administration of the Plan and to control its operation in accordance with its terms, including, but not limited to, the following discretionary powers:

(A)       To interpret and determine the meaning and validity of the provisions of the Plan and to determine any question arising under, or in connection with, the administration, operation or validity of the Plan or any amendment thereto;

(B)       To establish such rules, regulations, agreements, guidelines and procedures for the administration of the Plan;

(C)       To make Participant Grants, establish Participation Levels, set the Performance Cycle, establish Performance Targets, and take such other action as necessary to fulfill the terms of the Plan.

(D)       To determine any and all considerations affecting the eligibility of any Executive to become a Participant or remain a Participant in the Plan;

(E)       To establish and revise any accounting method or formula for the Plan, as provided in Section 1;

(F)       To determine the manner and form in which any payout is to be made under the Plan;

(G)       To employ such counsel, agents and advisers, and to obtain such legal, clerical and other services, as it may deem necessary or appropriate in carrying out the provisions of the Plan;

(H)       To establish, from time to time, rules for the performance of its powers and duties and for the administration of the Plan; and

(I)       To delegate to any one or more of its members or to any other person, severally or jointly, the authority to perform for and on behalf of the Committee one or more of the functions of the Committee under the Plan.

4.4       Decisions of Committee.  All actions, interpretations, and decisions of the Committee or the Board shall be conclusive and binding on all persons, and shall be given the maximum possible deference allowed by law.

5. Determination of Awards.

5.1       Valuation.  At the beginning of each Performance Cycle, the Board or the Committee shall establish the Performance Targets for the Performance Cycle and the Participation Levels for each Participant, which shall be communicated to each Participant through the Participant Grant at the time the Performance Targets are set and any other time during the Performance Cycle, as needed.

5.2       Participation Levels.  At the beginning of each Performance Cycle, the Committee shall (i) assign each Participant a Participation Level, which will determine the Participant's potential Award.  The threshold amount shall be set at 25% of the target amount.  The maximum Award payable with respect to any Performance Cycle shall be 200% of the target amount

5.3       Performance Targets.  At the beginning of each Performance Cycle, the Committee shall determine the Performance Targets for such Performance Cycle.   Awards shall be payable only if a threshold, target or maximum Performance Target objectives is met.  

6. Determination and Payout of Awards.

6.1       Calculation of Award Measures.  At the end of each Performance Cycle, the Committee, or its designee, shall calculate the three-year average annualized EBITDA growth and the three-year average ROCE using the formulas set forth in this Plan.

6.2       Payout Value.  The Award payout shall be determined as follows:

(a) Determine whether the threshold, target or maximum Performance Target is met for the EBITDA Component and the ROCE component.  

(b) In the case of the EBITDA component divide the actual EBITDA growth percentage achieved by the applicable Performance Target for the EBITDA component and multiple the result by 50% (the "EBITDA Award Measure".  In the case of the ROCE component, divide the actual ROCE percentage achieved by the applicable ROCE Performance Level for the ROCE component and multiple the result by 50% (the "ROCE Award Measure").  

(c) Add the EBITDA Award Measure and the ROCE Award Measure and multiply the resulting sum by the applicable Participation Level (threshold, target or maximum).

(d) Multiply the result of the calculation in (c) by the Base Salary of the Participant at the start of the cycle.

A sample calculation will be distributed to each Participant.  No Awards shall be paid to a Participant for a Performance Cycle unless the threshold for either the EBTIDA component or the ROCE component is achieved.

6.3       Award Payment.  Awards shall be paid in cash following the conclusion of each Performance Cycle as soon as reasonably practicable following completion of the audit of the Company's financial statements for the end of the last year in a Performance Cycle.  Subject to approval of the Committee, awards may be deferred into a capital accumulation plan as provided for in an irrevocable deferred compensation election during the second year of the Performance Cycle.  If the Committee, in its discretion, so determines, payment of all or part of an Award to one or more Participants may be deferred in cash or stock for a period provided in the Company’s Deferred Compensation Plan.  Any such deferral shall be subject to such rules and procedures for payment as provided in the Deferred Compensation Plan.

6.4       Termination of Employment.  Upon a Participant's termination of employment with the Company, other than by reason of death, Disability, or retirement after age 55 with at least 5 years of service with the Company, the Participant's right to an Award shall be forfeited.  Upon a termination of employment with the Company by reason of a Participant's death, Disability, or retirement after age 55 with at least 5 years of service with the Company, the Participant's Award will become fully vested and will be prorated to the Termination Date based on the number of days during the Performance Cycle a Participant was employed.  The Award will be paid to the terminated Participant at the end of the Performance Cycle.

6.5       Change of Control.  In the event of a Change of Control during a Performance Cycle, the Performance Cycle will be deemed to have ended at the end of the month immediately preceding the consummation of the Change of Control transaction.  All Participants shall become fully vested.  The Awards shall be calculated based on a deemed achievement of the greater of (1) the Performance Target at the target level or (2) an amount calculated assuming that results achieved through the deemed termination date of the Performance Cycle were achieved for the full Performance Cycle.  The amount of the Award to be paid to each Participant shall be prorated by multiplying the calculated Award by a fraction, the numerator or which shall be the actual number of days which have elapsed during the Performance Cycle (through the deemed termination date) and the denominator of which shall be the total number of days in the Performance Cycle.  Awards shall be determined and paid based on such calculations within 30 days after the consummation of a Change of Control transaction.

6.6       Taxes.  The Company shall withhold all applicable income and other taxes from any Award payment to any Participant.

6.7       Plan Unfunded.  This Plan shall be unfunded. The Company shall not be required to establish any special segregation of assets to assure the payment of Awards.

7.       Amendment or Termination of the Plan.  The Plan is voluntary on the part of the Company, and the Company does not guarantee to continue the Plan beyond any Performance Cycle.  The Board may alter, amend or terminate this Plan at any time for any reason.  Any alteration, amendment or termination shall take effect upon the date indicated in the document embodying such alteration, amendment or termination.  No termination shall impair a Participant's right to a previously granted Award, provided that the conditions to payment of the Award are satisfied.

8. Miscellaneous Provisions.

8.1       Interests Not Transferable.  In no event may either a Participant, a former Participant or his or her beneficiary, spouse or estate sell, transfer, anticipate, assign, hypothecate, or otherwise dispose of any right or interest under the Plan; and such rights and interests shall not at any time be subject to the claims of creditors nor be liable to attachment, execution or other legal process.

8.2       Notices.  All notices or other communications by a Participant to the Company or the Committee under or in connection with this Plan shall be deemed to have been duly given when received by the Committee, in such form specified by the Committee, or by the person, designated by the Committee for that purpose.

8.3       Rights and Duties.  Neither the Company, the Board nor the Committee shall be subject to any liability or duty under the Plan except as expressly provided in the Plan, or for any action taken, omitted or suffered in good faith.

8.4       No Employment Rights.  Nothing in this Plan shall confer upon any Participant the right to continue in the employ of the Company or shall interfere with or restrict in any way the rights of the Company to discharge or change the terms of employment of any Participant at any time for any reason whatsoever, with or without cause.

8.5       Applicable Law.  The provisions of this Plan shall be construed, administered and enforced in accordance with the laws of the State of Delaware.

8.6       Severability.  If any provision of this Plan is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provisions of this Plan, and in lieu of each provision which is held invalid or unenforceable, there shall be added as part of this Plan a provision that shall be as similar in terms to such invalid or unenforceable provision as may be possible and be valid, legal, and enforceable.

8.7       Captions. The captions contained in this Plan are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge or describe the scope or intent of this Plan nor in any way shall affect the construction of any provision of this Plan

9.Effective Date.The effective date of the Plan is January 1, 2004.

EX-10.47

Exhibit 10.47

BUILDING MATERIALS HOLDING CORPORATION

GENERAL TERMS AND CONDITIONS

BMHC OFFICERS

&

BMHC KEY MANAGEMENT

LONG-TERM CASH INCENTIVE PLAN

1. Definitions.

1.1       "Award" means a cash award pursuant to the provisions of the Plan, expressed as a percentage of a Participant's Base Salary during a Performance Cycle.

1.2       "Award Measures" means the sum of the EBITDA component and the ROCE component.

1.3       "Base Salary" means the annual base salary of a Participant at the beginning of a Performance Cycle.

1.4       "Board" means the Board of Directors of the Company, as from time to time constituted.

1.5       "Change of Control" means the occurrence of any of the following events: (i) there shall be consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the transaction or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (ii) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company; or (iii) any 'person' (as defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") shall become the 'beneficial owner' (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of fifty percent (50%) or more of the Company's outstanding Common Stock or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors shall cease for any reason to constitute a majority thereof, unless the election or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.  

1.6       "Code" means the Internal Revenue Code of 1986, as amended.  Reference to a specific section of the Code shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.

1.7       "Committee" means the Compensation Committee of the Company's Board.

1.8       "Company" means Building Materials Holding Corporation, a Delaware corporation and its successors and assigns.

1.9       "Disability" means such time at which a Participant becomes physically or mentally incapacitated or disabled such that the Participant is unable to perform for the Company substantially the same services that the Participant performed prior to incurring such incapacity or disability.

1.10       "EBITDA" means earnings before income taxes, depreciation and amortization.  Three year annualized EBITDA growth shall be calculated using the following formula:

	[(Ey3/EYo) ^ (1/3)] - 1
Where	Ey3 = EBITDA for the third fiscal year of the Performance Cycle
	EYo= EBITDA for the fiscal year end directly preceding the Performance Cycle commencement.

1.11       "Executive" means an officer or key manager employed by the Company.

1.12       "Net Income" means net income including extraordinary items determined in accordance with generally accepted accounting principles except that may be modified by the committee.

1.13       "Participant" means an Executive who is eligible to become a Participant in the Plan pursuant to Section 3 and has not ceased to be a Participant pursuant to Section 6.5.

1.14       “Participant Grant” means the grant to the Executive authorized by the Board or the Committee which sets forth the Participation Level of the Executive in the Plan.

1.15       "Participation Level" means that level in which a Participant is eligible.  The Participation Levels for each Performance Cycle shall be determined by the Board or the Committee and shall be described in the Participant Grant.  

1.16       "Performance Cycle" means a period of three consecutive years.  More than one Performance Cycle may be in progress at any one time.  This Performance Cycle shall begin on January 1, 2005 and shall end on December 31, 2007.  A new Performance Cycle may, subject to Board or Committee approval, begin on January 1 of each subsequent year.

1.17.       "Performance Targets" means the threshold, target and maximum levels of three-year average ROCE and EBITDA growth components for a particular Performance Cycle.  The Performance Targets for each Performance Cycle shall be determined by the Committee.  The Performance Targets for the first Performance Cycle are set forth below.  Each of the ROCE and EBITDA components are to be equally weighted.

1.18       "Plan" means this Building Materials Holding Corporation Executive Long-Term Cash Incentive Plan, as set forth in this instrument and as hereafter amended from time to time.

1.19       "Return on Capital Employed" or "ROCE" equals Net Income divided by Total Invested Capital.  The three year average ROCE shall be calculated using the following formula:

(ROCE_y1 + ROCE_Y2 + ROCE_Y3)/3)

1.20       "Termination Date" means the date of a Participant's termination of employment with the Company.

1.21       "Total Invested Capital" equals total long-term debt plus preferred stock plus minority interest plus total common equity.

2.       Objectives.  This Plan is intended to provide a long-term cash incentive program for Executives which will:

· encourage improved profitability, return on investment and growth of the Company;

· reinforce economic profit and the balance between growth and efficiency; and

· attract, retain and motivate senior management.

[This Plan is intended to qualify as "performance-based compensation" under Code Section 162(m).]

3. Eligibility.  

Prior to the beginning of each Performance Cycle, the Chairman, President and Chief Executive Officer and the Committee shall approve the Participants and the Participation Level for each Participant for that Performance Cycle.  Participation in the Plan and Participation Level is on a Performance Cycle basis and in the discretion of the Committee.  Thus, an Executive who is selected for participation in a given Performance Cycle is not guaranteed to be selected for participation in any subsequent Performance Cycle.

4. Administration of the Plan.

4.1       Administrator.  The Plan shall be administered by the Committee.  

4.2       Actions by the Committee.  Each decision of a majority of the members of the Committee then in office shall constitute the final and binding act of the Committee.  The Committee may act with or without a meeting being called or held and shall keep minutes of all meetings held and a record of all actions taken by written consent.

4.3       Powers of the Committee.  The Committee shall have all the powers and discretion necessary or appropriate to supervise the administration of the Plan and to control its operation in accordance with its terms, including, but not limited to, the following discretionary powers:

(A)       To interpret and determine the meaning and validity of the provisions of the Plan and to determine any question arising under, or in connection with, the administration, operation or validity of the Plan or any amendment thereto;

(B)       To establish such rules, regulations, agreements, guidelines and procedures for the administration of the Plan;

(C)       To make Participant Grants, establish Participation Levels, set the Performance Cycle, establish Performance Targets, and take such other action as necessary to fulfill the terms of the Plan.

(D)       To determine any and all considerations affecting the eligibility of any Executive to become a Participant or remain a Participant in the Plan;

(E)       To establish and revise any accounting method or formula for the Plan, as provided in Section 1;

(F)       To determine the manner and form in which any payout is to be made under the Plan;

(G)       To employ such counsel, agents and advisers, and to obtain such legal, clerical and other services, as it may deem necessary or appropriate in carrying out the provisions of the Plan;

(H)       To establish, from time to time, rules for the performance of its powers and duties and for the administration of the Plan; and

(I)       To delegate to any one or more of its members or to any other person, severally or jointly, the authority to perform for and on behalf of the Committee one or more of the functions of the Committee under the Plan.

4.4       Decisions of Committee.  All actions, interpretations, and decisions of the Committee or the Board shall be conclusive and binding on all persons, and shall be given the maximum possible deference allowed by law.

5. Determination of Awards.

5.1       Valuation.  At the beginning of each Performance Cycle, the Board or the Committee shall establish the Performance Targets for the Performance Cycle and the Participation Levels for each Participant, which shall be communicated to each Participant through the Participant Grant at the time the Performance Targets are set and any other time during the Performance Cycle, as needed.

5.2       Participation Levels.  At the beginning of each Performance Cycle, the Committee shall (i) assign each Participant a Participation Level, which will determine the Participant's potential Award.  The threshold amount shall be set at 25% of the target amount.  The maximum Award payable with respect to any Performance Cycle shall be 200% of the target amount

5.3       Performance Targets.  At the beginning of each Performance Cycle, the Committee shall determine the Performance Targets for such Performance Cycle.   Awards shall be payable only if a threshold, target or maximum Performance Target objectives is met.  

6. Determination and Payout of Awards.

6.1       Calculation of Award Measures.  At the end of each Performance Cycle, the Committee, or its designee, shall calculate the three-year average annualized EBITDA growth and the three-year average ROCE using the formulas set forth in this Plan.

6.2       Payout Value.  The Award payout shall be determined as follows:

(a) Determine whether the threshold, target or maximum Performance Target is met for the EBITDA Component and the ROCE component.  

(b) In the case of the EBITDA component divide the actual EBITDA growth percentage achieved by the applicable Performance Target for the EBITDA component and multiple the result by 50% (the "EBITDA Award Measure".  In the case of the ROCE component, divide the actual ROCE percentage achieved by the applicable ROCE Performance Level for the ROCE component and multiple the result by 50% (the "ROCE Award Measure").  

(c) Add the EBITDA Award Measure and the ROCE Award Measure and multiply the resulting sum by the applicable Participation Level (threshold, target or maximum).

(d) Multiply the result of the calculation in (c) by the Base Salary of the Participant at the start of the cycle.

A sample calculation will be distributed to each Participant.  No Awards shall be paid to a Participant for a Performance Cycle unless the threshold for either the EBTIDA component or the ROCE component is achieved.

6.3       Award Payment.  Awards shall be paid in cash following the conclusion of each Performance Cycle as soon as reasonably practicable following completion of the audit of the Company's financial statements for the end of the last year in a Performance Cycle.  Subject to approval of the Committee, awards may be deferred into a capital accumulation plan as provided for in an irrevocable deferred compensation election during the second year of the Performance Cycle.  If the Committee, in its discretion, so determines, payment of all or part of an Award to one or more Participants may be deferred in cash or stock for a period provided in the Company’s Deferred Compensation Plan.  Any such deferral shall be subject to such rules and procedures for payment as provided in the Deferred Compensation Plan.

6.4       Termination of Employment.  Upon a Participant's termination of employment with the Company, other than by reason of death, Disability, or retirement after age 55 with at least 5 years of service with the Company, the Participant's right to an Award shall be forfeited.  Upon a termination of employment with the Company by reason of a Participant's death, Disability, or retirement after age 55 with at least 5 years of service with the Company, the Participant's Award will become fully vested and will be prorated to the Termination Date based on the number of days during the Performance Cycle a Participant was employed.  The Award will be paid to the terminated Participant at the end of the Performance Cycle.

6.5       Change of Control.  In the event of a Change of Control during a Performance Cycle, the Performance Cycle will be deemed to have ended at the end of the month immediately preceding the consummation of the Change of Control transaction.  All Participants shall become fully vested.  The Awards shall be calculated based on a deemed achievement of the greater of (1) the Performance Target at the target level or (2) an amount calculated assuming that results achieved through the deemed termination date of the Performance Cycle were achieved for the full Performance Cycle.  The amount of the Award to be paid to each Participant shall be prorated by multiplying the calculated Award by a fraction, the numerator or which shall be the actual number of days which have elapsed during the Performance Cycle (through the deemed termination date) and the denominator of which shall be the total number of days in the Performance Cycle.  Awards shall be determined and paid based on such calculations within 30 days after the consummation of a Change of Control transaction.

6.6       Taxes.  The Company shall withhold all applicable income and other taxes from any Award payment to any Participant.

6.7       Plan Unfunded.  This Plan shall be unfunded. The Company shall not be required to establish any special segregation of assets to assure the payment of Awards.

7.       Amendment or Termination of the Plan.  The Plan is voluntary on the part of the Company, and the Company does not guarantee to continue the Plan beyond any Performance Cycle.  The Board may alter, amend or terminate this Plan at any time for any reason.  Any alteration, amendment or termination shall take effect upon the date indicated in the document embodying such alteration, amendment or termination.  No termination shall impair a Participant's right to a previously granted Award, provided that the conditions to payment of the Award are satisfied.

8. Miscellaneous Provisions.

8.1       Interests Not Transferable.  In no event may either a Participant, a former Participant or his or her beneficiary, spouse or estate sell, transfer, anticipate, assign, hypothecate, or otherwise dispose of any right or interest under the Plan; and such rights and interests shall not at any time be subject to the claims of creditors nor be liable to attachment, execution or other legal process.

8.2       Notices.  All notices or other communications by a Participant to the Company or the Committee under or in connection with this Plan shall be deemed to have been duly given when received by the Committee, in such form specified by the Committee, or by the person, designated by the Committee for that purpose.

8.3       Rights and Duties.  Neither the Company, the Board nor the Committee shall be subject to any liability or duty under the Plan except as expressly provided in the Plan, or for any action taken, omitted or suffered in good faith.

8.4       No Employment Rights.  Nothing in this Plan shall confer upon any Participant the right to continue in the employ of the Company or shall interfere with or restrict in any way the rights of the Company to discharge or change the terms of employment of any Participant at any time for any reason whatsoever, with or without cause.

8.5       Applicable Law.  The provisions of this Plan shall be construed, administered and enforced in accordance with the laws of the State of Delaware.

8.6       Severability.  If any provision of this Plan is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provisions of this Plan, and in lieu of each provision which is held invalid or unenforceable, there shall be added as part of this Plan a provision that shall be as similar in terms to such invalid or unenforceable provision as may be possible and be valid, legal, and enforceable.

8.7       Captions. The captions contained in this Plan are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge or describe the scope or intent of this Plan nor in any way shall affect the construction of any provision of this Plan

9.Effective Date.The effective date of the Plan is January 1, 2005.

EX-10.48

Exhibit 10.48

BUILDING MATERIALS HOLDING CORPORATION

GENERAL TERMS AND CONDITIONS

BMC CONSTRUCTION

KEY MANAGEMENT

LONG-TERM CASH INCENTIVE PLAN

1. Definitions.

1.1       "Award" means a cash award pursuant to the provisions of the Plan, expressed as a percentage of a Participant’s Base Salary at the start of a Performance Cycle.

1.2       "Award Measures" means the matrix comprised of BMCC’s EBIT and RONI.

1.3       "Board" means the Board of Directors of the Company, as from time to time constituted.

1.4       "Change of Control" means the occurrence of any of the following events: (i) there shall be consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the transaction or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (ii) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company; or (iii) any 'person' (as defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") shall become the 'beneficial owner' (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of fifty percent (50%) or more of the Company's outstanding Common Stock or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors shall cease for any reason to constitute a majority thereof, unless the election or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.  

1.5       "Code" means the Internal Revenue Code of 1986, as amended.  Reference to a specific section of the Code shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.

1.6       "Committee" means the Compensation Committee of the Company's Board.

1.7       "Company" means Building Materials Holding Corporation, a Delaware corporation and its successors and assigns.

1.8       "Disability" means such time at which a Participant becomes physically or mentally incapacitated or disabled such that the Participant is unable to perform for the Company substantially the same services that the Participant performed prior to incurring such incapacity or disability.

1.9       "EBIT" means operating income before interest expense, taxes, corporate overhead expense, extraordinary items, adjusted for the add back of lease expense, less proforma depreciation expense.  The three year total EBIT shall be the sum of Lease Adjusted EBIT for each fiscal year of the three year cycle.  

1.10       "Executive" means a key manager employed by the Company.

1.11       "Participant" means an Executive who is eligible to become a Participant in the Plan pursuant to Section 3 and has not ceased to be a Participant pursuant to Section 6.5.

1.12       “Participant Grant” means the grant to the Executive authorized by the Board or the Committee which sets forth the Participation Level of the Executive in the Plan.

1.13       "Participation Level" means that level in which a Participant is eligible.  The Participation Levels for each Performance Cycle shall be determined by the Board or the Committee and shall be described in the Participant Grant.  

1.14       "Performance Cycle" means a period of three consecutive years.  More than one Performance Cycle may be in progress at any one time.  This Performance Cycle shall begin on January 1, 2003 and shall end on December 31, 2005.  A new Performance Cycle may, subject to Board or Committee approval, begin on January 1 of each subsequent year.

1.15.       "Performance Targets" means the levels of EBIT and RONI results for a particular Performance Cycle.

1.16       "Plan" means this BMCC Executive Long-Term Cash Incentive Plan, as set forth in this instrument and as hereafter amended from time to time.

1.17       “RONI” means the Lease Adjusted EBIT divided by BMCC’s 12 month average Lease Adjusted Net Investment.  Lease Adjusted Net Investment shall mean BMCC’s total assets less current liabilities, plus the capitalized value of the leased assets (lease expense divided by corresponding capitalization rate).

1.18       "Termination Date" means the date of a Participant's termination of employment with the Company.

2.Objectives.  This Plan is intended to provide a long-term cash incentive program for Executives which will:

· encourage improved profitability, return on investment and growth of the Company;

· reinforce economic profit and the balance between growth and efficiency; and

· attract, retain and motivate senior management.

[This Plan is intended to qualify as "performance-based compensation" under Code Section 162(m).]

3. Eligibility.  

Prior to the beginning of each Performance Cycle, the Chairman, President and Chief Executive Officer of BMHC and the Committee shall approve the Participants and the Participation Level for each Participant for that Performance Cycle.  Participation in the Plan and Participation Level is on a Performance Cycle basis and in the discretion of the Committee.  Thus, an Executive who is selected for participation in a given Performance Cycle is not guaranteed to be selected for participation in any subsequent Performance Cycle.

4. Administration of the Plan.

4.1       Administrator.  The Plan shall be administered by the Committee...  

4.2       Actions by the Committee.  Each decision of a majority of the members of the Committee then in office shall constitute the final and binding act of the Committee.  The Committee may act with or without a meeting being called or held and shall keep minutes of all meetings held and a record of all actions taken by written consent.

4.3       Powers of the Committee.  The Committee shall have all the powers and discretion necessary or appropriate to supervise the administration of the Plan and to control its operation in accordance with its terms, including, but not limited to, the following discretionary powers:

(A)       To interpret and determine the meaning and validity of the provisions of the Plan and to determine any question arising under, or in connection with, the administration, operation or validity of the Plan or any amendment thereto;

(B)       To establish such rules, regulations, agreements, guidelines and procedures for the administration of the Plan;

(C)       To make Participant Grants, establish Participation Levels, set the Performance Cycle, establish Performance Targets, and take such other action as necessary to fulfill the terms of the Plan.

(D)       To determine any and all considerations affecting the eligibility of any Executive to become a Participant or remain a Participant in the Plan;

(E)       To establish and revise any accounting method or formula for the Plan, as provided in Section 1;

(F)       To determine the manner and form in which any payout is to be made under the Plan;

(G)       To employ such counsel, agents and advisers, and to obtain such legal, clerical and other services, as it may deem necessary or appropriate in carrying out the provisions of the Plan;

(H)       To establish, from time to time, rules for the performance of its powers and duties and for the administration of the Plan; and

(I)       To delegate to any one or more of its members or to any other person, severally or jointly, the authority to perform for and on behalf of the Committee one or more of the functions of the Committee under the Plan.

4.4       Decisions of Committee.  All actions, interpretations, and decisions of the Committee or the Board shall be conclusive and binding on all persons, and shall be given the maximum possible deference allowed by law.

5. Determination of Awards.

5.1       Valuation.  At the beginning of each Performance Cycle, the Board or the Committee shall establish the Performance Targets for the Performance Cycle and the Participation Levels for each Participant, which shall be communicated to each Participant through the Participant Grant at the time the Performance Targets are set and any other time during the Performance Cycle, as needed.

5.2       Participation Levels.  At the beginning of each Performance Cycle, the Committee shall (i) assign each Participant a Participation Level, which will determine the Participant's potential Award.  The threshold amount shall be set at 25% of the target amount.

6. Determination and Payout of Awards.

6.1       Calculation of Award Measures.  At the end of each Performance Cycle, the Committee, or its designee, shall calculate the EBIT and RONI for BMCC for the three-year average period and multiply the results by each participant’s percent.

6.2       Award Payment.  Awards shall be paid in cash following the conclusion of each Performance Cycle as soon as reasonably practicable following completion of the audit of the Company's financial statements for the end of the last year in a Performance Cycle.  Subject to approval of the Committee, awards may be deferred into a capital accumulation plan as provided for in an irrevocable deferred compensation election during the second year of the Performance Cycle.  If the Committee, in its discretion, so determines, payment of all or part of an Award to one or more Participants may be deferred in cash or BMHC stock for a period provided in the Company’s Deferred Compensation Plan.  Any such deferral shall be subject to such rules and procedures for payment as provided in the Deferred Compensation Plan.

6.3       Termination of Employment.  Upon a Participant's termination of employment with the Company, other than by reason of death, Disability, or retirement after age 55 with at least 5 years of service with the Company, the Participant's right to an Award shall be forfeited.  Upon a termination of employment with the Company by reason of a Participant's death, Disability, or retirement after age 55 with at least 5 years of service with the Company, the Participant's Award will become fully vested and will be prorated to the Termination Date based on the number of days during the Performance Cycle a Participant was employed.  The Award will be paid to the terminated Participant at the end of the Performance Cycle.

6.4       Change of Control.  In the event of a Change of Control during a Performance Cycle, the Performance Cycle will be deemed to have ended at the end of the month immediately preceding the consummation of the Change of Control transaction.  All Participants shall become fully vested.  The Awards shall be calculated based on a deemed achievement of the greater of (1) the Performance Target at the target level or (2) an amount calculated assuming that results achieved through the deemed termination date of the Performance Cycle were achieved for the full Performance Cycle.  The amount of the Award to be paid to each Participant shall be prorated by multiplying the calculated Award by a fraction, the numerator or which shall be the actual number of days which have elapsed during the Performance Cycle (through the deemed termination date) and the denominator of which shall be the total number of days in the Performance Cycle.  Awards shall be determined and paid based on such calculations within 30 days after the consummation of a Change of Control transaction.

6.5       Taxes.  The Company shall withhold all applicable income and other taxes from any Award payment to any Participant.

6.6       Plan Unfunded.  This Plan shall be unfunded. The Company shall not be required to establish any special segregation of assets to assure the payment of Awards.

7.       Amendment or Termination of the Plan.  The Plan is voluntary on the part of the Company, and the Company does not guarantee to continue the Plan beyond any Performance Cycle.  The Board may alter, amend or terminate this Plan at any time for any reason.  Any alteration, amendment or termination shall take effect upon the date indicated in the document embodying such alteration, amendment or termination.  No termination shall impair a Participant's right to a previously granted Award, provided that the conditions to payment of the Award are satisfied.

8. Miscellaneous Provisions.

8.1       Interests Not Transferable.  In no event may either a Participant, a former Participant or his or her beneficiary, spouse or estate sell, transfer, anticipate, assign, hypothecate, or otherwise dispose of any right or interest under the Plan; and such rights and interests shall not at any time be subject to the claims of creditors nor be liable to attachment, execution or other legal process.

8.2       Notices.  All notices or other communications by a Participant to the Company or the Committee under or in connection with this Plan shall be deemed to have been duly given when received by the Committee, in such form specified by the Committee, or by the person, designated by the Committee for that purpose.

8.3       Rights and Duties.  Neither the Company, the Board nor the Committee shall be subject to any liability or duty under the Plan except as expressly provided in the Plan, or for any action taken, omitted or suffered in good faith.

8.4       No Employment Rights.  Nothing in this Plan shall confer upon any Participant the right to continue in the employ of the Company or shall interfere with or restrict in any way the rights of the Company to discharge or change the terms of employment of any Participant at any time for any reason whatsoever, with or without cause.

8.5       Applicable Law.  The provisions of this Plan shall be construed, administered and enforced in accordance with the laws of the State of Delaware.

8.6       Severability.  If any provision of this Plan is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provisions of this Plan, and in lieu of each provision which is held invalid or unenforceable, there shall be added as part of this Plan a provision that shall be as similar in terms to such invalid or unenforceable provision as may be possible and be valid, legal, and enforceable.

8.7       Captions. The captions contained in this Plan are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge or describe the scope or intent of this Plan nor in any way shall affect the construction of any provision of this Plan

9. Effective Date.The effective date of the Plan is January 1, 2003.

EX-10.60

Exhibit 10.60

Building Materials Holding Corporation

EXECUTIVES' SUPPLEMENTAL RETIREMENT INCOME PLAN

(Revised and restated effective December 31, 2002)

ARTICLE I - Definitions:

1.1 “Plan” means the Executives' Supplemental Retirement Income Plan of Building Materials Holding Corporation (formerly known as the Executives' Supplemental Retirement Income Plan of BMC West Corporation), as described in this instrument, effective January 1, 1993 and thereafter.

1.2 “Company” means Building Materials Holding Corporation of San Francisco, California, a Delaware Corporation, or a successor corporation thereafter.

1.3 “Executive” means an Executive or highly compensated individual of the Company or of any division, subsidiary or affiliate of the Company who is eligible to become a participant in the Plan under Paragraph 3.1 hereof.

1.4 “Fiscal Year” means the fiscal year of the Company as established from time to time.

1.5 “Participant” means a person who is selected to participate in the Plan and has executed the Adoption Agreement as required by Paragraph 3.1 hereof.

1.6 “Deferred Compensation” means the portion of a participant's compensation for any fiscal year, or part thereof, that has been deferred pursuant to the Plan.

1.7 “Termination of Service” or similar expression means the termination of the Participant as an Executive or eligible employee of the Company or any division, subsidiary or affiliate thereof, and includes termination by way of resignation, removal, disability, or change in position prior to his Normal Retirement Date.  A Participant who is on temporary leave of absence, whether with or without pay, shall not be deemed to have terminated his service.

1.8 “Normal Retirement Date” as used herein means the date on which the Participant attains age sixty-five (65) or the date specified in Paragraph E of the Adoption Agreement, if later.

1.9 “Early Retirement” as used herein refers to an election available to a terminated Participant upon attaining age sixty (60) with at least fifteen (15) years of service at the time of termination or upon attaining age fifty-five (55) with at least twenty-five years of service at the time of termination.  Such Participant may begin receiving benefits by notifying the Plan Administrator at least six months prior to the requested benefit start date.

1.10 “Interest Credit” is a fixed percentage rate to be applied to the existing Retirement Account Balance as of January 1^st each year. The rates will be reviewed by the Compensation Committee each February.  Any changes will be effective for the January 1^st balance of the same year.  The rates to be effective for January 1, 2003 are as follows:

Active Employees	6.0%
Inactive Employees:
Less than 5 years of service	0.0%
With 5 - 9 years of service	1.5%
With 10 - 14 years of service	3.0%
With 15 - 19 years of service	4.0%
With 20 - 24 years of service	5.0%
With 25 or more years of service	6.0%

1.11 “Retirement Account Balance” is the balance in an account maintained by the Company for each participant comprised of contributions to the plan by the Company plus Interest Credit applied each January 1^st.  The Interest credits are applied to the account balance before adding the contributions of the Company for the current year.

1.12 “Computation Convention” the computations of future values, present values, or periodic payments (annuity) use the "end of period" assumption for the first payment.

1.13 “Trust” means the grantor trust established by the Company pursuant to Section 6.2 of the Plan hereof, and evidenced by the Supplemental Retirement Income Plans Trust Agreement effective on January 1, 1993, as such Agreement is amended from time to time.

1.14 “Change of Control” The purchase or other acquisition by any person, entity or group of persons, within the meaning of section 13(d) or 14(d) of the Securities Exchange Act of 1934 (“Act”), or any comparable successor provisions, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Act, of 30 percent or more of either the outstanding shares of common stock or the combined voting power of Company’s then outstanding voting securities entitled to vote generally, or the approval by the stockholders of Company of a reorganization, merger, or consolidation (in each case, with respect to which persons who were stockholders of Company immediately prior to such reorganization, merger or consolidation) do not immediately thereafter own more than 50 percent of the consolidated Company’s then outstanding securities, or a liquidation or dissolution of Company or of the sale of all or substantially all of Company’s assets.

ARTICLE II - CONTRIBUTIONS

2.1Contributions. The Company shall allocate five and one half percent (5.5%) of the Company's net income for SERP Benefits.  Sixty-five percent (65%) of the amount allocated will be directed to this plan.

2.2Allocation Among Participants. The funds allocated will be distributed among the active participants in accordance with the following method:

1. The base salaries less $40,000 for each active participant will be summed to provide the total benefit salary base.

2. The salaries for each individual in excess of $40,000 are divided by the total benefit salary base producing the participant's percentage share, to five decimals, of the current funds allocated.

3. The percentage in step two above is applied to the total funds allocated to establish the value of the contribution to the participant. If the contribution exceeds twenty percent (20%) of base salary, twenty percent (20%) of base salary will be used.

2.3Equivalent Base Pay. For participants whose pay is composed of a base salary plus commissions and whose base salary is less than fifty thousand dollars ($50,000) the base pay that will be used in these calculations will be fifty thousand dollars ($50,000).

2.4Changes In Contributions. The amounts to be allocated to this plan may be changed by the Board of Directors at any time.  The methods for allocating the funds among participants may be changed as deemed necessary to maintain equity by the Compensation Committee with the approval of the Board of Directors.  Participants will be notified of changes as soon as practicable after such change is adopted.

ARTICLE III - REQUIREMENTS FOR PARTICIPATION

3.1Requirements for Participants. In order to participate herein, the Executives of the Company selected to participate by the Company must

(a) Fit within the definition of highly compensated or select group of executives as that definition may be changed from time to time by ERISA or the IRS;

(b) Execute an Adoption Agreement in the form attached hereto as Exhibit “I”;

(c) If the Company desires to purchase key man life insurance on the Participant’s life for its sole benefit, cooperate so that the Company may obtain a valid insurance contract.

3.2Continued Service. Each Participant in the Plan shall continue as an employee of the Company under terms mutually agreed upon between the Company and the Participant, from time to time, until the Participant reaches his Normal Retirement Date or until such date as may be mutually agreed upon, or until his Termination of Service, as herein defined.  Any payments under this Plan shall be independent of, and in addition to, those under any other plan, program or agreement in effect between the Company and the Participant.  This Plan and the Adoption Agreement attached hereto as Exhibit "I" shall not be construed as a contract of employment, nor does it restrict the right of the shareholders or Directors of the Company to remove the Participant as an Executive, or the right of the Participant to resign as an Executive.

3.3Early Termination. If the Participant's service as an Executive of the Company is terminated for reasons other than death prior to his Normal Retirement Date, with or without cause or voluntarily or involuntarily, and if the Participant's termination was not due to fraudulent or dishonest conduct by the Participant, and Participant has not violated the Non Compete provision herein, the Company will disburse benefits in accordance with ARTICLE IV herein, or, at the sole discretion of the Company, the Company may fulfill its total obligations under the plan by making a Lump Sum Benefit distribution equal to Retirement Account Balance at the date of termination.  In the event of a lump sum settlement, such distribution must be made within forty-five (45) days of the date of termination.  Not withstanding this article, the company shall distribute participant balances of less than ten thousand dollars ($10,000) following termination.

If the termination is for fraudulent or dishonest conduct by the Participant, the benefit shall be paid in a lump sum equal to the lesser of the Retirement Account Balance or the sum of the company's contribution attributable to the participant without interest or other appreciation.

3.4Non-Compete. If a participant terminates employment with Company and accepts employment with a competitor of Company within twelve months of termination the benefits under this Plan will be paid as a lump sum equal to the lesser of the Retirement Account Balance at the date of termination or the sum of the company's contribution attributable to the participant without interest or other appreciation, unless the participant receives permission in writing from the Company before accepting such position.  If in the opinion of the Compensation Committee, conditions warrant, such permission may be granted as a general waiver rather than applied to a specific position.

ARTICLE IV - BENEFITS

4.1Pre-Retirement Death Benefits.

(a) If a Participant who dies before his Normal Retirement Date had not Terminated Service or had served for at least twenty-five (25) years before terminating service and no settlement has been made under any other provision herein, the Company will pay to the Participant's beneficiary(ies) a monthly benefit for a total of sixty (60) months. The Pre-Retirement Death Benefit will be derived by using the Retirement Account Balance to solve for 60 monthly payments using an interest factor of 0.75% (9% annual rate).

(b) If a Participant dies before the Normal Retirement Date but after terminating service, for any reason, with less than twenty-five (25) years of service and no settlement has been made under any other provision herein, the Company will pay the Participant's beneficiary(ies) a monthly benefit for a total of sixty(60) months.  The Pre-Retirement Death Benefit will be derived by using the Retirement Account Balance to solve for sixty (60) monthly payments using an interest factor of 0.50% (6% annual rate).

All monthly payments to be made pursuant to this Paragraph 4.1 shall commence within forty-five (45) days following the death of the Participant or when the beneficiary is properly identified, if later.

4.2Post-Retirement Income and Death Benefits.

(a) For Participants with continuous service who retire on or after their Normal Retirement Date, or Participants eligible for Early Retirement who had at least twenty-five (25) years of service, or participants who terminated service with at least twenty-five (25) years of service, the Company will pay a monthly benefit for 180 months.  The benefit due will be calculated using the Retirement Account Balance to solve for 180 monthly payments using an interest factor of 0.75% (9% annual rate).

(b) For Participants who have terminated service with less than twenty-five (25) years of service and no settlement has been made under any other provision herein and who have attained their Normal Retirement Date, the Company will pay a monthly benefit for 180 months.  The benefit due will be calculated using the Retirement Account Balance to solve for 180 monthly payments using an interest factor of 0.50% (6% annual rate).

(c) Following are optional retirement benefit pay out options available to the participants if elected in writing at least twelve months prior to the retirement date:

1. A lump sum payment equal to the balance in the Retirement Income Account maintained for the participant at the time benefit payments are due to commence.  This option requires approval by the compensation committee of the board.

2. Monthly payments for 120 months with interest at 0.667% monthly (8% annual rate) with at least 25 years of service and 0.417% monthly (5% annual rate) with less than 25 years of service.

3. Monthly payments for 60 months with interest at 0.583% monthly (7% annual rate) with at least 25 years of service and 0.333% monthly (4% annual rate) with less than 25 years of service.

If the Participant dies prior to receiving all of the monthly payments scheduled under the option elected, the Participant's beneficiary(ies) shall continue to receive such monthly payments in a like amount until the benefits provided for therein have been paid in full.  If such Participant has received at least all of the scheduled monthly payments prior to such Participant's death, no further benefits shall be due hereunder.

4.3Hardship Provision.  A participant may apply at any time to have the unpaid portion of the scheduled monthly benefits paid in a lump sum equal to the participants Retirement Account Balance (which will be the present value of the unpaid benefits at the interest rate applicable to the participant’s retirement schedule).  To make application for this provision the participant must make the request in writing to the compensation committee stating the nature of the hardship and the need for commuting the payments.  The committee will either approve or disallow the request and will notify the participant of its decision as soon as practicable after the request is received.

4.4Facility of Payment. Payment hereunder to the Participant or his or her beneficiary pursuant to this Plan shall fully discharge the Company from all claims or liabilities with respect to such payments unless, before such payment is made, the Company has received, at its principal place of business, written notice by or on behalf of some other persons who claim to be entitled to such payments or some part thereof.  In the event the Participant is deceased and a Court of competent jurisdiction has entered a final order with respect to his or her estate, payment of such money, or portions thereof, if any be due, pursuant to the terms of the judgment shall likewise fully protect the Company making such payment unless, before such payment is made, written notice of a claim or adverse claim is received in the manner provided above.

4.5Change of Control Benefits.

(a) Benefits Following an Approved Change of Control.

(i) In the event a Participant's employment with the Company is terminated for any reason within a five-year period following a Change of Control, and the transaction constituting the Change of Control was approved in writing prior to its consummation by a majority vote of the members of the Company's incumbent Board of Directors (an "Approved Change of Control"), then the Participant shall be entitled to receive payment of his or her Retirement Account Balance over a period of sixty (60) months using a 9% interest factor compounded annually.  The installment payments shall begin within forty-five (45) days of the termination of employment.

(ii) Following an Approved Change of Control, any participant (or beneficiary thereof) already receiving benefit payments under the Plan shall continue to receive benefit payments under the Plan for the lesser of (1) the remainder of the current pay out schedule, or (2) a sixty (60) month period commencing upon the consummation of the Approved Change of Control.

(b) Benefits Following a Non-approved Change of Control.

(i) In the event a Participant's employment with the Company is terminated for any reason within a five-year period following a Change of Control, and the Change of Control was not approved in writing prior to its consummation by a majority vote of the members of the Company's incumbent Board of Directors (a "Non-approved Change of Control"), then the Participant shall be entitled to receive payment of his or her Retirement Account Balance in a lump sum.  The lump sum payment shall be made within forty-five (45) days of the date of termination of employment.

(ii) Following a Non-approved Change of Control, any participant (or beneficiary thereof) already receiving payments under the Plan shall receive the remainder of his or her benefit under the Plan in the form of a lump sum.  Such lump sum payment shall be made within forty-five (45) days of the consummation of the Non-approved Change of Control.

ARTICLE V - RIGHTS OF PARTICIPANT

5.1Beneficiary. Each Participant shall have the right to designate a Primary and Contingent Beneficiary entitled to receive the benefits payable upon death on behalf of such Participant under the provisions of this Plan.  The Participant may change or revoke such designation in writing.  A change of beneficiary notice received after the death of a deceased participant but bearing a postmark prior to the date of death will be deemed to be in force at time of death.

If the beneficiary is the spouse of the insured, the spouse must also sign any change of beneficiary that would remove or subordinate the spouse as beneficiary.

5.2Non-Assignability. Neither the Participant nor the Participant's spouse, nor their heirs or legatees shall have any right to commute, encumber or dispose of the right to receive payments hereunder, which payments and the right thereto are expressly declared to be non-assignable and non-transferable.

5.3Bound by Plan Provisions. Each Participant, whether active or terminated, surviving spouse or other beneficiary, as a condition to receiving any benefits under the Plan shall be conclusively deemed for all purposes to have assented to the Plan and shall be bound hereby with the same force and effect as if he had executed a consent to all the terms and provisions of the Plan.

5.4Claim Procedure. If any former employee or any Beneficiary has not received a benefit under the Plan to which he thinks he is entitled, he or his authorized representative, within 180 days after the event that he thinks entitled him to the benefit, may file with the Compensation Committee a written claim for the benefit with sufficient detail to bring the nature of the claim to the attention of the Committee.

The Committee will notify the claimant of its decision in writing within 180 days of receipt of the claim.  If the claim is denied wholly or in part the notice will set forth in a manner calculated to be understood by the claimant the specific reasons for the denial.

In the case of a denial the claimant may request a review of his claim by making a written request to the Committee within 90 days of receiving notice of the denial.  The request may include issues and comments that the claimant feels the Committee should consider.

Within 90 days after receipt of the request for review, the Committee will notify the claimant of its final decision setting forth specific reasons.  Subject to any rights to remedies accorded by applicable law the decision of the Committee shall be conclusive and binding upon Company, the claimant and all other persons interested in the claim.

ARTICLE VI - FUNDING

6.1Un-funded Plan.  No Participant or any other person shall have any interest in any fund or in any specific asset or assets of the Company by reason of any amounts due him hereunder, nor any right to receive any distribution under the Plan except as and to the extent expressly provided in the Plan.  Nothing in the Plan shall be deemed to give any subsidiary or affiliate of the Company rights to participate in the Plan, except in accordance with the provisions of the Plan.  All benefits provided for hereunder and all other amounts deferred, if any, hereunder are completely unsecured and are payable only out of the general assets of the Company.  The Company shall be under no obligation whatsoever to purchase or maintain any life insurance policy or annuity contract or in any other manner segregate assets to provide the benefits or fund its obligations under this Plan.

6.2Funds In Trust. The Company will establish a Trust to hold such funds as the Company has allocated to the plan.  The establishment of said Trust does not assign any rights of ownership to the assets in the Trust.  The assets of the Trust are part of Company's general assets and are subject to the claims of the Company's creditors.  The Company is under no obligation to assure that the assets in the Trust are adequate to provide the benefits promised under the Plan.  The sole security of the benefits due under the plan is the Company's assurance under the provisions of this plan, which is specifically defined to be un-funded.

ARTICLE VII - OTHER PROVISIONS

7.1Relation to Other Plans. Any benefits payable under this Plan shall not be deemed salary or compensation to any Participant for the purpose of computing benefits to which he may be entitled under any pension or profit sharing plan or other similar plan or arrangement of the Company for the benefit of its Participants.

7.2Administration. The Compensation Committee of the Company shall have full power and authority to administer this Plan.  No member of the Compensation Committee or the Board of Directors shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own willful misconduct or lack of good faith.  The Directors shall, from time to time, establish eligibility requirements for participation in the Plan and rules for the Administration of the Plan that are not inconsistent with the provisions of the Plan.

7.3Amendment. The Board of Directors of the Company reserves the right to amend this Plan in such manner as it, in its sole discretion, may deem necessary and proper.  Such amendments will apply to terminated and retired Participants to the same extent that they apply to active Participants.

7.4Rights of Company to Terminate the Plan. The Company shall have the right to terminate this Plan at any time.  Each Participant in the Plan shall receive future benefits in the same manner and amount as he would have received had his service as an Executive terminated with twenty-five (25) years of service on the date the Plan is terminated.  Anything herein to the contrary notwithstanding, should the Company elect to terminate the Plan it shall be obligated to continue to pay all benefits provided for hereunder to all Participants or their beneficiaries, as the case may be, who have died or retired and who have become entitled to receive same in accordance with the terms of the Plan.

7.5Rights of Offset. If the Participant has any indebtedness to the Company at the time benefits become due by virtue of retirement, death, or termination, the Company may apply the amounts due, less the minimum Federal Backup Withholding Tax required on such amounts, to reduce such indebtedness.

7.6 Law Governing. This Plan shall be construed in accordance with and governed by the laws of the State of Idaho.

EX-10.60.1

Exhibit 10.60.1

Building Materials Holding Corporation

Executives’ Supplemental

Retirement Income Plan

(Effective as of January 1, 2005)

Table of Contents

Page

ARTICLE 1. DEFINITIONS		114
1.1	Account	114
1.2	Base Salary	114
1.3	Beneficiary	114
1.4	Board of Directors	114
1.5	Change in Control	114
1.6	Code	115
1.7	Committee	115
1.8	Company	115
1.9	Company Contributions	115
1.10	Disability	116
1.11	Early Retirement Date	116
1.12	Effective Date	116
1.13	Executive	116
1.14	Fiscal Year	116
1.15	Hardship	116
1.16	Interest Credit	117
1.17	Key Employee	117
1.18	Normal Retirement Date	117
1.19	Participant	117
1.20	Participant	117
1.21	Plan	117
1.22	Regulations	117
1.23	Separation from Service	117
1.24	Service	117
1.25	Trust or Trust Agreement	117
1.26	Trust Fund	118
1.27	Trustee	118
1.28	Year of Service	118
ARTICLE 2. ELIGIBILITY		118
2.1	Eligibility Requirements	118
2.2	Non-Competition Requirement	118
ARTICLE 3. DEFERRED COMPENSATION		118
3.1	Company Contributions	118
3.2	Interest Credits	119
3.3	Election of Payment Terms	121
ARTICLE 4. PAYMENT OF BENEFITS		122
4.1	Payment upon Distribution Event	122
4.2	Conditions on Payment	123
4.3	Withdrawal for Hardship	123
4.4	Payment Following a Change in Control	123
4.5	Payment upon Disability	124
4.6	Payment upon Death	124
4.7	Designation of Beneficiary	124
4.8	Administration of Payments	125

4.9	Permitted Acceleration of Payments	125
4.10	Permitted Delay of Payments	125
ARTICLE 5. TRUST		126
5.1	Accounts	126
5.2	Participants’ Rights Unsecured	126
5.3	Trust Agreement	126
ARTICLE 6. AMENDMENT AND TERMINATION		127
ARTICLE 7. ADMINISTRATION		127
7.1	Administration	127
7.2	Applying for Benefits	127
7.3	Liability of Committee; Indemnification	133
7.4	Expenses	133
ARTICLE 8. GENERAL AND MISCELLANEOUS		133
8.1	Rights Against Company	133
8.2	Assignment or Transfer	134
8.3	Severability	134
8.4	Construction	134
8.5	Governing Law	134
8.6	Payment Due to Incompetence	134
8.7	Taxes	134
8.8	Insurance	135
8.9	Attorney’s Fees	135
8.10	Plan Binding on Successors and Assignees	135

BUILDING MATERIALS HOLDING CORPORATION

2005 EXECUTIVES’ SUPPLEMENTAL RETIREMENT INCOME PLAN

Building Materials Holding Corporation, a Delaware corporation (the “Company”) hereby establishes an unfunded “supplemental executive retirement plan” (“SERP”) for the purpose of providing deferred compensation for a select group of management and highly compensated employees in compliance with Section 409A of the Internal Revenue Code, as amended (the “Code”).

RECITALS

WHEREAS, the Participants identified by the Compensation Committee of the Board of Directors of the Company, or any other committee designated by the Board of Directors of the Company to administer the Plan in accordance with Article 8 of the Plan (the “Committee”), as eligible to participate in the Plan (each a “Participant,” or collectively the “Participants”) provide services to the Company; and

WHEREAS, the Company desires to establish an unfunded deferred compensation plan in accordance with Code Section 409A and related Regulations and the Participants desire the Company to pay certain deferred compensation and/or related benefits to or for the benefit of the Participants, or a designated Beneficiary, or both;

NOW, THEREFORE, the Company hereby establishes this supplemental executive retirement plan to take the place of the prior Executives’ Supplemental Retirement Income Plan with respect to any compensation earned on or after January 1, 2005.

ARTICLE 1.  DEFINITIONS

1.1 Account. means the separate account established under the Plan and the Trust for each participating Participant comprised of Company Contributions to the Plan plus Interest Credits.  Interest Credits are applied to the Account before adding the Company Contributions for the current year.

1.2 Base Salary. means a Participant’s regular annual compensation for a Plan Year, determined as of the first day of that year, excluding bonuses, commissions, overtime, incentive payments, non-monetary awards, and other special compensation, before reduction for compensation deferred pursuant to all qualified and non-qualified plans of the Company.  For any Participant whose compensation is composed of a Base Salary plus commissions, and whose Base Salary is less than $50,000, the Participant’s Base Salary will be deemed to equal $50,000.

1.3 Beneficiary. means the beneficiary designated by the Participant to receive the Participant’s deferred compensation benefits in the event of his or her death.

1.4 Board of Directors. means the Board of Directors of the Company.

1.5 Change in Control. means the occurrence of any of the following, limited to the extent any such occurrence is consistent with the definition of a “change in control” or similar event described in Code Section 409A or related Regulations:

(a) when any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 as amended (“Exchange Act”) (other than the Company, a Subsidiary or a Company benefit plan, including any trustee of such plan acting as trustee) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities, where such person’s beneficial ownership of the Company’s securities was not initiated by the Company or approved by the Company’s Board of Directors; or

(b) the occurrence of a transaction requiring shareholder approval, and involving the sale of all or substantially all of the assets of the Company or the merger of the Company with or into another corporation, where such merger was not initiated by the Company and in which Company is not the surviving parent entity; or

(c) a change in the composition of the Board of Directors of the Company in any 12-month period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(d) any liquidation or dissolution of the Company.

1.6 Code. means the Internal Revenue Code of 1986, as amended from time to time.  Reference to any Code section shall include any successor or comparable provision of the Code or application Regulations.

1.7 Committee. means the Compensation Committee of the Board of Directors of the Company or any other committee designated by the Board of Directors of the Company to administer the Plan in accordance with Article 8.

1.8 Company. means Building Materials Holding Corporation, a Delaware Corporation, any successor organization thereto, and any corporation or other entity that must be aggregated with Building Materials Holding Corporation pursuant to the Code or Regulations.

1.9 Company Contributions. means the Company’s contribution to a Participant’s Account as determined in accordance with Section 3.1.

1.10 Disability. means—

the condition of being unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

by reason of suffering from any medically determinable physical or mental impairment that is expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company.

1.11 Early Retirement Date.means the date on which a Participant attains age 60 with at least 15 Years of Service or attains age 55 with at least 25 Years of Service.

1.12 Effective Date. means January 1, 2005.

1.13 Executive. means an Executive or highly compensated individual of the Company or of any division, subsidiary or affiliate of the Company who is eligible to become a Participant in the Plan under Section 3.1.

1.14 Fiscal Year. means the fiscal year of the Company as established from time to time.

1.15 Hardship. refers to a distribution made on account of an unforeseeable immediate and heavy financial need of the Participant and that is necessary to satisfy that financial need in accordance with Code Section 409A and the related Regulations.

(a) Amount.  The amounts distributed with respect to an emergency cannot exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

(b) Circumstances.  Whether a Participant has an immediate and heavy financial need shall be determined by the Committee based on all relevant facts and circumstances, and shall refer to a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152(a)) of the Participant; loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

1.16 Interest Credit. means earnings credited to a Participant’s Account as determined in accordance with Section 3.2.

1.17 Key Employee. means—

(a) an officer of the Company having an annual compensation greater than $130,000 (as adjusted),

(b) a 5% owner of the Company, or

(c) a 1% owner of the Company having annual compensation from the Company of more than $150,000.

For purposes of subsection (a), no more than 50 employees (or, if lesser, the greater of 3 employees or 10% of the employees) shall be treated as officers

1.18 Normal Retirement Date. means the date on which the Participant attains age 65 or the date specified in his or her Participation Agreement.

1.19 Participant. means a person who is selected to participate in the Plan and has satisfied the conditions of Section 2.1.

1.20 Participation Agreement. means the election to participate in the Plan under certain terms as completed by a Participant.

1.21 Plan. means the Executives’ Supplemental Retirement Income Plan of Building Materials Holding Corporation, as amended from time to time.

1.22 Regulations. means the rules, regulations, interpretations and procedures promulgated under the Code, as modified from time to time.

1.23 Separation from Service. means the termination of the Participant’s Service prior to his Normal Retirement Date.  A Participant who is on temporary leave of absence, whether with or without pay, shall not be deemed to have terminated Service.  “Separation from Service” shall be interpreted in accordance with the meaning of “separation from service” or similar term under Code Section 409A and related Regulations.

1.24 Service. means the Participant’s service with the Company that is not interrupted or terminated.  The Committee, in its sole discretion, may determine whether Service shall be considered interrupted or terminated in any circumstance, including (but not limited to) in the case of any leave of absence approved by the Company, including sick leave, military leave or any other personal leave.

1.25 Trust or Trust Agreement. means the Trust Agreement applicable to the Plan, as amended from time to time, entered into between the Company and the Trustee to carry out the provisions of the Plan.

1.26 Trust Fund. means the cash and other assets and/or properties held and administered by Trustee pursuant to the Trust to carry out the provisions of the Plan.

1.27 Trustee. means the designated Trustee acting at any time under the Trust.  

1.28 Year of Service. means any 12-consecutive-month period in which a Participant is in Service, commencing with the Participant’s date of hire, as determined by the Committee in its sole discretion.

ARTICLE 2.  ELIGIBILITY

2.1 Eligibility Requirements.  In order to participate in the Plan, the Executives of the Company selected to participate by the Company must—

belong to a select group of highly compensated or management employees within the meaning of ERISA and related Regulations;

execute a Participation Agreement in the form provided by the Committee; and

if the Company desires to purchase key man life insurance on the Participant’s life for its sole benefit, cooperate so that the Company may obtain a valid insurance contract.

2.2 Non-Competition Requirement.  If a Participant has a Separation from Service with the Company and, without the specific written consent of the Company, accepts a position of employment with a competitor of the Company within 12 months of Separation from Service, Plan benefits will be limited to the lesser of (a) the Retirement Account Balance at the date of termination, and (b) the sum of Company Contributions attributable to the Participant without interest or other appreciation.  If, in the sole discretion of the Committee, conditions warrant, the Committee may grant permission in the form of a general waiver rather than applied to a specific position.

ARTICLE 3.  DEFERRED COMPENSATION

3.1 Company Contributions.  

(a) Allocation to Plan.  The Company Contributions allocated to the Plan shall be determined as follows:

(1) Subject to subsection (b), the Company shall allocate a portion of a percentage of after-tax earnings of the Company, as determined from time to time by the Board of Directors in its sole discretion.  As of the Effective Date, this amount is 65% of 5.5% of after-tax earnings.

(2) The amounts to be allocated to the Plan may be changed by the Board of Directors at any time.  The method of allocation of the funds among Participant Accounts may be changed as deemed necessary to maintain equity among Participants, as determined by the Committee with the approval of the Board of Directors.  Participants will be notified of changes as soon as practicable after the change is adopted.

(b) Allocation Among Participants.  The benefit allocation to each Participant’s Account in accordance with the following calculation:

(1) The portion of the Base Salary of each Participant that is in excess of $40,000 will be added to obtain the total of all Participants’ Base Salaries, each only with respect to the portion in excess of $40,000, which shall be the denominator.

(2) The portion of the Base Salary of each Participant that is in excess of $40,000 will be divided by the denominator calculated in subsection (b)(1) to obtain a percentage, calculated to the nearest one-hundred thousandth.

(3) A Participant’s allocation to the Plan shall equal the percentage obtained in subsection (b) multiplied by the Company Contributions determined in Section 3.1, up to a maximum of 30% of the Participant’s Base Salary, or such other percentage as determined by the Committee from time to time.

3.2 Interest Credits and Method of Payment.  Subject to Article 4, Interest Credits shall be determined according to the Participant’s Years of Service and the applicable method of payment, as determined under this section.

(a) Prior to Commencement of Payment.  The Company shall credit each Participant’s Account with a simple interest rate, expressed as an annual rate, as of January 1 of each year, which rate may be changed by the Committee from time to time.  As of the Effective Date, with respect to Accounts that have not yet commenced payment under Article 4, the rates applicable to Account accruals are as follows:

Participant Classification	Years of Service	Interest Credit Rate
Active Employees	—	7.0%
Inactive Employees	Fewer than 5	0.0%
	At least 5, but fewer than 10	1.5%
	At least 10, but fewer than 15	3.0%
	At least 15, but fewer than 20	4.0%
	At least 20, but fewer than 25	5.0%
	25 or more	6.0%

The rates will be reviewed by the Committee each February.  Any changes will be effective for the January 1 balance of the same year.

(b) After Commencement of Payment.  After the payment of installments has commenced under Article 4, the Company shall continue to credit each affected Participant’s Account with a simple interest rate, expressed as an annual rate, as of January 1 of each year.  As of the Effective Date, the rates applicable to the method of payment elected are as follows:

(1) General Rule.  Subject to subsection (b)(2), the Interest Credit rate applicable to each method of payment shall be determined by the number of Years of Service completed by the Participant prior to his or her Separation from Service and the method of payment elected by the Participant pursuant to Section 3.3, as follows:

Participant Classification or Event	Monthly Installment Period Available	Corresponding Interest Credit Rate
Participants having a Separation from Service— -after completing at least 25 Years of Service, or -after the Participant’s Normal Retirement Date	15 years	9.0%
-after completing at least 25 Years of Service	10 years	8.0%
	5 years	7.0%
-prior to completing 25 Years of Service	15 years	6.0%
	10 years	5.0%
	5 years	4.0%

 

(2) Disability or Death.  In the event of the Participant’s Disability or death prior to the commencement of Plan payments, the Participant’s Account shall be payable in monthly installments over 5 years, and the applicable Interest Credit rate shall be determined as follows:

Participant Classification or Event	Monthly Installment Period Available	Corresponding Interest Credit Rate
Participant’s Disability or death— -while in Service, or -after completing at least 25 Years of Service	5 years	9.0%
-prior to completing 25 Years of Service	5 years	6.0%

(c) Interest Calculations.  The computations of future values, present values or installment payments shall use the “end of period” assumption for the first payment.

3.3 Election of Payment Terms.

(a) Initial Election - Method of Distribution.  By the later of December 31, 2005 and the date that is 30 days after becoming eligible for the Plan, or such later date as permitted under Code Section 409A, each Participant (or Beneficiary) will submit an election of the method of distribution applicable to the Participant’s entire Account.  Participants may choose among the following methods of distribution in accordance with the form provided by the Committee:

(1) a single lump sum payment, or

(2) monthly installments over a designated period of 5, 10 or 15 years, which election shall affect the Interest Credits that may be credited to the Participant’s Account in accordance with Section 3.2, and which installment shall be treated as a single payment for election purposes.

In the event the Participant fails properly to designate the method of distribution, subject to a subsequent election made under subsection (c), such amounts shall be payable in the form of monthly installments over 5 years, beginning as of the Participant’s Early Retirement Date, if the Participant is eligible, or if not, the Participant’s Normal Retirement Date.

(b) Subsequent Elections to Change Timing or Method of Distribution.  A Participant (or Beneficiary) may not accelerate the time or schedule of any payment under the Plan, except as provided in Regulations.  Any change to an election regarding the timing or method of distribution must satisfy the following conditions to be effective:

(1) the subsequent election to delay a payment must be made no later than 12 months prior to the date of the first scheduled payment; and

(2) the first payment must be deferred for a period of at least 5 years from the date the payment would otherwise have been made.

If such subsequent election does not satisfy the conditions specified in this subsection, the prior election shall be used to determine the timing and form of payment.  The last effective election accepted and acknowledged by the Committee shall govern the payment of the Participant’s Account.  Elections under this subsection will not affect the timing of distributions made on account of Disability, death or Hardship except as provided in Article 4.

ARTICLE 4.  PAYMENT OF BENEFITS

4.1 Payment upon Distribution Event.  Subject to the provisions of this article, the Company shall commence distributions in accordance with the terms of a Participant’s elections under Article 3 upon the earliest to occur of the following events:

(a) upon the Participant’s Separation from Service following his or her Early Retirement Date;

(b) upon the Participant’s Separation from Service following his or her Normal Retirement Date;

(c) upon such other date as specified by the Participant in the applicable Participation Agreement, provided that such date is one of the following:

(1) a specific date, including a specified age of the Participant,

(2) the beginning of the Plan Year following the passage of a specified number of years, or

(3) the Participant’s Separation from Service, or, in the case of Key Employees, a date that is 6 months after the date of Separation from Service (or, if earlier, the Participant’s date of death), if the Separation from Service is later than the Participant’s Early Retirement Date.

4.2 Conditions on Payment.  No payment shall be due under the Plan if (a) the Participant has a Separation from Service prior to his Normal Retirement Date by reason of fraudulent or dishonest conduct, or (b) the Participant has violated the non-compete provisions of Section 2.2, each as determined according to the Committee in its sole discretion.  In the case of a Participant who has had a Separation from Service prior to his Normal Retirement Date by reason of fraudulent or dishonest conduct, and who has not violated the non-compete provisions of Section 2.2, the Committee may, in its sole discretion, provide for payment to the Participant in a lump sum equal to the sum of the Company Contributions attributable to the Participant without Interest Credits.

4.3 Withdrawal for Hardship.  A Participant may apply for distributions from his or her Account to the extent that the Participant demonstrates to the reasonable satisfaction of the Committee that he or she needs the funds due to Hardship.  The Committee may deny a withdrawal for Hardship for any reason or approve a upon any terms permitted under the Code and Regulations, as determined in its sole discretion.

4.4 Payment Following a Change in Control.

(a) Benefits Following an Approved Change of Control.

(1) In the event a Participant’s has a Separation from Service for any reason within a 5-year period following a Change of Control, and the transaction constituting the Change of Control was approved in writing prior to its consummation by a majority vote of the members of the Company’s incumbent Board of Directors (an “Approved Change of Control”), then the Participant shall be entitled to receive monthly installment payments of his or her Account over a period of 5 years applying a 9% Interest Credit during the period of payment.

(2) Following an Approved Change of Control, any Participant (or Beneficiary) already receiving benefit payments under the Plan shall continue to receive benefit payments under the Plan for the lesser of—

(A) the remainder of the current installment schedule, or

(B) a 5-year period commencing upon the consummation of the Approved Change of Control.

(b) Benefits Following an Unapproved Change of Control.

(1) In the event a Participant’s has a Separation from Service for any reason within a 5-year period following a Change of Control, and the Change of Control was not approved in writing prior to its consummation by a majority vote of the members of the Company’s incumbent Board of Directors (an “Unapproved Change of Control”), then the Participant shall be entitled to receive payment of his or her Account balance in a lump sum payment.

(2) Following an Unapproved Change of Control, any Participant (or Beneficiary thereof) already receiving payments under the Plan shall receive the remainder of his or her benefit under the Plan in the form of a lump sum payment.

(c) Delayed Payment.  In the case of a Key Employee, any payment made on account of a Separation from Service following a Change in Control shall not be made until a date that is 6 months after the date of Separation from Service.

4.5 Payment upon Disability.  Upon a Participant’s Disability, as determined by the Committee in its sole discretion, prior to the date when payment of his or her Accounts would otherwise commence under Article 3, the Participant will be entitled to receive all amounts credited to the Accounts as of the date of Disability according to the method of payment elected by the Participant.

4.6 Payment upon Death.  Upon a Participant’s Separation from Service by reason of death, prior to the date when payment of his or her Accounts would otherwise commence, the Participant’s Beneficiary will be entitled to receive all amounts credited to the Accounts of the Participant as of the date of death according to the method of payment elected by the Participant, or to the extent permissible under Code Section 409A, according to the method of payment elected by the Beneficiary.  Upon the death of the Participant following the commencement of distribution, but prior to complete distribution of the entire balance of the Participant’s Accounts, the balance of the Participant’s Accounts on the date of death shall continue to be paid in the elected form of payment to the Participant’s Beneficiary; provided, however, that if the Participant has received at least all of the scheduled monthly installments prior to his or her death, no further benefits shall be due under the Plan.

4.7 Designation of Beneficiary.  The Participant may designate a Beneficiary or Beneficiaries to receive any amount due hereunder by the Participant by written notice thereof to the Company at any time prior to his or her death and may revoke or change the Beneficiary so designated without the Beneficiary’s consent by written notice delivered to Company at any time and from time to time prior to the Participant’s death.  If the Participant is married and a resident of a community property state, one half of any amount due under the Plan which is the result of an amount contributed to the Plan during the Participant’s marriage is the community property of the Participant’s spouse and the Participant may designate a Beneficiary or Beneficiaries to receive only the Participant’s one-half interest. If the Participant shall have failed to designate a Beneficiary, or if no such Beneficiary shall survive him, then such amount shall be paid to his or her estate. Designations of Beneficiaries shall be in the form provided by the Committee.

4.8 Administration of Payments.  Distribution of the lump sum or the first installment shall be made or commence within 90 days following the date of the distribution event or the proper identification of the Beneficiary, if later, as applicable, but in no event later than the end of the 2½ month period following the Plan Year in which occurs the distribution event.  Subsequent installments, if any, shall be made on the first day of each month following the first installment as determined by Company.  The amount of each installment shall be calculated by dividing the Account balance as of the date of the distribution by the number of installments remaining pursuant to the Participant’s distribution election.  Each such installment, if any, shall take into account Interest Credits credited to the balance of the Account remaining unpaid.

4.9 Permitted Acceleration of Payments.  To the extent permitted by Code Section 409A and related Regulations, the Company may, in the sole discretion of the Committee, commence distribution to Participant, Participant’s Beneficiary or other appropriate payee the portion of Participant’s Account authorized for distribution in accordance with Code Section 409A and related Regulations, including the following:

(a) amounts payable to an individual other than the Participant under a domestic relations order approved by the Committee in its sole discretion;

(b) de minimis cashout payments that result in the termination of the entirety of a Participant’s interest in the Plan, if the payment is made on or before the later of December 31 of the Plan Year in which occurs the Participant’s Separation from Service or the date 2½ months after the Participant’s Separation from Service and the payment is not greater than $10,000;

(c) payment to Participant to pay the Federal Insurance Contributions Act tax imposed under Code Section 3101 and 3121(v)(2) on Eligible Compensation deferred under the Plan, grossed up as permitted under applicable Regulations; and

(d) payment to Participant in the event the Plan with respect to that Participant fails to meet the requirements of Code Section 409A and related Regulations in an amount not to exceed the amount required to be included in income as a result of the failure to comply with the requirements of Code Section 409A and the related Regulations.

4.10 Permitted Delay of Payments.  To the extent permitted by Code Section 409A and related Regulations, the Company shall delay distribution to Participant, Participant’s Beneficiary or other appropriate payee the portion of Participant’s vested Plan Benefit authorized for distribution to the extent—

(a) that the Committee reasonably anticipates that the Company’s deduction with respect to such payment otherwise would be limited or eliminated by application of Code Section 162(m);

(b) that the Committee reasonably anticipates that the making of the payment will violate a term of a loan agreement or other similar contract to which the Company is a party, and such violation will cause material harm to the Company;

(c) that the Committee reasonably anticipates that the making of the payment will violate federal securities laws or other applicable law;

(d) upon such other events and conditions as may be permitted under the Code and Regulations;

provided that the payment shall be made at the earliest date at which the Committee reasonably anticipates that the applicable circumstance specified above is of no further force or effect.

ARTICLE 5.  TRUST

5.1 Accounts.  The Company shall establish separate Accounts for each Participant who participates in the Plan.  No special fund shall be established nor shall any note or security be issued by the Company with respect to a Participant’s Accounts.

5.2 Participants’ Rights Unsecured.  The right of the Participant or his or her Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company, and neither the Participant nor his or her Beneficiary shall have any rights in or against any amount credited to his or her Account or any other specific assets of the Company, except as otherwise provided in the Trust.  Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between the Plan and the Company or any other person.  

5.3 Trust Agreement.  The Company may establish the Trust for the purpose of retaining assets set aside by the Company pursuant to the Trust Agreement for payment of all or a portion of the amounts payable pursuant to the Plan.  Any benefits not paid from the Trust shall be paid solely from the Company’s general funds, and any benefits paid from the Trust shall be credited against and reduced by a corresponding amount the Company’s liability to the Participants under the Plan.  No special or separate fund, other than the Trust Agreement, shall be established and no other segregation of assets shall be made to assure the payment of any benefits hereunder.  All Trust Funds shall be subject to the claims of general creditors of the Company in the event the Company is insolvent (as that term is defined in the Trust Agreement).  The obligations of the Company to pay benefits under the Plan constitute an unfunded, unsecured promise to pay and Participants shall have no greater rights than general creditors of the Company.  Trust assets shall not, at any time, be located outside of the United States or be transferred outside of the United States, whether or not such assets are available to satisfy claims of general creditors.

ARTICLE 6.  AMENDMENT AND TERMINATION

The Committee shall have the right to amend the Plan at any time and from time to time, including a retroactive amendment.  Any such amendment shall become effective upon the date stated therein, and shall be binding on all Participants, except as otherwise provided in such amendment; provided, however, that said amendment shall not affect benefits adversely to the affected Participant without the Participant’s written approval.  Benefits accruing to a Participant pursuant to any employment agreement in effect between the Company and the Participant that entitles the Participant to participate in and to certain rights under the Plan shall not be affected by an amendment of the Plan.

ARTICLE 7.  ADMINISTRATION

7.1 Administration.  The Committee shall administer and interpret the Plan in accordance with the provisions of the Plan and the Trust Agreement.  Any determination or decision by the Committee shall be conclusive and binding on all persons who at any time have or claim to have any interest whatever under the Plan.  To the extent required to avoid penalties under section 409A of the Internal Revenue Code, the Committee intends to interpret and operate the Plan in all respects in compliance with Code Section 409A and related Regulations.

7.2 Applying for Benefits.  The following claims procedures are generally applicable to claims filed under the Plan.  To the extent required by law and to the extent the Committee is ruling on a claim for benefits on account of a disability, the Plan will follow, with respect to that claim, claims procedures required by law for plans providing disability benefits.

(a) General Procedures.  Subject to the provisions of subsection (b), the following procedures shall apply in the determination of claims under the Plan.

(1) Filing a Claim.  All applications and claims for benefits shall be filed in writing by the Participant, his or her Beneficiary, or the authorized representative of the claimant, by completing the procedures required by the Committee.  The procedures shall be reasonable and may include the completion of forms and the submission of documents and additional information.

(2) Review of Claim.  The Committee shall review all applications and claims for benefits and shall decide whether to approve or deny the claim in whole or in part.  If a claim is denied in whole or in part, the Committee shall provide written notice of denial to the claimant within a reasonable period of time no later than 90 days after the Committee receives the claim, unless special circumstances require an extension of time for processing the claim.  If an extension is required, the Committee shall notify the claimant in writing (including by electronic media) by the end of the initial 90-day period and indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render a decision on the claim.  The extension shall not exceed an additional 90 days.  The notice of denial shall be written (including in electronic media) in a manner calculated to be understood by the claimant and shall include the following:

(A) specific reasons for the denial;

(B) specific references to pertinent Plan provisions;

(C) description of any additional material or information necessary for the claimant to perfect his or her claim and an explanation of why such material or information is necessary; and

(D) appropriate information as to the steps the claimant should take if he or she wishes to submit the denied claim for review, including any applicable time limits and including a statement of the claimant’s right to bring a civil action under ERISA § 502(a) following a denied claim on review.

(3) Appealing a Claims Denial.  If the claimant wishes a review of the denied claim, he or she shall notify the Committee in writing within 60 days of the claimant’s receipt of notification of the denied claim.  The claimant or the claimant’s representative may review pertinent Plan documents and may submit issues or comments to the Committee in writing.  The claimant or the claimant’s representative may provide the Committee with a written statement of the claimant’s position and with written materials in support of his or her position, including documents, records and other information relating to the claim.  The claimant or the claimant’s representative may have, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim.  A document, record or other information shall be considered relevant to the claim if such document, record or other information (A) was relied upon in making the benefit determination, (B) was submitted, considered or generated in the course of making the benefit determination, without regard to whether such document, record or other information was relied upon in making the benefit determination, or (C) demonstrates compliance with the administrative processes and safeguards designed to ensure and verify that benefit claim determinations are made in accordance with the Plan and that, where appropriate, the Plan provisions have been applied consistently with respect to similarly situated claimants.

(4) Review of Appeal.  The Committee shall forward all requests for review of a denied claim together with all associated documents to the Chairman of the Committee promptly after receipt.  The Committee shall make its decision on review solely on the basis of the written record, including documents and written materials submitted by the claimant and/or the claimant’s representative.  The Committee shall make a decision on review within a reasonable period of time, not later than 60 days after the Committee receives the claimant’s written request for review unless special circumstances require additional time for review of the claim.  If the Committee needs an extension of time to review the claim, it shall notify the claimant in writing before the end of the initial 60-day period, and shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the determination on review.  The extension shall not be longer than an additional 60 days.  The decision on review will be written in a manner calculated to be understood by the claimant.  If the claim is denied, the written noticed shall include specific reasons for the decision as well as specific references to pertinent Plan provisions on which the decision is based, a statement of the claimant’s right to bring an action under ERISA § 502(a) and a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant’s claim for benefits, with “relevant” defined as provided in the previous subsection.  

(b) Determination of Disability.  To the extent the Committee is determining a claims for benefits under the Plan on account of disability, the following procedures shall apply.

(1) Notice of Denial.  If any person claiming benefits under the Plan on account of disability is denied such benefits by the Committee, no later than 45 days after receipt of the claim by the Committee (or within 75 days if special circumstances require an extension and if written (including electronic) notice of such extension and circumstances is given to such person within the initial 45-day period), he or she shall be furnished with written notification from the Committee stating the following: The notice of denial shall be written (including in electronic media) in a manner calculated to be understood by the claimant and shall include the following:

(A) specific reasons for the denial;

(B) specific references to pertinent Plan provisions on which the adverse determination is based;

(C) description of the Plan’s review procedures and time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review;

(D) if an internal rule, guideline, protocol or other similar criterion (a “Guideline”) was relied upon in making the adverse determination, either (A) a copy of the Guideline, or (B) a statement that such Guideline was relied upon in making the adverse determination and a statement that a copy of such Guideline will be provided free of charge to the claimant upon request; and

(E) if the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the Plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request.

In the case of any extension, the notice of extension shall specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues, and the claimant shall be afforded at least 45 days within which to provide the specified information.

In the event that a period of time is extended due to a claimant’s failure to submit necessary information, the period for making the benefit determination shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.

(2) Appeal Process.  A claimant shall have 180 days following receipt of a notification of an adverse benefit determination within which to appeal the determination.  A claimant shall be entitled to submit on appeal written comments, documents, records and other information relating to the claim.  During the time the claimant has for filing an appeal, the claimant shall be provided, upon request and free of charge, reasonable access to and copies of all documents, records and other information relevant to the claim.  The Committee shall forward all requests for review of a denied claim together with all associated documents to the Chair of the Committee promptly after receipt.  The Committee’s review of the claim shall take into account all comments, documents, records and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.  The review shall not give deference to the initial adverse benefit determination.  If the initial benefit determination was, in whole or in part, based on medical judgment (including determinations with regard to whether a particular treatment, drug or other item is experimental, investigational, or not medically necessary or appropriate), in deciding the appeal the Committee shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment.  Such professional shall be an individual who is neither an individual who was consulted in connection with the adverse benefit determination that is the subject of the appeal, nor the subordinate of any such individual.  If the Plan obtained advice from any medical or vocational experts in making the initial benefit determination, the Committee shall identify such experts to the claimant, regardless of whether the advice was relied upon in making the initial benefit determination.

The Committee shall notify the claimant of the benefit determination on review within a reasonable period of time, not to exceed 45 days after receipt by the Plan of the claimant’s request for review, unless the Committee determines that special circumstances (such as the need to hold a hearing, if the Plan’s procedures provide for a hearing) require an extension of time for processing the claim.  If the Committee determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 45-day period.  In no event shall such extension exceed a period of 45 days from the end of the initial period.  The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan expects to render the determination on review.

Notwithstanding the previous paragraph, if the Committee holds regularly scheduled meetings at least quarterly, the Committee shall instead make a benefit determination no later than the date of such meeting that immediately follows the Plan’s receipt of a request for review, unless the request for review is filed within 30 days preceding the date of such meeting.  In such case, a benefit determination may be made by no later than the date of the second meeting following the Plan’s receipt of the request for review.  If special circumstances (such as the need to hold a hearing, if the Plan’s procedures provide for a hearing) require a further extension of time for processing, a benefit determination shall be rendered not later than the third meeting of the Committee following the Plan’s receipt of the request for review.  If such an extension of time for review is required because of special circumstances, the Committee shall provide the claimant with written notice of the extension, describing the special circumstances and the date as of which the benefit determination will be made, prior to the commencement of the extension. The Committee shall notify the claimant of the benefit determination as soon as possible, but not later than 5 days after the benefit determination is made.

The period of time within which a benefit determination on review is required to be made shall begin at the time an appeal is filed in accordance with the reasonable procedures of the Plan, without regard to whether all the information necessary to make a benefit determination on review accompanies the filing.  In the event that a period of time is extended due to a claimant’s failure to submit information necessary to decide a claim, the period for making the benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.

(3) Notification of Benefit Determination on Review.  The Committee shall provide the claimant with written notification of the Plan’s benefit determination on review.  If on review the initial denial of benefits is affirmed, the notification shall set forth, in a manner calculated to be understood by the claimant, the following:

(A) specific reason for the adverse determination;

(B) specific references to pertinent Plan provisions on which the adverse determination is based;

(C) statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits;

(D) statement describing the Plan’s voluntary appeal procedures, if any, and describing the claimant’s right to obtain the information about such procedures, and a statement of the claimant’s right to bring an action under ERISA Section 502(a);

(E) if a Guideline was relied upon in making the adverse determination, either (A) a copy of the Guideline, or (B) a statement that such Guideline was relied upon in making the adverse determination and a statement that a copy of such Guideline will be provided free of charge to the claimant upon request;

(F) if the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the Plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request; and

(G) the following statement: “You and your Plan may have other voluntary alternative dispute resolution options, such as mediation.  One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency.”

(c) The Committee shall have full discretionary authority to consider claims filed under the Plan and to determine eligibility, status and rights of all individuals under the Plan and to construe any and all terms of the Plan.

(d) Following the approval of a claim for benefits under the Plan, pursuant to the claims procedure set forth in this section, the Committee shall have the authority to construe and administer the Plan in a manner that is consistent with the payment of benefits in accordance with the approved claim.

7.3 Liability of Committee; Indemnification.  To the extent permitted by law, the Committee shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan unless attributable to his or her own bad faith or willful misconduct.  The Committee may employ legal counsel, consultants, actuaries and agents as they may deem desirable in the administration of the Plan and may rely on the opinion of such counsel or the computations of such consultant or other agent.  The Committee shall provide for the keeping of detailed written minutes of its actions hereunder, which shall be reviewed by the legal counsel or the consultant engaged by the Committee prior to their finalization.

7.4 Expenses.  The costs of the establishment of the Plan and the adoption of the Plan by the Company, including but not limited to legal and accounting fees, shall be borne by the Company.  The expenses of administering the Plan shall be borne by the Trust; provided, however, that the Company shall bear, and shall not be reimbursed by, the Trust for any tax liability of the Company associated with the investment of assets by the Trust.  All taxes associated with participation in the Plan, including any tax liability under Code Section 409A, shall be borne by the Participant.

ARTICLE 8.  GENERAL AND MISCELLANEOUS

8.1 Rights Against the Company.  Except as expressly provided by the Plan, the establishment of the Plan shall not be construed as giving to any Participant or to any person whomsoever, any legal, equitable or other rights against the Company, or against its officers, directors, agents or shareholders, or as giving to any Participant or Beneficiary any equity or other interest in the assets, business or shares of Company stock or giving any Participant the right to be retained in the employment of the Company.  All Participants shall be subject to discharge (with or without cause) to the same extent they would have been if the Plan had never been adopted.  The rights of a Participant hereunder shall be solely those of an unsecured general creditor of the Company.  Neither the Plan nor any action taken hereunder shall be construed as giving to any Participant the right to continue rendering services to or for the benefit of the Company or as affecting the right of the Company to dismiss any Participant.  Any benefit payable under the Plan shall not be deemed salary or other compensation for the purpose of computing benefits under any Participant benefit plan or other arrangement of the Company for the benefit of its Participants.

8.2 Assignment or Transfer.  No right, title or interest of any kind in the Plan shall be transferable or assignable by any Participant or Beneficiary or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts of the Participant or Beneficiary.  Any attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or dispose of any interest in the Plan shall be void.  

8.3 Severability.  If any provision of the Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of the Plan but shall be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein.  

8.4 Construction.  The article and section headings and numbers are included only for convenience of reference and are not to be taken as limiting or extending the meaning of any of the terms and provisions of the Plan.  Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular.  When used herein, the masculine gender includes the feminine gender.  

8.5 Governing Law.  The validity and effect of the Plan and the rights and obligations of all persons affected hereby shall be construed and determined in accordance with the laws of the State of Delaware unless superseded by federal law, which shall govern correspondingly.

8.6 Payment Due to Incompetence.  If the Committee receives evidence that a Participant or Beneficiary entitled to receive any payment under the Plan is physically or mentally incompetent to receive such payment, the Committee may, in its sole and absolute discretion, direct the payment to any other person or Trust which has been legally appointed by the courts or to any other person determined by the Company to be a proper recipient on behalf of such person otherwise entitled to payment, or any of them, in such manner and proportion as the Company may deem proper.  Any such payment shall be in complete discharge of the Company’s obligations under the Plan.  

8.7 Taxes.  All amounts payable hereunder shall be reduced by any and all federal, state, and local taxes imposed upon Participant or his or her Beneficiary, which are required to be paid or withheld by Company.  The determination of Company regarding applicable income and employment tax withholding requirements shall be final and binding on Participant.

8.8 Insurance.  In the event that any Participant elects, in his or her discretion, to independently purchase an insurance policy covering the inability of the Plan or the Trust to make any payments to which Participant is entitled under the Plan or the Trust, the Company shall use its best efforts to facilitate the payment by Participant of any applicable excise taxes which become due as the result of the payment of premiums under such policy.  Nothing contained herein shall be construed as an endorsement by the Company of the purchase of such a policy or a recommendation by the Company that the purchase of such a policy is necessary or desirable as the result of Participant’s participation in the Plan.  In the event that such insurance would result in adverse tax consequences to the Participant, the Participant shall terminate such insurance.

8.9 Attorney’s Fees.  Company shall pay the reasonable attorney’s fees incurred by any Participant in an action brought against Company to enforce Participant’s rights under the Plan, provided that such fees shall only be payable in the event that the Participant prevails in such action.

8.10 Plan Binding on Successors and Assignees. The Plan shall be binding upon and inure to the benefit of the Company and its successor and assigns and the Participant and the Participant’s designee and estate.

Building Materials Holding Corporation

Executive and Director Supplemental Retirement Income

TRUST AGREEMENT

This Agreement made this first day of August, 2005 by and between Building Materials Holding Corporation (Company), and U. S. Bank Institutional Trust and Custody, Idaho (Trustee).

WHEREAS, the Company has established the Executives’ Supplemental Retirement Income Plans, both Old and New Plans (the “Plans”), attached hereto as Exhibit A and B, to encourage the participants in the Plans (the “Participants”) to continue to render services to the Company by providing for the Participants’ security after their retirement from service with the Company; and,

WHEREAS, the Plans provide for payments to be made under the conditions and on the terms contained therein to the Participants and/or their beneficiaries (hereinafter individually and collectively the (“Trust Beneficiaries”); and,

WHEREAS, the Company desires to establish this Trust Agreement to provide in whole or in part, for the payment of the benefits due under the Plans and accordingly to discharge its obligations thereunder, and to transfer to the Trust certain property which shall be held herein until paid to the Trust Beneficiaries in accordance with and pursuant to the Plans, subject however, to the claims of the Company’s creditors in the event of the Company’s insolvency as defined herein; and,

WHEREAS, it is the intention of the Company to make such contributions to the Trust as it may from time to time determine to be necessary or appropriate, to discharge its obligations to the Trust Beneficiaries under the Plans subject to Section 3 hereof;

NOW, THEREFORE, the Company hereby establishes with the Trustee this Trust to hold all property acceptable to the Trustee, together with the income thereon, as shall be transferred to it hereunder for the uses and purposes and upon the terms and conditions set forth herein.

SECTION I - DEFINITIONS

1.1 Plans. The plans covered by this Trust are those attached hereto as Exhibit A and B. The Company may at any time, by written notice to the Trustee, add additional plans to become subject to this Trust. Any such additional plans shall become Plans subject to this Trust only upon receipt and acceptance by the Trustee of the additional plan documents.

1.2 Board of Directors. The Board of Directors of Building Materials Holding Corporation.

1.3 Compensation Committee. The Committee established by the Board of Directors to evaluate, recommend and administer compensation programs of the Company for the Board of Directors.

1.4 Trust Beneficiaries. The Participants under the Plans covered by this agreement and/or their Beneficiaries who become eligible for the benefit payments under the Plans.

1.5 Insolvency. The Company is insolvent for purposes of this Trust if Company is unable to pay its debts as they become due or the Company is subject to insolvency or bankruptcy proceedings under federal, state or local law.

1.6 Insolvency Creditors. The general creditors of the Company as designated by a court of competent jurisdiction, or person appointed by such court having jurisdiction over Company’s insolvency proceedings.

SECTION II - TRUST FUND

2.1 Company’s Obligations to Participants. The Company shall continue to be liable to the Participants to make all payments required under the terms of the Plans to the extent such payments are not made from this Trust. Distributions made from this Trust to Participants or their beneficiaries shall, to the extent of such distributions, satisfy the Company’s obligations to pay benefits to Participants and their beneficiaries under the Plans.

2.2 Contributions. The Company shall make contributions to the Trust as it deems appropriate in its sole discretion to provide funds to satisfy Company’s contractual obligations under the Plans. Such contributions may be in cash or other property acceptable to the Trustee.

2.3 Irrevocable Trust. The Company and the Trustee agree that the Trust hereby created has been established to pay obligations of the Company pursuant to the Plans and is subject to the rights of general creditors of the Company in the event of the Company’s insolvency as defined herein, and accordingly is a grantor trust under the provisions of Sections 671 through 677 of the Internal Revenue Code of 1986, as amended (the “Code”). The Company hereby agrees to report all items of income and deduction of the Trust on its own income tax returns. It shall be impossible at any time prior to satisfaction of all liabilities with respect to Trust Beneficiaries under the Plans and to Insolvency Creditors, if any, for any part of the corpus or income of the Trust to be transferred to the Company other than such part as is required to pay taxes and administration expenses or the reimburse the Company for payments made under the Plan as herein provided. No contribution to or income of the Trust is intended to be taxable to the Participants until benefits are distributed to them.

2.4 Rights to Trust Assets. The property of the Trust shall be held separate and apart from other funds of the Company and shall be used exclusively for the purposes herein set forth. The Trust Beneficiaries shall not have any preferred claim on, or any beneficial ownership interest in, any assets of the Trust prior to the time such assets are paid to the Trust Beneficiaries as provided in Section 3 hereof, and the Trust Beneficiaries’ rights to payments created under the Plans and this Trust Agreement shall be no greater than the rights of unsecured general creditors of the Company.

All Trust assets remaining after all amounts due under the Plans and all amounts then due Insolvency Creditors are paid shall be paid to the company.

2.5 ERISA Considerations. The Plans attached hereto as Exhibit A and B are intended to be “unfunded” and maintained “Primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and as such are intended not to be covered by Parts 2 through 4 of Subtitle B of Title I of ERISA. The existence of this Trust is not intended to alter this characterization of the Plans.

SECTION III - PAYMENTS TO TRUST BENEFICIARIES

3.1 Payments Except During Insolvency. The Trustee shall make payments of benefits to the Trust Beneficiaries from the assets of the Trust, if and to the extent such assets are available for distribution, in accordance with the Plans, so long as the Company is not insolvent, as defined herein. Unless such insolvency is deemed to exist, the Trustee shall hold the Trust Fund exclusively to pay fees and expenses of the Trust and Plans’ benefits until all such benefits have been paid. Unless insolvency exists as herein defined, creditors of the Company shall not be paid from the Trust Fund. The Company may not hypothecate the assets of the Trust nor create any security interest in the Trust Fund in favor of any of its creditors.

3.2 Determination of Benefits Due. The Compensation Committee will be responsible for notifying the Trustee of amounts due to the Trust Beneficiaries and the dates such payments are due. If the Trustee has cause to believe that a payment is due and has not received notice from the Compensation Committee, the Trustee will request confirmation from the Compensation Committee and if no response is received may take such steps as Trustee deems appropriate and necessary to fulfill his obligations hereunder to determine what payment is actually due to make payments accordingly.

3.3 Insufficient Funds in Trust. If the property of the Trust is not sufficient to make payments under the Plans to the Trust Beneficiaries, upon notice from the Trustee to that effect, the Company shall make the balance of each such payment as it falls due.

3.4 Facility of Payment. Any payments made by the Trustee hereunder to the Trust Beneficiaries shall be in discharge of the Company’s obligations under the Plans, provided, however, that the Company shall remain liable to the Trust Beneficiaries for all amounts due under the Plans to the extent not paid hereunder.

SECTION IV - INSOLVENCY

4.1 Determination of Insolvency. The Company shall promptly give notice to the Trustee upon becoming insolvent. The Chief Executive Officer and/or the Board of Directors of the Company and/or the Compensation Committee shall be obligated to give such notice. If the Trustee receives such notice or receives from any other person claiming to be a creditor of the Company a written allegation that the Company is insolvent, the Trustee shall independently determine whether such insolvency exists. The expenses of such determination shall be allowed as administrative expenses of the Trust.

4.2 Suspension of Payments. The Trustee shall cease making any payments due from the Trust Fund to the Trust Beneficiaries while it is determining the existence of insolvency. Such payments shall cease and the Trustee shall commence insolvency Administration under Section 4.5 upon receipt of any notice of insolvency as provided in Section 4.1.

4.3 Obligation of Trustee. The Trustee shall have no obligation to investigate the financial condition of the Company prior to receiving a notice or allegation of insolvency. The Trustee may, in all events rely on such evidence concerning the Company’s solvency as may be furnished to the Trustee which will give the Trustee a reasonable basis for making the determination concerning the Company’s solvency.

4.4 Insolvency Administration. During Insolvency Administration, the Trustee shall hold the Trust Fund for the benefit of the general creditors of the Company and make payments only in accordance with this Section 4.4. The Trustee shall continue the investment of the Trust Fund in accordance with Section 5.

(A) After payment of Trustee fees authorized herein, the Trustee shall make payments out of the Trust Fund only as follows:

(i) To general creditors in accordance with instructions from a court of competent jurisdiction, or a person appointed by such court, having jurisdiction over the Company’s condition of insolvency, and/or

(ii) To the Trust Beneficiaries in accordance with instructions of such persons or entities specified in subparagraph A(i) above.

(B) The Trustee shall be a secured creditor with a priority claim to the Trust Fund with respect to its own fees and expenses.

4.5 Termination of Insolvency Administration. Insolvency Administration shall terminate when the Trustee determines that the Company is not insolvent, in response to a notice or allegation of insolvency under Section 4.1 or Company is no longer insolvent or a court of competent jurisdiction determines that the Company is no longer insolvent.

4.6 Resumption of Benefits. Upon termination of Insolvency Administration, the Trust Fund shall continue to be held for the benefit of the Trust Beneficiaries. Benefit payments due but not paid during the period of Insolvency Administration shall be made as soon as practicable.

SECTION V - INVESTMENT OF TRUST ASSETS

5.1 Types of Investments. Except for money and other property subject to the investment responsibility of an investment manager as provided in Section 5.5 hereof, and subject to Section 5.2 the Trustee shall, in its discretion, invest and reinvest the assets of the Trust without distinction between principal and income, in any property, real, personal or mixed, wherever situated, and whether or not productive of income or consisting of wasting assets, including, without limitation, common and preferred stocks, mutual funds, common trust funds, bonds, notes, debentures, securities convertible into common stock, leaseholds, mortgages (including, without limitation, any collective or part interest in any bond and mortgage or note and mortgage), interest bearing accounts and certificates of deposit, oil, mineral or gas properties, royalties, interests or rights (including equipment pertaining thereto), equipment trust certificates, investment trust certificates, savings bank deposits, commercial paper, and insurance contracts (including those to which amounts may be deposited and withdrawn). The Trustee may invest in certificates of deposit or savings accounts which bear a reasonable interest rate in a federally insured institution which may be affiliated with the Trustee. The Trustee shall, on the direction of the Company, purchase life insurance and/or annuity contracts including group annuity contracts providing for flexible funding or similar vehicles or for the investment of assets in separate accounts, invested in any securities and other property including real estate, regardless of whether or not the insurance carrier shall have assumed any contractual or other liability as to the benefits to be provided thereunder, the value thereof, or the return therefrom. Such life insurance and/or annuity contracts shall be considered investments of the Trust Fund and, together with all rights, privileges, options and elections contained therein, shall vest in the Trustee but shall be exercised, assigned or otherwise disposed of as directed by the Company. The insurance carrier under any such contract shall have full responsibility for the management and control of the assets held thereunder.

5.2 Investment Policies. The Board of Directors of the Company shall have the right at any time and in its discretion to formulate investment policies and standards for the investment of the Trust Fund. Such policies and standards may include, among other things, the percentage of the Trust Fund which may be invested in fixed income securities, the percentage of the Trust Fund which may be invested in common stocks, and the percentage of the Trust Fund which may be invested in the securities of any one company. Such policies may be changed from time to time by resolution of the Board.

5.3 Investment Funds. The Trustee shall maintain separate investment funds as the Company may direct. Contributions to the Trust shall be allocated among the funds by the Trustee in accordance with the directions of the Company. Each separate investment fund shall be invested only in types of investments consistent with guidelines established by the Company for such fund. Pending such investment and reinvestment, or transfers as herein provided, the Trustee may temporarily invest and reinvest the funds in any marketable short and medium term fixed income securities, United States Treasury Bills, other short and medium term government obligations, commercial paper, other money market instruments and part interest in any one of more of the foregoing, or may maintain cash balances consistent with the liquidity needs of the Plans as communicated to the Trustee by the Company. In addition, the Trustee shall have full power and authority to invest and reinvest all or any part of any investment fund through the medium of any pooled investment fund or group trust which is invested principally in property of the kind authorized for investment of the respective investment funds. To the extent of investment of the Trust’s assets in such a pooled fund or group trust, the terms of the instrument establishing such pooled fund or group trust are made a part hereof as fully as if set forth at length herein. The Trustee shall make transfers between each of the funds in accordance with the directions of the Company and may dispose of such investments in the particular investment fund as may be necessary to enable it to make any such transfer.

5.4 Powers of the Trustee. The Trustee shall be authorized and empowered, in its discretion (except as provided in Section 5.5) to exercise any and all of the following rights, powers and privileges with respect to any cash, securities or other properties held by the Trustee in Trust hereunder:

(A) To sell any such property at such time and upon such terms and conditions as the Trustee deems appropriate. Such sales may be public or private, for cash or credit, or partly for cash and partly for credit, and may be made without notice of advertisement of any kind.

(B) To exchange, mortgage, or lease any such property and to convey, transfer or dispose of any such property on such terms and conditions as the Trustee deems appropriate.

(C) To grant options for the sale, transfer exchange or disposal of any such property.

(D) To exercise all voting rights pertaining to any securities and to consent to or request any action on the part of the issuer of any such securities and to give general or special proxies or powers of attorney with or without power of substitution.

(E) To consent to or participate in amalgamations, reorganizations, re-capitalizations, consolidations, mergers, liquidations, or similar transactions with respect to any securities, and to accept and to hold any other securities issued in connection therewith.

(F) To exercise any subscription rights or conversion privileges with respect to any securities held in the Trust Fund.

(G) To collect and receive any and all money and other property of whatsoever kind or nature due or owing to belonging to the Trust Fund and to give full discharge and acquaintance therefore and to extend the time of payment of any obligation at any time owing to the Trust Fund, as long as such extension is for a reasonable period, and continues at reasonable interest.

(H) To cause any securities or other property to be registered in, or transferred to, the individual name of the Trustee or in the name of one or more of its nominees, or one or more nominees of any system for the centralized handling of securities, or it may retain them unregistered and in form permitting transferability by delivery, but the books and records of the Trust shall at all times show that all such investments are a part of the Trust Fund.

(I) To organize under the laws of any State a Company for the purpose of acquiring the holding title to any property which it is authorized to acquire under this Trust Agreement and to exercise with respect thereto any or all of the powers set forth in this Trust Agreement.

(J) To manage, operate, repair, improve, develop, preserve, mortgage or lease for any period any real property or any oil, mineral or gas properties, royalties, interest or rights held by it directly or through any Company, either alone or by joining with others, using other Trust assets for any of such purposes; to modify, extend, renew, waive or otherwise adjust any or all of the provisions of any such mortgage or lease and to make provision for amortization of the investment in or depreciation of the value of such property.

(K) To settle, compromise, or submit to arbitration any claims, debts or damages due or owing to or from the Trust; to commence or defend suits or legal proceedings whenever, in its judgment any interest of the Trust requires it; and to represent the Trust in all suits or legal proceedings in any court of law or equity or before any other body or tribunal, insofar as such suits or proceedings relate to any property forming part of the Trust Fund or to the administration of the Trust Fund.

(L) To borrow money from others for the purposes of the Trust, but the Trustee shall not be authorized to borrow any money from its banking department or from the Company or any subsidiary or associated company.

(M) The Trustee may, for the purpose of investing in and holding title to real or personal property or part interests therein located outside the state of Idaho, appoint one or more individuals or Companies as a co-trustee or subtrustee or join with one or more individuals or Companies (including itself) in the establishment of one or more than one or all of the powers, authorities, discretions, duties and functions of the Trustee under this Trust Agreement and the amendments hereto as shall be designated in the instrument establishing such subtrust including without limitation by the reference thereto power to receive and hold property, real or personal, or part interest therein, oil, mineral or gas properties, royalty interests or rights, including equipment pertaining thereto, leaseholds, mortgages and other interests in realty, situated in any state in which the co-trustee or subtrustee is authorized to act as trustee and pay the reasonable expenses and compensation of such co-trustee or subtrustee.

(N) To purchase, hold and sell interests or units of participation in any collective or common trust fund established by the Trustee, including any such funds which may be established in the future.

(O) Generally to do all acts, whether or not expressly authorized, which the Trustee deems necessary or desirable, but acting at all times according to the principles expressed in Section 9.

5.5 Investment Responsibilities. The Company may (but need not) appoint an Investment Manager or Managers to manage (including the power to acquire and dispose of) all or any of the assets of the trust Fund. In the event of any such appointment, the Company shall establish the portion of the assets of the Trust Fund which shall be subject to the management of the Investment Manager and shall so notify the Trustee in writing. Likewise, the Company may establish that all or a portion of the assets of the Trust Fund shall be subject to the investment jurisdiction of the Company itself (through the Compensation Committee or other designee) and shall advise the Trustee of such determination. With respect to such assets over which either an Investment Manager or the Company has investment responsibility, the Investment Manager or the Company shall possess all of the investment and administrative power and responsibilities granted to the Trustee hereunder, including the power to hold the indicia of ownership of any investment in a collective trust fund, and the Trustee shall invest and reinvest such assets pursuant to the written directions of the Investment Manager or the Company. If the Company so directs, an Investment Manager shall have the power to acquire and dispose of assets in the name of the Trust. The investment jurisdiction of the Company may be exercised in any manner consonant with its duties as a fiduciary including:

(A) directing the Investment Manager or the Trustee that certain investments or types of investments be made or liquidated;

(B) directing the Investment Manager or the Trustee that certain investments not be made;

(C) requiring that the Trustee or the Investment Manager obtain approval prior to acquiring or disposing of any asset. The Trustee shall have no investment responsibility with respect to the assets subject to the investment responsibility of an Investment Manager or the Company, and shall have no duty to inquire into the direction of such Investment Manager or the Company, to solicit such directions nor to review and follow the investments made pursuant to any such direction, other than to the extent provided by law.

SECTION VI - RESPONSIBILITY OF TRUSTEE

6.1 Accounting. The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements and all other transactions required hereunder. All such accounts, books and records shall be open to inspection at all reasonable times by the Company and by the Trust Beneficiaries. Within 60 days following the close of each calendar year and within 60 days after the removal or resignation of the Trustee, the Trustee shall deliver to the Company and the Trust Beneficiaries a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by the Trustee.

6.2 General Responsibilities.

(A) The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims provided, however, that the Trustee shall have no liability for any action taken pursuant to a direction given by the Company contemplated by and complying with the terms of the Trust Agreement.

(B) The Trustee shall not be responsible for determining the required amount or frequency of contributions made by Company nor shall the Trustee be responsible for the adequacy of the Trust Fund to meet and discharge all liabilities under the Plans.

(C) The Trustee shall not be required to undertake or to defend any litigation arising in connection with this Trust Agreement, unless it is first indemnified by the company against its costs, and the Company hereby agrees to indemnify the Trustee for such costs.

(D) The Trustee may consult with legal counsel with respect to any of its duties or obligations hereunder and shall be fully protected in acting or refraining from action in accordance with such advice of counsel.

(E) The Trustee may hire agents, accountants, actuaries and financial consultants to assist it in the performance of its duties hereunder.

(F) The Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law unless expressly provided otherwise herein.

6.3 Trustee Fees and Expenses. The Trustee shall be entitled to be reimbursed for all expenses and receive such reasonable compensation for its services hereunder as shall be agreed upon, from time to time, by the Company and the Trustee. Such expenses, compensation and fees shall be payable by the Company. If such expenses, compensation and fees are not so paid, they shall be paid out of the Trust Fund, and shall be a charge against such Trust Fund until paid. The Company shall be obligated to reimburse the Trust Fund for any such expenses, compensation and fees paid out of the Trust Fund.

SECTION VII - OTHER TRUSTEE MATTERS

7.1 Resignation and Removal of Trustee. The Trustee may be removed upon 30 days written notice to the Trustee at any time by the Company. The Trustee may resign at any time, upon 30 days written notice to the Company. In the event of such resignation or removal, a new corporate Trustee shall be appointed by the Company which shall be independent and not subject to the control of either the Company or the Trust Beneficiaries. Notwithstanding the foregoing, an individual may be appointed, serve, resign, or be removed as a successor Trustee in the same manner as a corporate trustee, provided that in no event may an individual Trustee be a Participant, or a spouse thereof. Any Trustee hereunder that is removed, or any Trustee that resigns hereunder, is authorized, however, to reserve such sum of money, as to it may seem advisable, for the payment of any outstanding taxes or other liabilities of the Trust Fund and its reasonable fees and expenses in connection with the settlement of its accounts. Any balance of such reserve remaining after the payment of such taxes, liabilities, fees and expenses shall be paid over to the successor Trustee.

7.2 Exoneration and Indemnification of Trustee.

(A) The Trustee has no liability to any Trust Beneficiary or other party interested herein regarding the income tax consequences to any such person under the terms of the Plans, under the terms of this Trust Agreement as they affect the Plans, or otherwise occurring as a result of this Trust Agreement or any actions pertaining hereto. The company shall indemnify and hold harmless the Trustee, individually and as Trustee, from any costs, claims, losses, demands or liabilities (including reasonable attorney’s fees incurred in defending against such matters) incurred by or brought against the Trustee in respect of any such actual or asserted income tax liability of any such interested party.

(B) The Company shall indemnify and hold harmless the Trustee, individually and as Trustee, against all costs, claims, losses, demands or liabilities (including reasonable attorney’s fees in defending against such claims), incurred by or brought against the Trustee in respect of the acts, omissions, transactions, duties, obligations or responsibilities which the Trustee performs or undertakes on the direction of the Investment Manager, the Company or any other fiduciary given the power to direct the Trustee. In addition, such indemnity should include all claims and liabilities arising from any breach of fiduciary responsibility by a fiduciary other than the Trustee, unless the Trustee knowingly participates in or knowingly undertakes to conceal, an act or omission of such other fiduciary. The performance by the Trustee of trades, custody, reporting, recording and bookkeeping with respect to assets managed by another fiduciary shall not be deemed to give rights to any participation or knowledge on the part of the Trustee. The undertakings of this section shall survive the amendment or termination of this agreement of the Company and Trustee under the laws of the State of Idaho.

SECTION VIII - MISCELLANEOUS

8.1 Amendment. This Trust Agreement may not be amended except by a written instrument executed by the Trustee and the Company and consented to by a simple majority of the then Participants.

8.2 Duration. This Trust shall continue in effect and be irrevocable with respect to amounts contributed to it until all assets of the trust fund are exhausted through distribution of benefits to the Participants in accordance with the Plans, payment to general creditors in the event of insolvency, payment of fees and expenses of the Trustee, and return of remaining funds to the Company.

8.3 Severability.  Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition without invalidating the remaining provisions hereof.

8.4. Non Alienation. To the extent permitted by law, benefits payable to the Trust Beneficiaries under this Agreement may not be assigned, alienated, or subject to attachment, garnishment, levy execution or any other legal or equitable process and no benefit actually paid to the Trust Beneficiaries shall be subject to any claim for repayment by the Company or the Trustee. The Trust Beneficiaries may not assign or transfer any interest in the benefits due hereinafter and shall have no direct interest in any Trust asset.

8.5. Governing Law. This Trust Agreement shall be construed and administered in accordance with the laws of the State of Idaho, except as preempted by ERISA.

8.6. Taxes. The Company shall from time to time pay taxes of any and all kinds whatsoever which at any time are lawfully levied or assessed upon or become payable in respect of the Trust Fund, the income or any property forming a part thereof, or any security transaction pertaining thereto. To the extent that any taxes levied or assessed upon the trust Fund are not paid by the Company or are contested by the Company, the Trustee shall pay such taxes out of the trust Fund. If requested by the company, the Trustee shall, at the company’s expense, contest the validity of such taxes in any manner deemed appropriate by the Company or it counsel, but only if it has received an indemnity bond or other security satisfactory to it to pay an expenses of such contest.

IN WITNESS WHEREOF, the foregoing Trust Agreement has been duly executed by the Company and the Trustee.

Building Materials Holding Corporation	U. S. Bank Institutional Trust and Custody, Idaho
Paul S. Street Sr. Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary	Jennifer Hogaboom Vice President & Relationship Manager
Date	Date
Steven H. Pearson Sr. Vice President - Human Resources
Date

EXHIBIT A

Executives’ Supplemental Retirement Income Plan“NEW Plan”

EXHIBIT B

Executives’ Supplemental Retirement Income Plan“OLD Plan”

EX-10.91

Exhibit 10.91

EMPLOYMENT AGREEMENT

This Employment Agreement (this "Agreement"), dated April 1, 2004, is entered into between Building Materials Holding Corporation (the "Company"), and the undersigned employee, William M. Smartt ("Employee").

RECITALS

A.       Employee has been elected to the position of Senior Vice President and Chief Financial Officer of the Company.

B.       The Company desires to obtain the benefit of the services of Employee.

C.       Employee desires to provide his service to the Company as provided for in this Agreement.

In consideration of the compensation paid or to be paid to the Employee and for other good and valuable consideration, the Company and the Employee agree as follows:

1.       Effective Date.  This Agreement shall become effective on April 1, 2004 (the "Effective Date").

2.       Terms of Employment.  Subject to Section 7 hereof, the Company hereby employs the Employee under the terms of this Agreement, and the Employee hereby accepts continued employment with the Company under the terms of this Agreement, for a period commencing on the Effective Date and ending on April 1, 2006 (the "Term"), which may be extended for a one year extension upon mutual agreement by Employee and Company. The one year extension, if exercised, must be mutually agreed upon by the parties prior to April 1, 2006.

3.       Duties.  The Employee shall serve as the Senior Vice President and Chief Financial Officer of the Company.

4.       Compensation and Benefits.

(a)       Base Salary.  During the Term, in exchange for the services to be rendered by the Employee and the covenants of the Employee in this Agreement, the Company shall compensate the Employee with a minimum base salary at the rate of $275,000 per year, subject to review and evaluation in accordance with the Company's past practice and payable in accordance with the Company's compensation practices in effect from time to time during the Term. The Employee will continue to be eligible to participate in the Company's deferred compensation program and will have an annual opportunity to elect to defer his salary in accordance with the terms of such program. Such right to participate in the deferral of salary will end on the expiration of the Term.

(b)       Bonus.  During the Term, the Employee will participate in the Company's regular officers' bonus plan and the Equity Bonus set forth in Section 5. Payment of the regular officers' bonus plan will be pro-rated at the end of the Term for 2006.

(c)       Employee Benefits.  During the Term and the extension as provided for herein, Employee shall be entitled to participate in the Company's benefit plans generally available to its officers, employees and their dependents from time to time in accordance with the terms thereof. Thereafter, Employee may participate in the Company's health care plan both individually and with dependant spouse with payment of the premium equal to one-half of the respective COBRA benefit cost (single, two party or family). However, after retirement, when the dependent reaches age 65, the Company health care plan will be secondary to Medicare.  The Company will either recognize prior service in the industry so that Employee is eligible to participate in the Company's Retirement Health Care Plan if tax regulations permit, or reimburse Employee's participation in another health care plan up to the amount that the Company would have otherwise contributed for Employee's participation in the BMHC Retirement Health Care Plan. Employee shall be eligible to participate in the Company's Long Term Incentive Plan to the same extent as similar employees of the Company through 2006 and the extension of the Term, and the parties acknowledge that such plan currently provides payouts based on the Company's operating performance on three year cycles. Partially completed cycles will be paid out on a pro-rated basis at the end of the term of each cycle. Employee will also be entitled to the Company's PTO Plan (minimum of 4 weeks per year), to be taken at a time acceptable to the Company with regard to its operations.

(d)       Expenses.  The Company shall promptly reimburse Employee for any reasonable business expense incurred by Employee in connection with the business of the Company if (1) it is of a nature qualifying it as a proper deduction on the federal and state income tax return of the Company for the relevant period; (2) Employee furnishes to the Company adequate records and other documentary evidence required by federal and state statutes and regulations issued by the appropriate taxing authorities for the substantiation of each such expenditure as an income tax deduction; and (3) such reimbursement is in accord with the internal policies and procedures of the Company.

5.       Equity Bonus.  To secure the benefits of Employee's services during the Term, Company agrees to provide to Employee an Equity Bonus which grants to Employee 30,000 units valued at a minimum of $15 per unit. At the end of the Term on April 1, 2006, Employee will be paid a cash bonus equal to the greater of (1) 30,000 multiplied times the average price of the Company's stock on the 5 business days immediately preceding the end of the Term, or (2) $450,000 which is equal to $15 per unit. The Equity Bonus shall be paid within 30 days following then end of the Term. Employee must be employed by the Company at the end of the Term in order to receive payment of the Equity Bonus, and the Equity Bonus shall be forfeited in its entirety if Employee voluntarily or involuntarily terminates employment prior to the completion of the Term. If employment is terminated as a result of death or disability of Employee, the Equity Bonus will be calculated as described above as of the date of death or disability and a prorated amount paid (bonus amount multiplied by fraction of portion of Term completed divided by 2 years) within 30 days of such date.

To encourage the Employee to continue with the Company through the one-year extension, Company agrees to provide to Employee an Equity Bonus, which grants to Employee 10,000 units at the beginning of the one-year extension thereafter valued at $15 per unit. At the end of each one-year extension, Employee will be paid a cash bonus equal to the greater of (1) 10,000 multiplied times the average price of the Company's stock on the 5 business days immediately preceding the end of the one-year extension of the Term, or (2) $150,000, which is equal to $15 per unit. If Employee leaves the Company voluntarily or is terminated for cause (as described within Paragraph 8(a)) before the end of the one year extension of the Term, Employee forfeits the right to any equity bonus under this paragraph. In the event that Employee is terminated without cause (as described within Paragraph 8(b)), the equity bonus shall be redeemed on the date of termination and calculated by the price of the Company's stock on the date of termination.

Notwithstanding the foregoing, if there is a Change of Control of the Company, the Equity Bonus will immediately vest in full upon such Change of Control; valued in accordance with Section 5 with the market value being the closing stock price on the 5 business days immediately preceding the Change of Control, and paid within 30 days of the Change of Control. A "Change of Control" shall be deemed to have occurred if: (i) there shall be consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the transaction or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (ii) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company; or (iii) any 'person' (as defined in Section 13(d) or 14(d) of the Exchange Act, shall become the 'beneficial owner' (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended directly or indirectly of 50% or more of the Company's outstanding Common Stock.

6. Confidential Information.

6.1       Definition of Confidential Information.  Company is in the business of providing building material services and has built up an established and extensive trade and reputation in the industry. Company has developed and continues to develop commercially valuable technical and non-technical information ("Confidential Information") that is proprietary and confidential and/or constitutes Company's "trade secrets." Such Confidential Information, which is vital to the success of Company's business, includes, but is not necessarily limited to; system documentation, data compilations, manuals, methods, techniques, processes, customers, prospective customers, suppliers, prospective suppliers, contracts with suppliers and customers, sales proposals, methods of sales, marketing research and data, pricing policies, cost information, financial information, business plans, specialized requests of Company's customers, and other materials and documents developed by Company. Confidential Information does not include, however, information which (i) is or becomes generally available to the public other than as a result of a disclosure by Employee, (ii) was available to Employee on a non-confidential basis prior to its disclosure by Company, or (iii) becomes available to Employee on a non-confidential basis from a person other than Company who is not otherwise bound by a confidentiality agreement with Company, or is not otherwise prohibited from transmitting the information to Employee.

6.2       Employee Access to Confidential Information.  The Company agrees to give Employee such access as is necessary to enable Employee to perform Employee's job function.

6.3       Nondisclosure of Confidential Information.  Employee shall not, at any time, either during employment or during a period of five years subsequent to employment (i) directly or indirectly, disclose or divulge any Confidential Information to any person not then employed by Company, unless authorized or directed by Company or (ii) appropriate any Confidential Information for use other than performance of Employee's duties hereunder. If Company authorizes or directs Employee to disclose Confidential Information to any such third party, Employee must ensure that a signed confidentiality agreement is or has been obtained from the third party to whom Confidential Information is being disclosed and that all Confidential Information so disclosed is clearly marked "Confidential"

6.4       Return of Confidential and Other Information.  All Confidential Information provided to Employee, and all documents and things prepared by Employee in the course of Employee's employment, including but not necessarily limited to correspondence, manuals, letters, notes, lists, notebooks, reports, flow-charts, proposals, day-timers, planners, calendars, schedules, discs, financial plans and information, business plans, and other documents and records, whether in hard copy or otherwise, and any and all copies thereof, are the exclusive property of Company and shall be returned immediately to Company upon termination of employment or upon Company's request at any time.

7.0 Enforcement.

7.1       Reasonableness of Restrictions.  Employee acknowledges that compliance with this Agreement, including but not limited to Section 6, is reasonable and necessary to protect Company's legitimate business interests, including but not limited to the Company's goodwill and maintaining the confidentiality of Company's Confidential Information.

7.2       Irreparable Harm.  Employee acknowledges that a breach of Employee's obligations under this Agreement will result in great, irreparable and continuing harm and damage to Company for which there is no adequate remedy at law.

7.3       Injunctive Relief.  The parties agree that in the event either party breaches this Agreement, the non-breaching party shall be entitled to seek, from any court of competent jurisdiction, preliminary and permanent injunctive relief to enforce the terms of this Agreement, in addition to any and all monetary damages allowed by law, against the other party.

7.4       Extension of Covenants.  In the event Employee violates anyone or more of the covenants contained in Section 6 of this Agreement, Employee agrees that the term of each such covenant so violated shall be automatically extended for a period equal to the period during which Employee is in violation of such covenants.

7.5       Judicial Modification.  Section 6 of this Agreement shall be deemed to consist of a series of separate covenants, one for each line of business carried on by Company and each county in California. The parties expressly agree that the character, duration and geographical scope of such provisions in this Agreement are reasonable in light of the circumstances as they exist on the date upon which this Agreement has been executed. The parties have attempted to limit the Employee's right to solicit employees and customers only to the extent necessary to protect Company's goodwill, proprietary and/or Confidential Information, and other business interests. The parties recognize, however, that reasonable people may differ in making such a determination. Consequently, the parties hereby agree that a court having jurisdiction over the enforcement of this Agreement shall exercise its power and authority to reform Employee's covenants under Section 6 above to the extent necessary to cause the limitations contained therein as to time, geographic area and scope of activity to be restrained to be reasonable and to impose a restraint that is not greater than necessary to protect Company's goodwill, Confidential Information, and other business interests.

7.6       Attorney Fees.  In the event of any action in law or in equity for the purposes of enforcing any of the provisions of this Agreement, the prevailing party as determined by the trier of fact shall be entitled to recover its reasonable attorney fees, plus court costs and expenses, from the other party, to the extent permitted by applicable law.

8. Termination.

(a)       Termination for Cause.  If the Employee's employment is terminated by the Company for Cause, the Employee will be entitled to receive only base salary earned but unpaid through the date of termination, and the Company will not be required to make any payment under the Equity Bonus Plan or any other benefits or payment, by way of salary, bonus or other compensation or damages of any kind. Cause means (i) the Employee has been convicted of, or pleaded nolo contendere to, a felony; (ii) the Employee has willfully failed to perform his obligations under this Agreement; (iii) the Employee has committed an act of fraud upon, or willful misconduct toward, the Company; or (iv) the Employee has otherwise materially breached this Agreement.

(b)       Termination Without Cause.  If the Company terminates the Employee's employment without Cause, the Employee shall be entitled to receive base salary the time remaining from the effective date of termination to the end of the Term, payable in accordance with the Company's payroll practices in effect on the date of termination, continuation of benefits in accordance with the applicable plans, payment of a pro-rata portion of the Equity Bonus within 30 days following termination. The prorate amount of Equity Bonus shall be calculated by calculating the amount owed on the termination date as if it were the end of the term and multiplying that amount by a fraction of which the nominator is the number of months of employment prior to termination and the denominator is 24, and payment of the pro rated portion of any other bonus that Employee may be entitled to under the Company's Long Term Incentive Plan pursuant to the terms thereof. Upon termination by the Company of the Employee without Cause, except as provided in this Section the Company will not be required to make any other payment, by way of salary, bonus or other compensation or damages of any kind.

(c)       Termination Upon Death or Disability.  If the Employee's employment is terminated as a result of death or disability, the Employee will be entitled to receive the base salary earned but unpaid through the date of termination, a portion of the Equity Bonus pro rated over the Term and the pro rated portion of any other bonus that Employee may be entitled to under the Company's bonus and Long Term Incentive Plans pursuant to the respective terms thereof. The Company may terminate the Employee's employment hereunder attributable to the disability of the Employee if the Employee becomes physically or mentally incapacitated or disabled so that he is unable to perform for the Company substantially the same services as he performed prior to incurring such incapacity or disability, and such incapacity or disability exists for an aggregate of 180 days in any 360 day period. The Company, at its option and expense, is entitled to retain a physician reasonably acceptable to the Employee to determine or confirm the existence of such incapacity or disability, and the determination of such physician shall be binding upon the Company and the Employee.

(d)       Resignation By The Employee.  If, for any reason, Employee wishes to terminate the employment, Employee agrees to provide the Company with ninety days written notice prior to terminating the employment. If the Employee's employment is terminated by the Employee for any reason, the Employee will be entitled to receive only salary earned but unpaid through the date of termination and any benefits that Employee may be entitled to as a person retiring after the age of 55 pursuant to the terms and conditions of the Company's normal benefit plans, and the Company will not be required to make any other payment, by way of salary, bonus, benefits or other compensation or damages of any kind.

9. Miscellaneous.

(a)       Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the internal, substantive laws of the State of California, without giving effect to the conflict of laws rules thereof.

(b)       Amendment: Waiver.  No amendment or modification of this Agreement shall be binding unless it is in writing signed by the parties. The waiver by any party to this Agreement of a breach of any provision hereof by any other party shall not be construed as a waiver of any subsequent breach by any party.

(c)       Entire Agreement.  This Agreement represents the entire agreement between the parties regarding the Employee's employment by the Company.

(d)       Binding Effect.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, the Parent and, to the extent expressly provided and permitted herein, to their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement.

(e)       Severability of Provisions.  If any provision or any portion of any provision of this Agreement, or the application of any such provision or any portion thereof to any person or circumstance, shall be held invalid or unenforceable, the remaining portion of such provision and the remaining provisions of this Agreement, and the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be thereby affected.

(f)       Arbitration and Attorneys Fees.  Any and all disputes between the Employee and Company, or its Affiliates, agents, employees or representatives, concerning this Agreement or the parties' employment relationship, that cannot be resolved by negotiation between the parties, shall be resolved by final and binding arbitration to be conducted in Boise, Idaho, according to Idaho law and the rules of the American Arbitration Association then in effect. This agreement to arbitrate covers and includes, without limitation, any claims concerning in any way the subject of the Employee's employment, including but not limited to claims of discrimination or other claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Employee Retirement Income Security Act, the Family and Medical Leave Act, or any other federal, state, or local law or regulation now in existence or hereinafter enacted and as amended from time to time concerning in any way the subject of the Employee's employment. The arbitration provided for herein shall be in lieu of any civil action, and any decision resulting from such arbitration shall be final and binding, and enforceable by any competent court of law. The prevailing party in any such arbitration or court action to enforce arbitration shall be entitled to recover his/her/its expenses, including attorneys' fees.

(g)       Affiliates.  For the purposes of this Agreement, the term "affiliate" shall mean any entity controlling, controlled by or under common control with the named party.

(h)       Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but of which taken together shall constitute one and the same agreement.

__________________________________________

William M. Smartt

BUILDING MATERIALS HOLDING CORPORATION

By:_________________________________________

Robert E. Mellor, Chairman, President and

Chief Executive Officer

EX-21.0

Exhibit 21.0

Subsidiaries of Building Materials Holding Corporation

Unless otherwise indicated, subsidiaries are 100% owned by Building Materials Holding Corporation or the subsidiaries listed below.  We operate principally under the trade names of BMHC, BMC Construction and BMC West.

As the result of a branding strategy, we changed the name of BMC Construction to SelectBuild Construction.  This change is expected to be formally announced in the first quarter of 2006.

	State of
	Incorporation
	or Organization
SelectBuild Construction, Inc. (previously BMC Construction, Inc.)	Delaware
KBI Construction, LLC	Delaware
KBI Stucco, Inc.	Delaware
KBI Mechanical, LLC (60% ownership)	Delaware
KB Industries, LP (owned 99% by SelectBuild Construction, Inc. and 1% by BMHC)	California
KBI Windows, Inc.	Delaware
Vaughn Road, LLC	California
RJ Norcal, LLC	California
KBI Norcal, GP (owned 51% by Vaughn Road, LLC and 49% by RJ Norcal, LLC)	California
KBI Norcal Windows, Inc.	Delaware
WBC Construction, LLC (80% ownership)	Delaware
A-1 Building Components, LLC (51% ownership)	Delaware
WBC Mid-Atlantic, LLC (67.33% ownership)	Delaware
RCI Construction, LLC (51% ownership)	Delaware
Riggs Plumbing, LLC (73% ownership)	Arizona
BBP Companies (51% ownership)
BBP Commercial Company	Arizona
BBP Concrete Company	Arizona
BBP Construction Company	Arizona
70th and Northern Avenues Holdings, LLC	Arizona
TBA Materials, LLC	Arizona
HnR Framing Systems, Inc.	California
FSC Construction, LLC	Delaware
C Construction, Inc.	Delaware
TWF Construction, Inc. (January 2006)	Delaware
BMC West Corporation	Delaware
BMCW, LLC	Delaware
BMC West Corporation SouthCentral	Delaware
BMCW SouthCentral, LP (owned 99% by BMCW, LLC and 1% by BMC West Corporation SouthCentral)	Texas
BBD Construction, LP (51% ownership)	Texas
BMC Insurance, Inc.	Hawaii
BMC Realty, Inc.	Delaware

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Building Materials Holding Corporation:

We consent to the incorporation by reference in the registration statements (Nos. 333-47122, 333-44260, 33-52478, 33-80952, 333-36387, 333-61221, and 333-117237) on Forms S-8, S-8/A, and S-4 of Building Materials Holding Corporation of our reports dated February 24, 2006, with respect to the consolidated balance sheets of Building Materials Holding Corporation as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2005, and the related financial statement schedule, and our report dated February 24, 2006 with respect to management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005 and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, which reports appear in the December 31, 2005, annual report on Form 10-K of Building Materials Holding Corporation.

Our report dated February 24, 2006, on management’s assessment of effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting as of December 31, 2005, contains an explanatory paragraph that states that Building Materials Holding Corporation acquired a 51% interest in BBP Companies and a 100% interest in Campbell Companies, Quality Truss, and HnR Framing Systems and Home Building Components subsequent to June 30, 2005, and management excluded from its assessment of the effectiveness of Building Materials Holding Corporation’s internal control over financial reporting as of December 31, 2005, these entities’ internal control over financial reporting. These entities comprise 14.2% of tangible assets and 6.9% of sales included in the consolidated financial statements of Building Materials Holding Corporation and subsidiaries as of and for the year ended December 31, 2005.  Our audit of internal control over financial reporting of Building Materials Holding Corporation also excluded an evaluation of the internal control over financial reporting of these entities.  

/s/ KPMG LLP

San Francisco, California

February 24, 2006

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-47122, 333-44260 and 333-117237), Form S-8/A (No. 33-52478 and 33-80952), and Form S-4 (No. 333-36387 and 333-61221) of Building Materials Holding Corporation of our report dated March 12, 2004, relating to the financial statements and financial statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

February 24, 2006

EX-31.1

Exhibit 31.1

CEO CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Robert E. Mellor, certify that:

1.I have reviewed this annual report on Form 10-K of Building Materials Holding Corporation (Registrant);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5.The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:  February 27, 2006	/s/ Robert E. Mellor
	Robert E. Mellor Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CFO CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, William M. Smartt, certify that:

1.I have reviewed this annual report on Form 10-K of Building Materials Holding Corporation (Registrant);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5.The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:  February 27, 2006	/s/ William M. Smartt
	William M. Smartt Senior Vice President and Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CEO AND CFO CERTIFICATIONS PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies, in his capacity as an officer of Building Materials Holding Corporation, for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

·   the annual report on Form 10-K for the period ended December 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

·   the information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations.

Date:  February 27, 2006	/s/ Robert E. Mellor
	Robert E. Mellor Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

___________________________________________________________________________________________________________________________

The undersigned hereby certifies, in his capacity as an officer of Building Materials Holding Corporation, for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

·   the annual report on Form 10-K for the period ended December 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

·   the information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations.

Date:  February 27, 2006	/s/ William M. Smartt
	William M. Smartt Senior Vice President and Chief Financial Officer (Principal Financial Officer)