BMC Stock (BMCH) DEF 14ADefinitive proxy

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

BMC Stock Holdings, Inc.

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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DEAR FELLOW STOCKHOLDERS,

We and our fellow directors strive to govern BMC Stock Holdings, Inc. in a prudent and transparent way that will support the Company in achieving strong operating and financial performance and deliver long-term value for you, our stockholders. On behalf of our fellow directors, we are honored to write to you and provide you with our 2020 proxy materials, which gives you the opportunity to vote on a number of important matters.

The Proxy Statement describes the business to be conducted at our 2020 Annual Meeting of Stockholders. A Notice of Internet Availability, which contains instructions on how to access online our 2020 Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, is first being sent to stockholders on or about March 27, 2020 (unless you have previously requested to receive a paper copy of our materials). We urge you to carefully read our proxy materials regarding the matters to be voted on at the Annual Meeting and to vote your shares via the Internet, by telephone or by mail as soon as possible so that your shares are represented at the Annual Meeting.

We believe that accountability to stockholders is an important part of BMC’s success. We encourage you to contact us to share your views, interests and concerns via BMC’s website at ir.buildwithbmc.com. If you would like to write to us, you may do so by addressing your correspondence to the Corporate Secretary at our principal executive offices at 8020 Arco Corporate Drive, Suite 400, Raleigh, NC 27617. We are excited about the future of BMC and are grateful for the trust you have placed in our Company. On behalf of the entire Board of Directors and management team, thank you for your continuing support.

David Bullock		David E. Flitman
Chairman of the Board		President and CEO

Message from The Chairman & CEO       i

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Dear Fellow Stockholder:
It is my pleasure to invite you to attend the 2020 Annual Meeting of Stockholders (the “Annual Meeting”) of BMC Stock Holdings, Inc. (“BMC” or the “Company”), which will be held exclusively online at the website above. We are holding the Annual Meeting for the following purposes:

DIRECTOR ELECTIONS

AUDITOR RATIFICATION

SAY ON PAY

2020 STOCK PLAN

Board recommendation VOTEFOReach director nominee

Board recommendation VOTEFORratification of PwC

Board recommendation VOTEFORapproval of our pay practices

Board recommendation VOTEFORapproval of 2020 Stock Plan

Elect Mark A. Alexander, David W. Bullock and David L. Keltner as Class I directors to hold office until the 2023 Annual Meeting and until their respective successors are elected and qualified

Ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020

Approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers as disclosed in the proxy statement

Approve our 2020 Incentive Compensation Plan

Stockholders will also transact such other business as may properly come before the Annual Meeting or any adjournments or postponements, although we are not aware of any such business.

In light of ongoing developments related to coronavirus (COVID-19) and after careful consideration, the Board of Directors has determined to hold a virtual annual meeting in order to facilitate stockholder attendance and participation by enabling our stockholders to participate from any location at no cost. We believe that this is the right choice for BMC and our stockholders at this time, as it increases our ability to engage with all stockholders while safeguarding the health of our stockholders, directors and BMC’s management team.

Thank you for your ongoing support and continued interest in the Company.

Very truly yours,

Timothy D. Johnson
Executive Vice President, General Counsel and Corporate Secretary
Raleigh, North Carolina
March 27, 2020

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This summary contains highlights about BMC and the upcoming Annual Meeting. This summary does not contain all of the information that you should consider in advance of the meeting, and we encourage you to read the entire proxy statement carefully before voting.

OVERVIEW

Beginning on March 27, 2020, the Board of Directors (the “Board”) of BMC is making available to you this proxy statement in connection with its solicitation of proxies for the Annual Meeting. The Annual Meeting will be held on Thursday, May 14, 2020, at 8:00 a.m., Eastern Time, for the purposes set forth in the Notice, and it will be a completely virtual meeting. You will be able to attend the Annual Meeting online, vote your shares electronically and submit your questions online prior to and during the meeting. In light of on-going developments related to coronavirus (COVID-19), we are not holding an in-person meeting this year. For more information about the Annual Meeting, including how you can vote your shares and attend, see “Frequently Asked Questions About These Proxy Materials & Voting” on page 46.

On December 1, 2015, Stock Building Supply Holdings, Inc. (“SBS”) and Building Materials Holding Corporation (“BMHC”) merged (the “Merger”) to create the Company (Nasdaq: BMCH). In this proxy statement, unless the context requires otherwise, all references to the Company, BMC, we, us, our or similar words refer to BMC Stock Holdings, Inc. and its subsidiaries (the combined company), and references to SBS and BMHC refer to the legacy companies (and their respective subsidiaries) as they existed before the Merger.

2019 BUSINESS HIGHLIGHTS

Net sales for 2019 were negatively impacted by commodity price deflation of 7.5% as compared to 2018. Despite this headwind, the Company continued its track record of strong performance in 2019 by continuing to grow sales in its value-added product categories, including achieving millwork, doors & windows sales of over $1.0 billion for the first time since the Merger. Key financial highlights include:

NET SALES ($ millions)	STRUCTURAL COMPONENTS SALES ($ millions)	MILLWORK, DOORS & WINDOWS SALES ($ millions)
NET INCOME ($ millions)	ADJUSTED EBITDA* ($ millions)	$246M Cash provided by operating activities, up from $210M in 2018

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PROXY STATEMENT INTRODUCTION & SUMMARY

2019 SUSTAINABILITY HIGHLIGHTS

We at BMC are committed to delivering long-term value to our employees, customers, communities and stockholders. Guided by initiatives such as the Sustainability Accounting Standards Board (SASB) and informed by our stakeholders, we focus on the issues that are important to the success of our business.

Our strong safety record is one factor important to the success of our business, and we have cut our workforce recordable incident rate by over 35% during the prior three years to 3.25 in 2019. While we are proud of our strong safety record, we are focused on continuously improving our safety performance, and after beating our company goal last year, we are targeting a further 10% improvement for 2020.

Another area is helping customers cost-effectively improve their safety and efficiency, and our READY-FRAME^® products, computerized precise pre-cut and labeled framing bundles, enable crews to build faster, safer and with less waste. READY-FRAME^® enables construction up to 20% faster and can deliver an over 35% increase in productivity per hour. It requires little to no cutting of framing lumber and can deliver over 25% less ladder time, reducing injury risk for a safer and cleaner jobsite. Environmentally, READY-FRAME^® significantly reduces the amount of material sent to landfill, with up to two-thirds fewer dumpster loads per jobsite, meaning less waste and lower disposal costs, as well as lower emissions from avoided waste haulage.

We recognize that the environmental sustainability of our products is important to our customers and, of course, to us. We prioritize purchasing and supplying sustainable wood products with over 60% of the wood we purchase certified sustainable by the Sustainable Forestry Initiative (SFI) or Forest Stewardship Council (FSC).

BOARD HIGHLIGHTS

The following table provides an introduction to our Board, including the three Class I nominees for election at the Annual Meeting.

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PROXY STATEMENT INTRODUCTION & SUMMARY

The Corporate Governance and Nominating Committee (the “Governance Committee”) is responsible for, among other things, overseeing the succession planning process for directors so that we have the right people on the Board, both now and in the future, to oversee management’s execution of the Company’s strategy and safeguard the long-term interests of stockholders. Key Board composition highlights include:

	Deep bench of industry experience, with 8 of 11 directors having served as executives in the building materials, home building, construction services or real estate industries
	Significant financial expertise,with all 4 members of the Audit Committee qualifying as audit committee financial experts
	Substantial majority of independent directors,with 9 of 11 directors, including our Chairman, being independent
	Diversity of backgrounds,with 7 CEOs, 4 CFOs, 1 venture capitalist, a broad range of ages represented on the Board (ranging from 55 to 73), 2 female directors and 1 director identifying as LGBT
	Mix of director tenures,with 2 of 11 directors having served on the Board for more than 5 years (including, for this purpose, service on the boards of SBS or BMHC prior to the Merger) and 5 directors joining the Board over the past 3 years

CORPORATE GOVERNANCE HIGHLIGHTS

We believe that our long-standing commitment to robust corporate governance is a crucial aspect of our efforts to advance and safeguard the interests of our Company and our stakeholders. Some of our key corporate governance practices include:

	Separate Chairman of the Board and CEO,with an independent director serving as Chairman
	Substantial majority of our Board is independent,including 9 of our 11 directors
	Solely independent key committees,including Audit, Governance, and Compensation
	Active, engaged Board,with total average attendance at meetings of the Board and applicable committees of over 96%
	Annual Board and committee evaluationsoverseen by the Governance Committee

EXECUTIVE COMPENSATION HIGHLIGHTS

PROGRAM ELEMENTS FOR 2019

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PROXY STATEMENT INTRODUCTION & SUMMARY

PAY MIX FOR 2019

For 2019, 77% of David Flitman’s target total direct compensation (i.e., base salary, target annual bonus, and target long-term equity award value) and an average of 64% of our other named executive officers’ target total direct compensation was at risk or contingent upon corporate performance as shown below.

CEO*		AVERAGE OF OTHER NEOs

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PROXY STATEMENT INTRODUCTION & SUMMARY

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	PROPOSAL 1
	ELECTION OF DIRECTORS
At the Annual Meeting, three director nominees are to be elected as Class I directors. Upon recommendation by the Governance Committee, the Board has nominated Mark A. Alexander, David W. Bullock and David L. Keltner for election for a term of three years (through the 2023 Annual Meeting) and until their successors have been duly elected and qualified. Each of the nominees currently serves as a Company director. Mr. Alexander was appointed to the Board in 2017 and so has not previously been elected by BMC’s stockholders. Mr. Bullock and Mr. Keltner were previously elected by BMC’s stockholders in 2017. In connection with the May 2019 appointment of Dr. Bo-Linn as a Class II director, the Board increased its size to 11 and the number of Class II directors to four. In nominating three director nominees to be elected as Class I directors, the Board will be decreasing its size to 10 and the number of Class I directors to three. Unless a proxy specifies otherwise, the persons named in the proxy will vote the shares covered thereby FOR the nominees as listed. Each nominee has consented to be a candidate and to serve if elected. Although the Board has no reason to believe that any nominee will be unavailable to serve as a director, if such an event should occur, the Board may designate a substitute nominee or reduce the size of the Board. If the Board designates a substitute nominee, proxies will be voted for such substitute nominee(s).
BMC Board Recommendation The Board unanimously recommends a voteFOR the election of each of the director nominees.

CLASS I NOMINEES FOR A TERM EXPIRING AT THE 2023 ANNUAL MEETING

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CORPORATE GOVERNANCE MATTERS

CLASS III DIRECTORS CONTINUING IN OFFICE UNTIL THE 2022 ANNUAL MEETING

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CORPORATE GOVERNANCE MATTERS

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CORPORATE GOVERNANCE MATTERS

CLASS II DIRECTORS CONTINUING IN OFFICE UNTIL THE 2021 ANNUAL MEETING

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CORPORATE GOVERNANCE MATTERS

CLASS I DIRECTOR NOT STANDING FOR ELECTION

Jeffrey G. Rea will step off the Board as of the Annual Meeting. Mr. Rea has served as a director of the Company since 2015 and previously served as a director of SBS from 2010 until the Merger. The Board thanks Mr. Rea for his years of valuable service to the Company.

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CORPORATE GOVERNANCE MATTERS

BOARD COMPOSITION

The Governance Committee is responsible for, among other things, overseeing the succession planning process for directors and ensuring that we have the right people on the Board, both now and in the future, to oversee management’s execution of the Company’s strategy and safeguard the long-term interests of stockholders. In this regard, the Governance Committee is charged with identifying, screening and recruiting potential director candidates to fill expected vacancies.

HOW WE BUILD A BOARD THAT’S RIGHT FOR BMC

In identifying potential candidates for Board membership, the Governance Committee relies on suggestions and recommendations from directors, stockholders, management and others, including from time to time executive search firms to assist it in locating qualified candidates. The Governance Committee does not distinguish between nominees recommended by stockholders and other nominees. Dr. Bo-Linn, who was elected to our Board in 2019, was recommended for consideration as a director by Mr. Vertuca, a non-employee director.

Once potential director candidates are identified, the Governance Committee, with the assistance of management, undergoes an extensive vetting process that considers each candidate’s background, independence and fit with the Board’s priorities. As part of this vetting process, the committee as well as other members of the Board and the Chief Executive Officer will conduct a series of interviews with the candidates. If the Governance Committee determines that a potential candidate meets the needs of the Board and has the desired qualifications, it will recommend the candidate’s nomination or appointment to the full Board for consideration.

WHAT WE LOOK FOR IN DIRECTORS

The Governance Committee strives to maintain an engaged, independent Board with broad and diverse experience and judgment that is committed to representing the long-term interests of our stockholders. The committee considers a wide range of factors when selecting and recruiting director candidates, including achieving:

Director “must-haves.”In addition to the considerations above, we believe that all of our directors should possess the following personal attributes: integrity and sound ethical character, absence of legal or regulatory impediments, absence of conflicts of interest, demonstrated track record of achievement, ability to act in an oversight capacity, appreciation for the issues confronting a public company, adequate time to devote to the Board and its committees, and willingness to assume broad, fiduciary responsibilities on behalf of all stockholders.

HOW WE ASSESS DIRECTOR INDEPENDENCE

Our policy and practice.We require a majority of our Board members, including all members of our Audit Committee, Compensation Committee and Governance Committee, to be independent under Nasdaq listing standards. The Board, with the assistance of the Governance Committee, considers all relevant facts and circumstances when making its independence determinations. A substantial majority of our Board – nine out of eleven directors – is independent.

How we assessed independence this year.The Board has affirmatively determined that the following nine directors are independent within the meaning of the Nasdaq listing standards: Dr. Bo-Linn, Mrs. Boydston and Messrs. Alexander, Buckley, Bullock, Keltner, Miller, O’Leary and Vertuca. In making this determination, the Board found that none of these directors had a material or other disqualifying relationship with BMC. In making this determination, the Board took into account that BMC from time to time engages in business in the ordinary course with entities where our directors are employed. In each of the last three fiscal years, payments that BMC made to or received from these businesses accounted for less than 2% of the annual revenues of each of BMC and the other entities.

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CORPORATE GOVERNANCE MATTERS

HOW YOU CAN RECOMMEND A CANDIDATE FOR ELECTION TO THE BOARD
The Governance Committee considers director candidates recommended by stockholders. Stockholders wishing to recommend a candidate may do so by writing to the Corporate Secretary at the Company’s address on the last page of this proxy statement, and including all information that our Bylaws require for director nominations.

BOARD OPERATIONS

The Board is elected by stockholders to oversee management and assure that stockholders’ long-term interests are being served. In furtherance of this responsibility, a key function of the Board is reviewing, approving (where appropriate) and actively monitoring management’s execution on the Company’s long-term strategic goals and providing advice and counsel to management on significant issues facing the Company. The Board reviews and considers the Company’s strategy throughout the year, and discusses it at every Board meeting.

Attendance at Board meetings.We expect all directors to attend and actively participate in all in-person and telephonic meetings of the Board (and of any committees on which they serve). In 2019, the Board held 11 meetings, the Audit Committee held nine meetings, the Compensation Committee held six meetings and the Governance Committee held four meetings. The Board’s Technology Committee, which was disbanded in March 2020, held one meeting. For 2019, the total average attendance at meetings of the Board and applicable committees was over 96%, and each director attended 91% or more of the aggregate number of meetings of the Board and of the committees on which he or she served during the period he or she was on the Board or committee.

Attendance at the annual stockholders meeting.Directors are also encouraged to attend the annual meeting of stockholders. All of our directors then on the Board attended our 2019 Annual Meeting.

HOW THE BOARD OVERSEES RISK
Our executive management team is responsible for managing the risks inherent in our business, and our Board oversees our executive team in the execution of its risk management function. To assist in this oversight function, our Board has overseen the development of the Company’s risk management process. Management identifies and assesses the risks inherent in the business based on the likelihood of the risk occurring and the consequence to the Company if the risk were to be realized. Each year an annual risk assessment is presented to the Board identifying significant risks, including a description of any current or future mitigating actions the Company may take. The Board and Audit Committee also receive interim reports on emerging risks as they occur.

The Board decided to disband the Technology Committee in March 2020 as it was determined that the full Board, which is responsible for overseeing technology and cybersecurity risks, could, together with the Audit Committee, sufficiently oversee the technology risks of the Company. In this regard, the Board receives regular cybersecurity updates (at least annually) from the Company’s senior information technology executives.

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CORPORATE GOVERNANCE MATTERS

BOARD OVERSIGHT AND SUCCESSION PLANNING
As reflected in our Corporate Governance Guidelines, among its other primary responsibilities, the Board is responsible for planning for CEO, senior management and director succession and overseeing the development of the Company’s senior management. The Board’s succession planning process includes consideration of ordinary course succession, as well as the development of contingency plans for emergencies such as the unplanned departure, death or disability of the CEO or other members of senior management. As part of the Board’s oversight of senior management succession planning, the Compensation Committee reviews our succession plan, actively monitors the development of qualified candidates for principal positions and reviews succession planning and management development with the full Board.

BOARD LEADERSHIP STRUCTURE
Current Board leadership structure.We currently separate the roles of Chairman of the Board and CEO. Mr. Bullock, an independent director, serves as Chairman, and Mr. Flitman serves as President and CEO.

Why the Board believes its leadership structure is appropriate for the Company.The Board periodically reviews its leadership structure to evaluate whether the structure remains appropriate for the Company. The Board has determined that the current structure is appropriate at this time in that it enables Mr. Flitman to focus on his role leading the Company as President and CEO, while enabling Mr. Bullock to continue to provide leadership on policy matters at the Board level. The Board believes that the Board leadership structure should, among other things, be informed by the needs and circumstances of the Company and the then-current membership of the Board, and that the Board should remain adaptable to shaping the leadership structure as those needs and circumstances change.

BOARD COMMITTEES
The Board has a standing Audit Committee, Compensation Committee and Governance Committee. The Board’s Technology Committee, which met once in 2019, was disbanded in March 2020. Each of the standing committees meets periodically throughout the year, reports its actions to the Board, receives reports from senior management, annually evaluates its performance and can retain outside advisors. The Board has adopted a written charter for each of these committees, which sets out its functions and responsibilities. These are available in the “Corporate Governance” section of our Investor Relations website at ir.buildwithbmc.com.

Committee independence.The Board has determined that each standing committee member meets the applicable Nasdaq listing standards regarding “independence,” and each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to BMC. In addition, all of our Audit Committee and Compensation Committee members meet the heightened independence requirements under applicable SEC rules and Nasdaq listing standards.

Financial acumen.Each of our Audit Committee members meets the financial literacy requirements of the SEC and Nasdaq, and each of our Audit Committee members also qualifies as an “audit committee financial expert” under SEC rules.

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CORPORATE GOVERNANCE MATTERS

Key committee oversight responsibilities

OTHER GOVERNANCE POLICIES

CORPORATE GOVERNANCE GUIDELINES
The Company has adopted Corporate Governance Guidelines, which you can find on our website at ir.buildwithbmc.com, that we believe reflect the Board’s commitment to a system of governance that enhances corporate responsibility and accountability. The Board annually reviews these guidelines, along with the charters for the Board’s standing committees, so that our policies and programs continue to reflect good corporate governance practices. The guidelines were most recently updated in October 2019. In connection with the Board’s review over the past two years, the Board determined to: adopt stock ownership guidelines for directors and executive officers (discussed below); expand the Board’s director selection criteria beyond experience in the Company’s industry to include other business experience relevant to the Company and, where appropriate, the consideration of diverse characteristics; adopt limits on the number of public company boards on which directors can serve (four other boards or, for directors who serve as a public company CEO, two other boards); adopt a mandatory retirement age of 72 for directors, which can be waived if the Board determines that re-nomination after a director’s 72^ndbirthday is in the best interests of the Company; require directors to seek approval before joining the board of another company; provide an oversight role for the Compensation Committee regarding stockholder engagement on executive compensation matters and the Governance Committee regarding stockholder engagement on all other matters; provide that the Governance Committee will oversee the director orientation process for new directors; and strengthen the Company’s insider trading and investor communication policies.

HOW YOU CAN COMMUNICATE WITH THE BOARD
Stockholders may contact an individual director, the Board as a group or a specified Board committee or group, including the non-employee directors as a group, at the following address:

c/o Corporate Secretary, BMC Stock Holdings, Inc., 8020 Arco Corporate Drive, Suite 400, Raleigh, NC 27617 Attn: Chairman of the Corporate Governance and Nominating Committee

The Board has instructed our Corporate Secretary to review correspondence directed to the Board and not to forward certain items that are unrelated to the duties and responsibilities of the Board, such as resumes or business solicitations, or that are otherwise inappropriate. See our website at http://ir.buildwithbmc.com/investors/corporate-governance/contact-the-board/default.aspx for more information. In accordance with our Corporate Governance Guidelines, appropriate correspondence will be forwarded to the Chairman of the Governance Committee.

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CORPORATE GOVERNANCE MATTERS

BOARD INTEGRITY POLICIES
Code of Business Conduct and Ethics.The Board has approved and adopted a Code of Business Conduct and Ethics applicable to all directors, officers and employees. In the event that we amend, or grant a waiver from, a provision of the code that applies to the chief executive officer, chief financial officer or chief accounting officer and that requires disclosure under applicable SEC rules, we will disclose this within four business days on our website at ir.buildwithbmc.com.

Conflicts of interest.All directors are required to recuse themselves from any discussion or decision affecting their personal, business or professional interests. If an actual or potential conflict of interest arises, the director is required to promptly inform the Board, which will then determine an appropriate resolution on a case-by-case basis.

RELATED PERSON TRANSACTIONS

Approval Policies
Our Board has adopted a written policy regarding the review, approval or ratification of transactions involving certain persons that the SEC requires to be disclosed in proxy statements, which are commonly referred to as “related person transactions.” Under SEC rules, a related person is an officer, director, nominee for director, beneficial holder of more than 5% of any class of our voting securities since the beginning of the last fiscal year, or an immediate family member of any of the foregoing. Under this written policy, our Audit Committee is responsible for the review, approval and ratification of “related person transactions” between us and any related person. In the course of its review and approval or ratification of a related person transaction, the Audit Committee will consider:

Related Person Transactions for 2019
Other than compensation agreements and other arrangements that are described under “Executive Compensation,” since January 1, 2019, there has not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which any related person had or will have a direct or indirect material interest.

DIRECTOR COMPENSATION

The Compensation Committee annually reviews the form and amount of compensation payable to our non-employee directors and recommends any appropriate adjustments to the full Board for approval. With the establishment of the Technology Committee in May 2019, the Compensation Committee recommended and the Board approved an annual cash retainer of $10,000 for membership on such committee and $25,000 for the chairperson of such committee. The Technology Committee was disbanded in March 2020. As a result of its annual review, the Compensation Committee also recommended and the Board approved, a reduction in the Board chair’s annual cash retainer from $150,000 to $112,500 and annual equity grant from $200,000 to $180,000, as well as an increase in the annual equity retainer of all other non-employee directors from $100,000 to $120,000. These changes were intended to more closely align our non-employee director compensation with the median of our peer group as discussed under “Compensation Discussion & Analysis – Benchmarking.” Following such adjustments, for 2019, all members of our Board who were not employed by the Company or one of its subsidiaries received compensation for their services to the Board and related committees as described below.

NON-EMPLOYEE DIRECTOR COMPENSATION ELEMENTS

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CORPORATE GOVERNANCE MATTERS

2019 NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
The following table sets forth the annual compensation that we paid our non-employee directors in 2019.

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CORPORATE GOVERNANCE MATTERS

DIRECTOR STOCK OWNERSHIP GUIDELINES
Effective as of March 1, 2018, the Board adopted a policy requiring each non-employee director to own Company equity securities with an aggregate value of at least three times the director’s annual cash retainer. Directors have five years from the later of the date of their election or the effective date of the policy to meet this ownership requirement. If a director does not reach his or her ownership requirement within the time period provided, the Compensation Committee will determine whether action is appropriate, and may award all future Board compensation, including any retainers for committee service, in equity until the guideline is met. Moreover, if a director does not meet the ownership requirement, he or she must obtain advance approval from the chair of the Compensation Committee before selling, transferring or otherwise disposing of any Company equity securities. As of the date of this proxy statement, all of the non-employee directors serving on the Board had met the ownership requirement or were on track to meet the ownership requirement by the applicable deadline.

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	PROPOSAL 2
	RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has the sole responsibility for the appointment, compensation and oversight of the Company’s independent registered public accounting firm. For 2020, the Audit Committee has selected PricewaterhouseCoopers LLP (“PwC”) as our independent auditor. PwC has served as our independent auditor since 2015, and previously served as the independent auditor for SBS from 1985 to 2015. The Audit Committee and the Board believe that the continued retention of PwC as our independent auditor is in the best interests of the Company and its stockholders. Why are we asking stockholders to vote on this proposal? The Board, upon recommendation of the Audit Committee, is submitting the selection of PwC to stockholders for ratification as a matter of good corporate governance. If stockholders do not ratify the selection of PwC, the Audit Committee will review its future selection of our independent auditor in light of that vote result. Even if the selection is ratified, the Audit Committee may, in its discretion, appoint a new independent auditor at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders. Representatives of PwC are expected to attend the Annual Meeting. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate stockholder questions.
BMC Board Recommendation The Board unanimously recommends a voteFOR this proposal.

FEES PAID TO PwC

The following table sets forth the aggregate fees billed for professional services rendered by PwC for 2018 and 2019.

KEY AUDIT OVERSIGHT POLICIES AND PRACTICES

PRE-APPROVAL POLICY FOR SERVICES PROVIDED BY PwC

The Audit Committee has established a policy concerning the pre-approval of services performed by the Company’s external accounting firms. Under this policy, the committee reviews all engagement letters from accounting firms for non-audit services and specifically pre-approves all services to be provided by the Company’s independent registered public accounting firm. As part of its review, the committee considers whether the provision of any non-audit services is compatible with maintaining the independence of our independent auditor, and solicits the input of management and the independent auditor on this issue.

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AUDIT MATTERS

In 2019, all services provided to the Company by PwC were pre-approved by the Audit Committee pursuant to the policies and procedures described above, and all non-audit services provided to the Company by PwC were determined by the committee to be compatible with the maintenance of PwC’s independence in the conduct of its auditing functions.

ROTATION OF LEAD AUDIT ENGAGEMENT PARTNER
Key PwC partners assigned to our audit are rotated at least every five years. The Audit Committee and its chair oversee the selection process for each new lead engagement partner. Throughout this process, the committee and management provide input to PwC about the Company’s priorities, discuss candidate qualifications and interview potential candidates put forth by the firm.

AUDIT COMMITTEE REPORT

ROLES AND RESPONSIBILITIES

ANNUAL INDEPENDENT AUDITOR EVALUATION AND ENGAGEMENT PROCESS
At least annually, the Audit Committee evaluates the qualifications, performance and independence of PwC to decide whether to continue to retain PwC as the Company’s independent auditor or engage another firm. When conducting its most recent evaluation of PwC, the Audit Committee considered, among other factors, PwC’s:

REQUIRED DISCLOSURES AND DISCUSSIONS
In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed our audited consolidated financial statements for the year ended December 31, 2019 with the Company’s management and representatives of PwC. The Audit Committee discussed with PwC the matters required to be discussed under PCAOB standards. In addition, the Audit Committee received the written disclosures and the letter from PwC, as required by the PCAOB, regarding PwC’s independence and discussed with PwC its independence. Based on these reviews and discussions with management and PwC, the Audit Committee recommended to the Board, and the Board approved, the inclusion of the Company’s audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Audit Committee
Mark A. Alexander, Chair
Cory J. Boydston
Michael T. Miller
Carl R. Vertuca, Jr.

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The following table sets forth the names, ages and titles of our current executive officers:

1) See “Proposal 1 – Election of Directors” beginning on page 1 for Mr. Flitman’s background.

Our executive officers are appointed by our Board and serve until their successors have been duly elected and qualified or until their earlier resignation or removal. There are no family relationships among any of our directors or executive officers.

James F. Major, Jr.Mr. Major has been an executive officer of the Company since 2015 (and of SBS from 2005 through the Merger). He is currently our Executive Vice President, Chief Financial Officer and Treasurer, and is responsible for finance, credit and information technology activities. Mr. Major has substantial expertise in financial planning, analysis and reporting, tax planning and compliance. Mr. Major joined SBS in 1998 as Assistant Controller. Prior to that, he was an audit manager with PwC. Mr. Major received his undergraduate degree from Wake Forest University. He is a Certified Public Accountant (North Carolina) and has attended management programs at the Darden School of Business at the University of Virginia and the International Institute for Management Development in Lausanne, Switzerland.

Mike Farmer.Mr. Farmer is responsible for the Company’s human resources, process improvement and value-added product sales growth areas. Mr. Farmer assumed the role of Vice President of Human Resources as of the effective time of the Merger, was appointed Senior Vice President of Human Resources in January 2017, was appointed Executive Vice President of Human Resources in February 2019 and was appointed Executive Vice President, Operational Excellence, People and Growth in May 2019. Mr. Farmer joined SBS in 2006 in its HR department and, before that, Mr. Farmer was a director of HR at ATX-CoreComm. Mr. Farmer received his undergraduate degree from Hope College and a Master’s Degree from Michigan State University.

Timothy D. Johnson.Mr. Johnson has responsibility for all legal, corporate governance and compliance matters for the Company. Prior to joining the Company in January 2019, Mr. Johnson was Senior Vice President and General Counsel for Ply Gem Holdings, Inc. from June 2008 until January 2019, and Senior Vice President and Regional Counsel for Arysta Life-Science North America from March 2006 to June 2008. Previously, Mr. Johnson was an attorney at the law firms of Hunton & Williams and Wilson, Sonsini Goodrich & Rosati. Mr. Johnson received his undergraduate degree from Taylor University and his J.D. from Duke University School of Law.

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	PROPOSAL 3
	ADVISORY VOTE ON EXECUTIVE COMPENSATION
We are asking our stockholders to approve a non-binding advisory resolution on the compensation of our named executive officers (“NEOs”), as disclosed in this proxy statement. Although this advisory vote, commonly referred to as a “say-on-pay” vote, is non-binding, the Board and the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding our executive compensation programs. Stockholders are urged to read the Compensation Discussion and Analysis (“CD&A”), which begins on page 18, as well as the Summary Compensation Table and other related compensation tables and narrative disclosure, which begin on page 27 and end on page 34 prior to “CEO Pay Ratio,” for information relevant to your vote on this proposal. The Compensation Committee and the Board believe that the policies and procedures articulated in the CD&A are effective in aligning the interests of our executives with those of our stockholders and in incentivizing performance that supports our short- and long-term strategic objectives and that the compensation of our NEOs for 2019 reflects and supports these compensation policies and procedures. As required by Section 14A of the Exchange Act and as a matter of good corporate governance, we are asking stockholders to approve the following advisory resolution at the Annual Meeting: RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K in the Proxy Statement for the Annual Meeting, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED. Our Board’s current policy is to hold an advisory vote to approve our executive compensation on an annual basis, and accordingly, after the Annual Meeting, the next advisory vote to approve executive compensation is expected to occur at our 2021 Annual Meeting.
BMC Board Recommendation The Board unanimously recommends a voteFOR this proposal.

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EXECUTIVE COMPENSATION MATTERS

COMPENSATION DISCUSSION AND ANALYSIS
This CD&A describes the objectives and philosophy underlying our compensation policies and programs for our NEOs and discusses our compensation decisions for 2019 and the material factors that were considered in making those decisions.

EXECUTIVE SUMMARY

Our Named Executive Officers
Our named executive officers for our fiscal year ended December 31, 2018 were:

Fiscal 2019 Compensation Program Highlights*

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Compensation Program Elements for 2019
For our 2019 fiscal year, our named executive officers received the following compensation elements.

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EXECUTIVE COMPENSATION MATTERS

Compensation Best Practices

What We Do			What We Don’t Do
	Set challenging objectives on a variety of performance measures			No change in control excise tax gross ups
	Maintain a clawback policy to recoup undue incentive compensation			No defined benefit pension arrangements or special retirement benefits for executive officers
	Hold an annual say-on-pay vote			No excessive perquisites
	Conduct an annual compensation risk assessment			No repricing or exchange of underwater stock options without stockholder approval
	Include a maximum on incentive compensation payouts			No hedging or pledging of Company securities by directors, officers, employees or consultants
	Maintain robust stock ownership guidelines covering both directors and executive officers
	Engage an independent compensation consultant

OBJECTIVES AND PHILOSOPHY

Our compensation philosophy is based on the following core principles:

Pay for Performance NEO compensation is based on Company performance and varies based on the extent to which pre-established short- and long-term financial objectives are met.

Pay Competitively We are committed to providing a total compensation program that retains our highest-performing employees and executives and attracts superior leaders to our Company.

Pay Equitably We consider accountability, responsibility, qualifications and performance, both individually and collectively as a team, when setting equitable pay levels for our executive officers.

Be Aligned with Stockholders A significant portion of our executives’ total compensation is in the form of equity-based awards, which fluctuate in value based on our share price, aligning executives’ and stockholders’ interests.

Be Transparent We strive to clearly communicate our programs to both internal and external stakeholders. Internally, participants should understand performance goals, results and the link between pay and performance. Externally, stockholders should understand how our pay programs link to our business strategies and the relationship between pay and performance.

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EXECUTIVE COMPENSATION MATTERS

RESPONSIBILITIES FOR COMPENSATION DECISIONS

Compensation Committee, Chief Executive Officer and Board
Our Compensation Committee has been responsible for the oversight, implementation and administration of all of our executive compensation plans and programs and recommends compensation plans to our Board that are consistent with our compensation philosophy, strategically positioned against our peer group and competitive with other organizations similar to ours.

Our Compensation Committee, in consultation with and upon recommendation of our Chief Executive Officer (with regard to all executive officers other than himself), reviews compensation elements and amounts for our executive officers on an annual basis and at the time of a promotion or other change in level of responsibilities, as well as when competitive circumstances or business needs may require. Our Board and Compensation Committee determine all of the components of our Chief Executive Officer’s compensation, which is also reviewed annually as part of our business planning for the year.

Our Chief Executive Officer evaluates the performance and development of our other executive officers and makes recommendations to the Compensation Committee regarding performance objectives and achievement for such individuals. Our Compensation Committee meets to consider these recommendations, makes determinations as to whether and to what extent performance objectives for our executive officers have been achieved and confirms that we have effective and appropriate compensation programs in place. Our Compensation Committee undertakes a similar review of the performance and development of our Chief Executive Officer and our Chief Executive Officer’s contribution to corporate goals. Our compensation arrangements with our executive officers are primarily based on the consolidated financial achievements of our Company, with targets established at the beginning of the year, and these arrangements reflect our commitment to compensating for the achievement of corporate or individual objectives.

Compensation Consultant
During 2019, as in prior years, the Compensation Committee engaged an independent consultant, Lyons, Benenson & Company Inc. (“Lyons, Benenson”) to assist with determining compensation levels. The committee retained Lyons, Benenson based upon its expertise and industry experience. Lyons, Benenson reports directly to the committee and the committee has the sole authority to retain and dismiss Lyons, Benenson and to approve Lyons, Benenson’s fees. In 2019, the committee relied on Lyons, Benenson to provide a review of executive and director compensation practices of companies in our peer group, including a benchmarking analysis of base salary levels and short- and long-term incentive targets at the companies with which we compete for executive talent. The Compensation Committee evaluated the independence of Lyons, Benenson and determined that Lyons, Benenson was independent and that their engagement did not present a conflict of interest after considering the independence factors enumerated in Rule 10C-1(b) under the Exchange Act.

RISK MANAGEMENT AND ASSESSMENT

Our Compensation Committee, with the assistance of Lyons, Benenson, has assessed our compensation philosophy, policies and program for our employees as they relate to our overall risk management. Based upon this assessment, we believe that there are no undue risks in these policies and programs that would result in a material adverse effect on the Company. In addition, we believe that the mix and design of the elements of executive compensation do not encourage management to assume unnecessary, excessive or inappropriate risks. These beliefs are based on a number of factors, including the following:

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BENCHMARKING

Lyons, Benenson, in consultation with our Compensation Committee, compiled a report of compensation benchmarking data for executive officers holding comparable positions at comparable companies. The benchmark data included base salary, annual cash incentive opportunities and long-term incentive opportunities. The peer group of companies we used in our benchmarking survey when analyzing 2019 compensation levels consisted of the following:

All of these companies, which come primarily from the lumber and building materials distribution industries as well as other, related industries with which we may compete for talent, were selected for the compensation peer group because they were considered to be significant competitors with respect to the individuals with the talent and experience needed to serve in our executive officer positions. Ply Gem Holdings, Inc. was removed from our 2018 peer group following its April 2018 merger with NCI Building Systems.

During October 2019, for purposes of analyzing 2020 compensation levels, the Compensation Committee approved amending the Company’s peer group to further align our peer group to our business.

Peer group data is collected for executive positions as one factor our committee considers in setting appropriate compensation levels to attract, motivate and retain qualified executives. In general, we structure our compensation plans to provide target compensation levels and opportunities that are competitive with the median target opportunities for comparable positions in the peer group, but our pay varies from the median at the committee’s discretion when warranted by differences in responsibility or function compared to similar positions in peer groups, retention considerations, cumulative performance of any particular NEO or similar considerations.

While our Compensation Committee utilizes this formal benchmarking in its consideration of compensation decisions, we expect it will continue to manage our compensation programs on a flexible basis that will allow it to respond to market and business developments as it views appropriate.

ELEMENTS OF COMPENSATION

Base Salary
We provide a base salary to each of our NEOs that is intended to reflect the scope of his or her responsibilities, individual performance, labor market conditions and competitive market. Base salaries are reviewed from time to time, but no less than annually, and are adjusted when warranted based on performance, changes in responsibilities and overall budget considerations. For 2019, Mr. Major received a modest increase in base salary and Mr. Farmer received a 15% base salary increase in connection with his promotion to Executive Vice President, Operational Excellence, People and Growth in May 2019 and resulting expanded role and responsibilities. The table below sets forth the annualized base salaries for each of our NEOs as of December 31, 2018 and December 31, 2019 or such NEO’s last date of employment:

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Annual Performance-Based Cash Incentives
Our annual performance-based executive bonuses are provided under our Management Incentive Plan, which we refer to as the MIP. The MIP provides our NEOs the opportunity to earn cash payments each fiscal year. The MIP is intended to motivate our NEOs to work effectively to achieve challenging, but attainable financial performance goals that are aligned with the Company’s strategic plan and to reward them when these objectives are met or exceeded. Each NEO’s target bonus amount is expressed as a percentage of base salary, which we refer to as the Target Bonus. For 2019, we also “capped” the maximum cash incentive payout for each NEO at a maximum award equal to 200% of his or her Target Bonus based on the Company’s achievement against financial targets established by our Compensation Committee of Adjusted EBITDA (weighted 75%) and Free Cash Flow (weighted 25%).

The payouts upon achievement of the threshold, target and maximum performance levels set by the Compensation Committee were set at 50%, 100% and 200% of the weighted portion of the Target Bonus amount, respectively, with pro rata computations between achievement levels. If either of the threshold financial targets were not achieved, the NEOs would receive no payout under the MIP with respect to that component.

We continued to use Adjusted EBITDA under the MIP because it measures performance over the periods in which our NEOs can have significant impact, is directly linked to our long-term growth plan and is a key metric used by management and the Board to assess our operating performance. We also retained Free Cash Flow as a secondary metric to encourage management focus on the Company’s cash conversion cycles when executing the Company’s strategic plan. The financial targets under both metrics were based on our operating plan established by management and approved by the Board at the beginning of the fiscal year, which is based upon certain assumptions and estimates of construction activity, growth and overall market conditions for the fiscal year. For 2019, the Board approved targets for Adjusted EBITDA and Free Cash Flow that required growth over 2018 results for both of these key performance metrics. Under the MIP, the Board reserves the right to make adjustments to financial and operational goals to account for items and circumstances not contemplated at the time the goals were initially established.

The following table shows the final financial metrics established for determining payouts under the 2019 MIP for the NEOs and the calculation of the 2019 MIP payouts based on actual performance. Although the 2019 targets were set below actual 2018 results, they were established at levels that eliminated the effects of significant commodity price inflation that was in the 2018 results that was not expected to, and did not, continue into 2019, and remained at levels intended to drive superior performance.

In light of the achievement of 132% payout of MIP performance targets, our NEOs received the following 2019 MIP annual bonus payments in early 2020: Mr. Flitman: $1,023,775, Mr. Major: $594,450, Mr. Farmer: $312,086, Mr. Johnson: $321,994 and Ms. Hamblet: $440,736.

Mr. McGaugh received a payment of $563,750 reflecting his 2019 target annual bonus amount, in accordance with the terms of his separation agreement

Equity Incentives
During 2019, we maintained the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan, as amended (the “2013 Incentive Plan”). The purpose of the 2013 Incentive Plan is to provide incentives that attract, retain and motivate high-performing officers, directors, employees and consultants by providing them a proprietary interest in our long-term success and compensation based on their performance in fulfilling their responsibilities to our Company.

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EXECUTIVE COMPENSATION MATTERS

ANNUAL EQUITY AWARDS
For 2019, the Compensation Committee and the Board determined to provide approximately 75% of each named executive officer’s annual equity award value in the form of performance-based RSUs and approximately 25% in the form of time-based RSUs. Thus, the Compensation Committee recommended and the Board approved the following annual equity grants on February 19, 2019, which grants were effective on February 28, 2019. In determining the size of these grants, the Compensation Committee considered the compensation levels of similarly situated executive officers in our peer group, the Company’s 2018 performance, and the executive officers’ individual performance over the prior fiscal year.

Retirement, Health, Welfare and Limited Personal Benefits
We provide our NEOs with benefits that we believe are reasonable and in the best interests of our Company and our stockholders. Consistent with our compensation philosophy, we currently intend to maintain these benefits for our NEOs; however, the Compensation Committee, in its discretion, may revise or amend to an officer’s benefits if it deems it advisable. We believe these benefits are generally similar to benefits provided by comparable companies.

We maintain a broad-based tax-qualified 401(k) savings plan, which allows eligible participants, including our NEOs, to defer from 0% to 50% of cash compensation up to the maximum amount allowed under Internal Revenue Service guidelines. From time to time, we make contributions to our employees’ individual 401(k) accounts as a performance incentive. For 2019, we also provided a Company matching contribution equal to 1/2 of up to 6% of compensation contributed to the plan. Participants are always vested in their own contributions to the plan and are generally fully vested in contributions by us after five years of service. We do not currently offer any defined benefit or supplemental executive retirement plans or non-qualified deferred compensation plans for executive officers but may elect to do so in the future.

We offer broad-based medical, dental, vision, life insurance, short- and long-term disability insurance and accidental death and dismemberment insurance for all eligible employees, including our NEOs. Certain of our NEOs participate in a health care program administered by ArmadaCare, which provides reimbursement for certain out-of-pocket health care expenses.

In addition, certain of our executive officers received automobile allowances the costs of which are reflected in the “All Other Compensation” column of the “Summary Compensation Table” included below.

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EXECUTIVE COMPENSATION MATTERS

OTHER CONSIDERATIONS AND COMPENSATION BEST PRACTICES

Accounting and Tax Considerations
Section 162(m) generally limits the deductibility of compensation paid to covered employees, including our NEOs, to $1 million during any fiscal year. The exemption from Section 162(m)’s deduction limit for “performance-based compensation” was repealed effective for taxable years beginning after December 31, 2017, such that compensation paid to any covered employee in excess of $1 million will not be deductible, unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. Although our Board and Compensation Committee have historically considered the deductibility of compensation elements under Section 162(m) when determining elements of compensation, including our 2017 performance-based RSUs, and remains committed to a performance-based compensation program, we have preserved the flexibility to pay compensation that was not intended to be tax deductible when we determined that it was in the best interests of our stockholders. In addition, the rules and guidance issued under Section 162(m) are complicated, and may change from time to time. Thus, there is no guarantee that compensation awarded in prior years will actually qualify as deductible under Section 162(m).

2019 Say-on-Pay Vote
We received the support of approximately 96.7% of the votes cast at our 2019 Annual Meeting to approve the compensation of our named executive officers as described in our 2019 proxy statement. The Compensation Committee generally considered this very high level of support when reviewing the structure of our compensation program, and, therefore, did not make any specific changes to program elements or policies as a result of this vote.

Recoupment Policy
We are subject to the recoupment requirements under the Sarbanes-Oxley Act. Our equity incentive plans also provide that awards granted under the 2013 Incentive Plan are subject to recoupment, including the clawback of “incentive-based compensation” under the Exchange Act, or under any applicable rules and regulations promulgated by the SEC.

We also maintain a recoupment policy, pursuant to which the Compensation Committee may determine in its discretion if it will require an individual executive officer, a group of executive officers or all executive officers to reimburse the Company for certain incentive compensation paid to them if the financial results upon which the incentive compensation was based are restated or if an executive officer willfully engages in conduct that, among other things, is materially and demonstrably injurious to the Company. The recoupment policy permits the Compensation Committee to take into account the following considerations when determining whether to recoup incentive compensation:

We believe our recoupment policy is sufficiently broad to reduce the potential risk that an executive officer would intentionally misstate results in order to benefit under an incentive program and provides a right of recovery in the event that an executive officer took actions that, in hindsight, should not have been rewarded. Our recoupment policy may be adjusted in the future as determined appropriate by the Compensation Committee or as regulatory requirements are adopted.

Hedging and Pledging Policies
Our directors, officers, employees and consultants are prohibited from engaging in any hedging or monetization transactions involving Company securities. In addition, directors, officers, employees and consultants are prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan without pre-clearance from the Company’s General Counsel.

Stock Ownership Guidelines
In an effort to ensure that senior officers have a significant ownership stake in the Company that aligns the long-term interests of executive officers and stockholders, the Company implemented stock ownership guidelines applicable to all NEOs effective as of March 1, 2018. Under these guidelines, our Chief Executive Officer is required to own Company equity securities with an aggregate value equal to at least five times his base salary. Each other NEO is required to own Company equity securities with an aggregate value of at least three times his or her base salary. Each NEO has five years from the later of the date of their employment in a covered role or the effective date of the policy to meet this ownership requirement. Shares of Company stock owned outright or in trust, vested options and unvested time-based restricted stock units are counted when determining whether the guideline has been achieved. As of the date of this proxy statement, all of our NEOs had met their ownership requirement or were on track to meet the ownership requirement by the applicable deadline.

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EXECUTIVE COMPENSATION MATTERS

COMPENSATION COMMITTEE REPORT

This report is submitted by the Compensation Committee of the Board. The Compensation Committee has reviewed the Compensation Discussion and Analysis included in this proxy statement and discussed it with management. Based on its review of the Compensation Discussion and Analysis and its discussions with management, the Compensation Committee has recommended to the Board that this Compensation Discussion and Analysis be included in this proxy statement.

Compensation Committee
James O’Leary, Chair
Henry Buckley
David Bullock

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EXECUTIVE COMPENSATION MATTERS

COMPENSATION TABLES

The purpose of the following tables is to provide information regarding the compensation earned by our NEOs during the fiscal years indicated.

SUMMARY COMPENSATION TABLE

The following table shows the compensation earned by our NEOs during fiscal 2017, 2018 and 2019, as applicable:

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EXECUTIVE COMPENSATION MATTERS

ALL OTHER COMPENSATION TABLE

The table below provides an itemization of all other compensation for 2019 for each of our NEOs.

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EXECUTIVE COMPENSATION MATTERS

GRANTS OF PLAN-BASED AWARDS

During fiscal 2019, each of the NEOs participated in the 2019 MIP and was eligible to receive the awards set forth under “Estimated Future Payouts under Non-Equity Incentive Plan Awards” below. In addition, each of our NEOs received the below-described equity awards in 2019 under our 2013 Incentive Plan.

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EXECUTIVE COMPENSATION MATTERS

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The table below provides information on the NEOs’ outstanding equity awards, which consisted of restricted stock units that had not vested and option awards that had not been exercised, as of December 31, 2019. Mr. McGaugh had no equity awards outstanding as of this date.

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EXECUTIVE COMPENSATION MATTERS

OPTIONS EXERCISED AND STOCK VESTED
The table below provides information with respect to the number and value of shares acquired during fiscal year 2019 by our NEOs from the vesting of restricted stock units and exercise of stock options. Mr. Johnson did not exercise any stock options or hold any restricted stock units that vested during fiscal year 2019.

POTENTIAL PAYMENTS UPON TERMINATION AND CHANGE IN CONTROL
Separation Agreement with Mr. McGaugh
On March 11, 2019, Mr. McGaugh entered into a Separation Agreement with the Company (the “Separation Agreement”) in connection with his departure effective as of March 11, 2019. In exchange for a general release of claims, the Separation Agreement provided that Mr. McGaugh would receive: (i) salary continuation through March 31, 2020 totaling $594,059; (ii) his 2019 annual MIP bonus at target (which was $563,750), which was paid when bonuses for 2019 were paid to other senior executives; and (iii) payment of $13,114, payable over 12 months, which amount represents the approximate cost of COBRA continuation premiums for health, dental and vision insurance for a period of 12 months following his separation date. Additionally, all of Mr. McGaugh’s outstanding time-based equity compensation awards that would have vested within twelve months, as well as his awards granted on February 20, 2017, became fully vested on his separation date. The Separation Agreement also confirmed Mr. McGaugh’s continuing obligations under restrictive covenants, including a one-year post-termination non-solicitation covenant, that he had previously agreed to with the Company and included a mutual non-disparagement provision.

Separation Agreement with Ms. Hamblet
On December 31, 2019, Ms. Hamblet entered into a Separation Agreement with the Company (the “Separation Agreement”) in connection with her departure effective as of December 31, 2019. In exchange for a general release of claims, the Separation Agreement provided that Ms. Hamblet would receive: (i) salary continuation for twelve months, totaling $333,638; (ii) her 2020 annual MIP bonus at target (which is $333,638), to be paid when bonuses for 2020 are paid to other senior executives; and (iii) payment of $14,505, payable over 12 months, which amount represents the approximate cost of COBRA continuation premiums for health, dental and vision insurance for a period of 12 months following her separation date. Additionally, all of Ms. Hamblet’s outstanding time-based equity compensation awards that would have vested within twelve months, as well as her awards granted on February 21, 2017, became fully vested on January 3, 2020. The Separation Agreement also confirmed Ms. Hamblet’s continuing obligations under restrictive covenants, including a one-year post-termination non-solicitation covenant, that she had previously agreed to with the Company and included a mutual non-disparagement provision.

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EXECUTIVE COMPENSATION MATTERS

Employment Agreements with Other NEOs
We have entered into employment agreements with each of our other NEOs, which generally specify base salary levels and target annual bonus opportunities (which remain subject to annual review), and reimbursement and benefit plan participation, as well as provide for post-termination payments upon certain qualifying termination events. Although somewhat similar, these agreements are individually negotiated and the terms of each are summarized in the table that follows.

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EXECUTIVE COMPENSATION MATTERS

As used in the agreements, the term “change in control” includes the following events: (i) approval by the Board of a plan of liquidation, dissolution or winding-up of the Company; (ii) the consummation of a sale or other disposition of all or substantially all of the assets of the Company and its subsidiaries; (iii) any person (other than the Company, any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of common stock of the Company, and for Mr. Major, Gores Building Holdings, which we refer to as Gores, or its affiliates, or for Mr. Flitman, Mr. Farmer and Mr. Johnson, any trustee or other fiduciary holding securities under any employee benefit plan of the Company), becoming the beneficial owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then-outstanding securities; and (iv) subject to certain exceptions, a merger or consolidation of the Company with any other entity, which we refer to as a Merger Partner, as a result of which (A) the voting securities in the Merger Partner immediately prior thereto represent more than 50% of the combined voting power in the surviving entity immediately thereafter, or (B) the stockholders of the Merger Partner immediately prior to such transaction have the power to elect or designate a majority of the members of the board of the Company or the surviving entity. Under Mr. Major’s employment agreement, the decrease of the equity holdings of Gores or any of its affiliates in the Company does not constitute a “change in control,” unless such reduction in equity holdings is part of a transaction that constitutes a “change in control” pursuant to clauses (iii) or (iv) above.

The terms Cause and Good Reason are individually defined in each of the agreements, as amended where applicable.

Payments to Mr. McGaugh and Ms. Hamblet
Given their respective terminations of employment on March 11, 2019 and December 31, 2019, Mr. McGaugh and Ms. Hamblet received the payments and benefits described above under “Separation Agreement with Mr. McGaugh” and “Separation Agreement with Ms. Hamblet.”

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EXECUTIVE COMPENSATION MATTERS

Payments to Other Named Executive Officers
The table below reflects amounts that would have been payable to each of our other named executive officers assuming their employment was terminated on December 31, 2019 and assuming that the NEO executed a general release of claims against us. For a description of the amounts reflected below, see the “Employment Agreements with Other NEOs” section above.

CEO PAY RATIO

The 2019 annual total compensation of the median compensated employee was $42,450; our CEO’s 2019 annual total compensation for purposes of this pay ratio was $3,626,092, and the ratio of these amounts was 1-to-85. Our pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll records. As permitted by SEC rules, for our fiscal 2019 pay ratio reported above, we used the same median employee that we used for our fiscal 2017 and 2018 pay ratios, as we believe there has been no change in our employee population or employee compensation arrangements that would significantly impact our pay ratio disclosure. We identified the median compensated employee from our employee population as of December 31, 2017 using total cash compensation paid to our employees during fiscal 2017.

The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

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	PROPOSAL 4
	APPROVAL OF 2020 INCENTIVE COMPENSATION PLAN
We are asking stockholders to consider and vote upon a proposal to approve a new BMC Stock Holdings, Inc. 2020 Incentive Compensation Plan, which we refer to below as the “2020 Plan.” The Board currently intends that upon approval of the 2020 Plan, awards will no longer be made under our existing Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan, as amended (the “2013 Plan”), and the 2020 Plan will become the primary plan used for equity grants to employees, non-employee directors, advisors and consultants of the Company and its affiliates going forward. The following is qualified in its entirety by the full text of the 2020 Plan, which is attached to this Proxy Statement as Appendix B and is incorporated by reference into this proposal.
BMC Board Recommendation The Board unanimously recommends a voteFOR this proposal.

The Company anticipates that its equity-based compensation needs will soon exceed the remaining shares available under the 2013 Plan. Upon the recommendation of the Compensation Committee, the Board on March 19, 2020 therefore approved the 2020 Plan, subject to the receipt of stockholder approval at the Annual Meeting. The 2020 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, performance awards, other stock-based awards or other cash-based awards.

No awards under the 2020 Plan have been granted or will be granted until the 2020 Plan is approved by the Company’s stockholders at the Annual Meeting. Grants of awards under the 2020 Plan will be in the discretion of the Compensation Committee (or any other committee duly authorized by the Board to administer the 2020 Plan) to grant awards under the 2020 Plan. Accordingly, it is not possible as of the date of this proxy statement to determine the nature or amount of any awards under the 2020 Plan that may be subject to future grants to employees, non-employee directors, advisors and consultants of the Company and its affiliates.

The following table sets forth certain information about the 2020 Plan, as well as the Company’s 2013 Plan:

If the 2020 Plan is approved, the Company’s total potential dilution from the shares available for issuance under its equity incentive plans would increase from 4.9% as of March 19, 2020 to 8.8%. The Compensation Committee has considered this potential dilution level in the context of competitive data from its peer group, and believes that the resulting dilution levels would be within normal competitive ranges.

In addition to overall dilution, the Compensation Committee considered annual dilution from the Company’s equity incentive plans in approving the 2020 Plan. The Company measures annual dilution as the total number of shares subject to equity awards granted during the year less cancellations and other shares returned to the reserve, divided by total common shares outstanding at the end of the year. The Company’s annual dilution under the 2013 Plan for fiscal 2019 was 0.8%.

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EQUITY COMPENSATION PLAN MATTERS

The Company manages its long-term dilution goal by monitoring the number of shares subject to equity awards that it grants annually, commonly referred to as burn rate. Burn rate shows how rapidly a company is depleting its shares reserved for equity compensation plans, and is defined as the number of shares granted under the Company’s equity incentive plans divided by the weighted average number of common shares outstanding at the end of the year. The Company has calculated the burn rate under the 2013 Plan for the past three years, as set forth in the following table:

The three-year average burn rate is 1.1%.

An additional metric that the Company uses to measure the cumulative impact of its equity program is overhang (the number of shares subject to equity awards outstanding but not exercised or settled plus the number of shares available to be granted, divided by the sum of the total number of shares of Company common stock outstanding at the end of the year). If the 2020 Plan is approved, the Company’s overhang would increase to approximately 8.8%, and then would be expected to decline as awards are exercised and/or become vested.

When considering the size of the share reserve under the 2020 Plan, the Compensation Committee also reviewed, among other things, projected future share usage and projected future forfeitures. The projected future usage of shares for long-term incentive awards under the 2020 Plan was reviewed under scenarios based on a variety of assumptions. Depending on assumptions, the Committee currently anticipates that the 2,650,000 shares under the 2020 Plan, in combination with the remaining authorized shares and shares added back to the 2013 Plan from forfeitures of awards previously granted, is expected to satisfy, the Company’s equity compensation needs for approximately 5 years of similar levels of awards.

In order to minimize stockholder dilution, the 2020 Plan provides that, if the exercise price or withholding obligation of any award granted under the 2020 Plan is satisfied by tendering shares to the Company or by withholding shares, such tendered or withheld shares will not again be made available for issuance under the 2020 Plan. In addition, shares subject to a stock option or stock appreciation right that were not issued upon the net settlement of such stock option stock appreciation right will not again be made available for issuance under the 2020 Plan.

The closing price of a share of our common stock on the NASDAQ Stock Market on March 19, 2020 was $15.89.

Why You Should Vote to Approve the 2020 Plan

The Board recommends that our stockholders approve the 2020 Plan because it believes that the 2020 Plan enhances the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer cash and stock-based incentives to eligible participants in order to attract, retain and reward such individuals and strengthen the mutuality of interests between such individuals and the stockholders of the Company. The approval of the 2020 Plan will enable us to continue to provide such incentives.

Promotion of Good Corporate Governance Practices. The Board believes the use of share-based incentive awards promotes best practices in corporate governance by aligning plan participants’ interests with maximizing stockholder value. Specific features of the 2020 Plan that are consistent with good corporate governance practices include, but are not limited to:

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2020 Plan Summary

Purpose and Eligibility.The purpose of the 2020 Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer eligible individuals cash and stock-based incentives in order to attract, retain and reward such individuals and strengthen the mutuality of interests between such individuals and the Company’s stockholders.

Awards may be granted under the 2020 Plan to current and prospective employees, non-employee directors, advisors and consultants of the Company and its affiliates. There are currently approximately 250 individuals who would be eligible to receive awards under the 2020 Plan. Further, only our employees or employees of our subsidiaries are eligible to receive incentive stock options.

Effective Date and Term; Amendment and Termination.The 2020 Plan was approved by the Board on March 19, 2020 and will become effective on the date the 2020 Plan is approved by the stockholders of the Company (the “Effective Date”). Subject to earlier termination as provided in 2020 Plan, no new awards may be granted under the 2020 Plan on or after March 19, 2030. However, awards outstanding on such date will remain subject to the terms of the 2020 Plan and any applicable award agreement.

The Board may at any time amend any or all of the provisions of the 2020 Plan or suspend or terminate it entirely, retroactively or otherwise. Unless otherwise required by law or specifically provided under the 2020 Plan, however, the rights of a participant with respect to awards granted prior to such amendment, suspension or termination, may not be materially impaired without the consent of such participant. Without the approval of the holders of the Company’s common stock entitled to vote in accordance with applicable law, no amendment may be made that would (i) increase the aggregate number of shares of common stock that may be issued under the 2020 Plan (except due to changes in capitalization); (ii) increase the maximum individual participant limitations for a fiscal year set forth in the 2020 Plan (except due to changes in capitalization); (iii) change the classification of individuals eligible to receive awards under the 2020 Plan; (iv) decrease the exercise price of any stock option or stock appreciation right; (v) extend the maximum option period set forth in the 2020 Plan; (vi) grant any award in replacement of a canceled stock option or stock appreciation right with a higher exercise price than the replacement award; or (viii) otherwise require stockholder approval in order for the 2020 Plan to comply with applicable law or the rules and regulations or the rules of any exchange or system on which the Company’s securities are listed or traded.

Administration.Our Board has the power and authority to administer the 2020 Plan. In accordance with the terms of the 2020 Plan, the Board has delegated this power and authority to the Compensation Committee. The Compensation Committee has the authority to administer and interpret the terms and intent of the 2020 Plan. This includes the authority, among other things:

Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company, the Board or the Compensation Committee (or any of its members) relating to the 2020 Plan will be within the absolute discretion of all and each of them and will be final, binding and conclusive on the Company and all employees and participants and their respective heirs, executors, administrators, successors and assigns.

Awards.Awards under the 2020 Plan may be made in the form of stock options, stock appreciation rights, restricted stock, performance awards, other stock-based awards or other cash-based awards. Any of the foregoing awards may be made subject to attainment of performance goals.

Ninety-five percent (95%) of the shares of Common Stock reserved for issuance under the 2020 Plan will be granted subject to the following vesting limitations: (i) no such award granted under the 2020 Plan to any participant (other than a non-employee director) will vest earlier than the first anniversary of the grant date of the award; and (ii) all such awards granted to non-employee directors will vest no earlier than the earlier of the first anniversary of the grant date of the Award or the next annual meeting of stockholders of the Company (provided that such annual meetings are at least fifty (50) weeks apart). The foregoing restrictions will not apply in the case of the Participant’s death or Disability or upon a Change in Control.

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Shares Subject to 2020 Plan.The aggregate number of shares of common stock that may be issued pursuant to awards granted under the 2020 Plan will be 2,650,000 shares (subject to any increase or decrease in connection with a change in our capitalization) plus (A) any shares of common stock that remain available for grant under the 2013 Plan as of the Effective Date and (B) any shares of common stock subject to outstanding awards under the 2013 Plan as of the Effective Date that on or after the Effective Date are forfeited, terminated, expire or otherwise lapse without being exercised (to the extent applicable), or are settled in cash. Shares of common stock issued pursuant to awards granted under the 2020 Plan may be either authorized and unissued common stock or common stock held in or acquired for the treasury of the Company or both. The maximum number of shares of Common Stock with respect to which incentive stock options may be granted under the 2020 Plan will be 2,650,000 shares.

If any shares of common stock subject to an award cease to be issuable or transferable to a participant because of the forfeiture, termination, expiration or cancellation, in whole or in part, of such award or for any other reason, such shares may be used thereafter for additional awards under the 2020 Plan. Additionally, if an award may be settled in shares of common stock or cash, such shares will be deemed issued only when and to the extent that settlement or payment is actually made in shares of common stock. To the extent an award is settled or paid in cash, any shares previously reserved for issuance or transfer pursuant to such award will again be deemed available under the 2020 Plan.

Shares withheld or tendered to pay withholding taxes or the exercise price of an award will not again be available under the 2020 Plan. The full number of shares subject to a stock option or stock appreciation right granted that is net settled by the issuance of shares will be counted against the shares authorized for issuance under the 2020 Plan, regardless of the number of shares actually issued upon the net settlement of such stock option or stock appreciation right. Any shares repurchased by the Company on the open market using the proceeds from the exercise of an award will not increase the number of shares available for the future grant of awards.

Awards may, in the discretion of the Committee, be granted under the 2020 Plan in assumption of, or in substitution for, outstanding awards previously granted by the Company or any of its affiliates or a company acquired by the Company or any of its Affiliates or with which the Company or any of its Affiliates combines (“Substitute Awards”). Shares underlying any such Substitute Awards will generally not be counted against the aggregate number of Shares available for awards under the 2020 Plan. However, Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding stock options intended to qualify for special tax treatment under Sections 421 and 422 of the Code previously granted by an entity that is acquired by the Company or any of its affiliates or with which the Company or any of its affiliates combines will be counted against the aggregate number of Shares available for incentive stock options under the 2020 Plan.

Non-Employee Director Limitations.Subject to adjustment provisions in the 2020 Plan, the aggregate grant date fair market value of share subject to awards granted under the 2020 Plan, together with any cash compensation paid or payable, during any calendar year to any one non-employee director will not exceed $650,000. However, with respect to the calendar year in which a non-employee director first joins the Board or is designated as Chairman of the Board or Lead Director, such maximum dollar value may be up to two hundred percent (200%) of the dollar value set forth in the foregoing limit.

Terms and Conditions of Options.The Committee will have the authority to grant to any eligible employee one or more incentive stock options, non-qualified stock options, or a combination of both. The Committee may also grant to any consultant or non-employee director one or more non-qualified stock options. If the aggregate fair market value (determined as of the time of grant) of the common stock with respect to which incentive stock options are exercisable for the first time by an eligible employee during any calendar year under the 2020 Plan and/or any other stock option plan of the Company or any subsidiary exceeds $100,000, such stock options will be treated as non-qualified stock options.

The exercise price per share of common stock subject to a stock option cannot be less than 100% (or, 110% in the case of an incentive stock option granted to a person owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or its subsidiaries) of the fair market value of the common stock at the time of grant. The term of each stock option cannot be more than 10 years after the date of grant. In the case of an incentive stock option granted to a person owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or its subsidiaries, the term cannot exceed five years. To the extent vested, and subject to any other restrictions set forth in the 2020 Plan, stock options may be exercised in whole or in part at any time during the term of the stock option, by giving written notice of exercise to the Company accompanied by payment in full of the purchase price.

No stock option may be transferred by a participant other than by will or by the laws of descent and distribution. Stock options will be exercisable only by the participant during his or her lifetime. However, the Committee may provide in the applicable award agreement that a non-qualified stock option that is otherwise not transferable may be transferred to a family member or certain controlled trusts or other entities, as specified by the Committee. Such a transferred non-qualified stock option may not be subsequently transferred other than by will or by the laws of descent and distribution and remains subject to the terms of the 2020 Plan and the applicable award agreement.

An outstanding stock option may not be modified to reduce the exercise price thereof nor may a new stock option or other award at a lower price be substituted or exchanged for a surrendered stock option (other than adjustments or substitutions in accordance with the 2020 Plan), unless such action is approved by the stockholders of the Company.

Terms and Conditions of Stock Appreciation Rights.The Committee may grant stock appreciation rights, or “SARs,” either with a stock option (the “Reference Stock Option”), which may be exercised only at such times and to the extent the related option is exercisable (a “Tandem Stock Appreciation Right”) or independent of a stock option (a “Non-Tandem SAR”).

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Tandem Stock Appreciation Rights.The exercise price per share of common stock subject to a Tandem Stock Appreciation Right cannot be less than 100% of the fair market value of the common stock at the time of grant (other than in the case of a substitute award). No Tandem Stock Appreciation Right may be modified to reduce the exercise price thereof nor may a new stock appreciation right or other award at a lower price be substituted or exchanged for a surrendered Tandem Stock Appreciation Right (other than adjustments or substitutions in accordance with the 2020 Plan), unless such action is approved by the stockholders of the Company. A Tandem Stock Appreciation Right or applicable portion thereof granted with respect to a Reference Stock Option will terminate and no longer be exercisable upon the termination or exercise of the Reference Stock Option, except that a Tandem Stock Appreciation Right granted with respect to less than the full number of shares covered by the Reference Stock Option generally will not be reduced until, and then only to the extent that the exercise or termination of the Reference Stock Option causes, the number of shares covered by the Tandem Stock Appreciation Right to exceed the number of shares remaining available and unexercised under the Reference Stock Option. Tandem Stock Appreciation Rights will be exercisable only at such time or times and to the extent that the Reference Stock Options to which they relate shall be exercisable. Upon the exercise of a Tandem Stock Appreciation Right, a participant will be entitled to receive up to, but no more than, an amount in cash and/or common stock (as chosen by the Committee) equal in value to the excess of the fair market value of one share of common stock over the option exercise price per share specified in the Reference Stock Option agreement multiplied by the number of shares of common stock in respect of which the Tandem Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment. Notwithstanding the foregoing, the Committee may, in its sole discretion, award an amount less than the earned Performance Awards and/or subject the payment of all or part of any Performance Award to additional vesting, forfeiture and deferral conditions as it deems appropriate. Upon the exercise of a Tandem Stock Appreciation Right, the Reference Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in the 2020 Plan on the number of shares of common stock to be issued under the 2020 Plan. Tandem Stock Appreciation Rights will be transferable only when and to the extent that the underlying stock option would be transferable under the 2020 Plan.

Non-Tandem Stock Appreciation Rights.The exercise price per share of common stock subject to a Non-Tandem Stock Appreciation Right will not be less than 100% of the fair market value of the common stock at the time of grant (other than in the case of a Substitute Award). No Non-Tandem Stock Appreciation Right may be modified to reduce the exercise price thereof nor may a new Stock Appreciation Right or other award at a lower price be substituted or exchanged for a surrendered Non-Tandem Stock Appreciation Right (other than adjustments or substitutions in accordance with the 2020 Plan), unless such action is approved by the stockholders of the Company. The term of each Non-Tandem Stock Appreciation Right cannot be greater than 10 years after the date the right is granted. Non-Tandem Stock Appreciation Rights may be exercised in whole or in part at any time in accordance with the applicable award agreement, by giving written notice of exercise to the Company. Upon the exercise of a Non-Tandem Stock Appreciation Right a participant will be entitled to receive, for each right exercised, up to, but no more than, an amount in cash and/or common stock (as chosen by the Committee) equal in value to the excess of the fair market value of one share of common stock on the date that the right is exercised over the fair market value of one share of common stock on the date that the right was awarded to the participant. No Non-Tandem Stock Appreciation Rights will be transferable by the participant other than by will or by the laws of descent and distribution, and all such rights shall be exercisable, during the Participant’s lifetime, only by the Participant.

Terms and Conditions of Restricted Stock.Shares of restricted stock may be issued either alone or in addition to other awards granted under the 2020 Plan. The Committee may condition the grant or vesting of restricted stock upon the attainment of specified performance targets (including performance goals) or such other factors as the Committee may determine.

The purchase price of restricted stock will be fixed by the Committee. The purchase price may be zero to the extent permitted by applicable law, and, to the extent not so permitted, such purchase price may not be less than par value. The participant will not be permitted to transfer shares of restricted stock awarded under the 2020 Plan during the period or periods set by the Committee (the “Restriction Period”) commencing on the date of such award, as set forth in the applicable award agreement and such agreement will set forth a vesting schedule and any event that would accelerate vesting of the shares of Restricted Stock (subject to limitations set forth in the 2020 Plan). Within these limits, based on service, attainment of performance goals and/or such other factors or criteria as the Committee may determine, the Committee may condition the grant or provide for the lapse of such restrictions in installments in whole or in part, or may accelerate the vesting of all or any part of any Restricted Stock Award (subject to the limitations set forth in the 2020 Plan) and/or waive the deferral limitations for all or any part of any Restricted Stock Award. If the grant of shares of restricted stock or the lapse of restrictions is based on the attainment of performance goals, the Committee will establish the objective performance goals and the applicable vesting percentage of the restricted stock applicable to each participant or class of participants in writing prior to the beginning of the applicable fiscal year or at such later date as otherwise determined by the Committee and while the outcome of the performance goals are substantially uncertain.

The participant will generally have, with respect to the shares of restricted stock, all of the rights of a holder of shares of common stock of the Company, including, without limitation, the right to receive dividends, the right to vote such shares and, subject to and conditioned upon the full vesting of shares of restricted stock, the right to tender such shares. However, the payment of dividends will be deferred until, and conditioned upon, the expiration of the applicable Restriction Period.

Unless otherwise provided by the Committee in the applicable award agreement or, if no rights of the participant are reduced, thereafter, subject to the applicable provisions of the award agreement and the 2020 Plan, upon a participant’s termination for any reason during the relevant Restriction Period, all of the Participant’s restricted stock still subject to restriction will be forfeited in accordance with the terms and conditions established by the Committee at grant or thereafter. If and when the Restriction Period expires without a prior forfeiture of the restricted stock, the certificates for such shares will be delivered to the participant either in certificated or book-entry form.

Performance Awards.The Committee may grant a performance award to a participant payable upon the attainment of specific performance goals in cash or stock. At the expiration of the applicable performance period, the Committee will determine the extent to which

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the performance goals are achieved and the percentage of each performance award that has been earned. Subject to the applicable provisions of the award agreement and the 2020 Plan, performance awards may not be transferred during the Performance Period. The Committee shall establish the performance goals for the earning of performance awards based on a performance period applicable to each participant or class of participants. Such performance goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar events or circumstances.

Unless otherwise provided by the Committee in the applicable award agreement, amounts equal to dividends declared during the applicable performance period with respect to the number of shares of common stock covered by a performance award will not be paid to the participant. In any event, dividends and dividend equivalents may not be paid on any unearned or unvested performance award. To the extent provided by the Committee in the applicable award agreement, dividend equivalents may accrue and be paid out if and to the extent that the underlying performance award vests.

Following the Committee’s determination of the achievement of the applicable performance goals, the Company will settle performance awards, in such form (including, without limitation, in shares of common stock or in cash) as determined by the Committee, in an amount equal to such participant’s earned performance awards.

Subject to the applicable provisions of the award agreement and the 2020 Plan, upon a participant’s termination for any reason during the performance period for a given performance award, the performance award in question will vest or be forfeited in accordance with the terms and conditions established by the Committee at grant. Based on service, performance and/or such other factors or criteria, if any, as the Committee may determine, and subject to the limitations set forth in the 2020 Plan, the Committee may, at or after grant, accelerate the vesting of all or any part of any performance award.

Terms and Conditions of Other Stock-Based Awards and Other Cash-Based Awards.

Other Stock-Based Awards.The Committee is authorized to grant to eligible individuals “Other Stock-Based Awards” that are payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of common stock, including but not limited to, shares of common stock awarded purely as a bonus and not subject to restrictions or conditions, shares of common stock in payment of the amounts due under an incentive or performance plan sponsored or maintained by the Company or an affiliate, stock equivalent units, restricted stock units, and awards valued by reference to book value of shares of common stock. Other Stock-Based Awards may be granted either alone or in addition to or in tandem with other awards granted under the 2020 Plan. The Committee may condition the grant or vesting of Other Stock-Based Awards upon the attainment of specified performance goals as the Committee may determine. Such performance goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances. Subject to the applicable provisions of the award agreement and the 2020 Plan, shares of common stock subject to awards made in connection with Other Stock-Based Awards may not be transferred prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses. Unless otherwise provided by the Committee in the applicable award agreement, subject to the provisions of the award agreement and the 2020 Plan, the recipient of an award under that is an Other Stock-Based Award will not be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents in respect of the number of shares of common stock covered by the award. In any event, dividends and dividend equivalents may not be paid on any unvested Other Stock-Based Awards. To the extent provided by the Committee in the applicable award agreement, dividend equivalents may accrue and be paid out if and to the extent that the underlying Other Stock-Based Award vests. Common Stock issued on a bonus basis may be issued for no cash consideration.

Other Cash-Based Awards.The Committee may from time to time grant Other Cash-Based Awards to eligible individuals in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by applicable law. Other Cash-Based Awards may be granted subject to the satisfaction of vesting conditions or may be awarded purely as a bonus and not subject to restrictions or conditions. The Committee may condition the grant or vesting of Other Cash-Based Awards upon the attainment of specified performance goals as the Committee may determine. Such performance goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances.

Effect of Corporate Transactions

Changes.The existence of the 2020 Plan and the awards granted under it will not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (ii) any merger or consolidation of the Company or any affiliate, (iii) any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the common stock, (iv) the dissolution or liquidation of the Company or any affiliate, (v) any sale or transfer of all or part of the assets or business of the Company or any affiliate or (vi) any other corporate act or proceeding.

Subject to certain limitations in the 2020 Plan, if there shall occur any change in the capital structure of the Company by reason of any stock split, reverse stock split, stock dividend, subdivision, combination or reclassification of shares that may be issued under the 2020 Plan, any recapitalization, any merger, any consolidation, any spin off, any reorganization or any partial or complete liquidation, or any other corporate transaction or event having an effect similar to any of the foregoing (a “Section 4.2 Event”), then (i) the aggregate number and/or kind of shares that thereafter may be issued under the 2020 Plan, (ii) the number and/or kind of shares or other

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property (including cash) to be issued upon exercise or settlement of an outstanding award granted under the 2020 Plan, and/or (iii) the purchase price thereof, will be appropriately adjusted. In addition, subject to certain limitations in the 2020 Plan, if there will occur any change in the capital structure or the business of the Company that is not a Section 4.2 Event (an “Other Extraordinary Event”), including by reason of any extraordinary dividend (whether cash or stock), any conversion, any adjustment, any issuance of any class of securities convertible or exercisable into, or exercisable for, any class of stock, or any sale or transfer of all or substantially all of the Company’s assets or business, then the Committee, in its sole discretion, may adjust any award and make such other adjustments to the 2020 Plan. Any such adjustments will be consistent with the applicable Section 4.2 Event or the applicable Other Extraordinary Event, as the case may be, and in such manner as the Committee may, in its sole discretion, deem appropriate and equitable to prevent substantial dilution or enlargement of the rights granted to, or available for, participants under the 2020 Plan. Any such adjustment determined by the Committee will be final, binding and conclusive on the Company and all participants and their respective heirs, executors, administrators, successors and permitted assigns.

In the event of a merger or consolidation in which the Company is not the surviving entity or in the event of any transaction that results in the acquisition of substantially all of the Company’s outstanding common stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the sale or transfer of all or substantially all of the Company’s assets (all of the foregoing being referred to as an “Acquisition Event”), then the Committee may, in its sole discretion, terminate all outstanding and unexercised stock options, stock appreciation rights, or any Other Stock-Based Award that provides for a participant elected exercise, effective as of the date of the Acquisition Event, by (i) cashing-out such awards upon the date of consummation of the Acquisition Event (including for no consideration if such awards are out of the money), or (ii) delivering notice of termination to each participant at least 20 days prior to the date of consummation of the Acquisition Event, in which case during the period from the date on which such notice of termination is delivered to the consummation of the Acquisition Event, each such participant will have the right to exercise in full all of such participant’s awards that are then vested and outstanding (without regard to any limitations on exercisability otherwise contained in the award agreements), but any such exercise will be contingent on the occurrence of the Acquisition Event, and, provided that, if the Acquisition Event does not take place within a specified period after giving such notice for any reason whatsoever, the notice and exercise pursuant thereto shall be will and void.

Change in Control Provisions.In the event of a “Change in Control” (defined below) of the Company, and except as otherwise provided by the Committee in an award agreement, a participant’s unvested award will not vest automatically and a participant’s award will be treated in accordance with one of the following methods as determined by the Committee:

Unless otherwise provided by the Committee in the applicable award agreement at the time of grant or other written agreement approved by the Committee, a “Change in Control” will be deemed to occur if:

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Notwithstanding the foregoing, with respect to any award that is characterized as “nonqualified deferred compensation” within the meaning of Section 409A of the Code where Change in Control is intended to be a payment event in compliance with Section 409A, an event shall not be considered to be a Change in Control under the Plan for purposes of payment of such Award unless such event is also a “change in ownership,” a “change in effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code.

Federal Income Tax Consequences

The following summarizes the federal income tax consequences of awards that may be granted under the 2020 Plan.

Incentive Stock Options.An option holder will not realize taxable income upon the grant or of an incentive stock option under the 2020 Plan. In addition, an option holder generally will not realize taxable income upon the exercise of an incentive stock option. An option holder’s alternative minimum taxable income, however, will be increased by the amount by which the aggregate fair market value of the shares underlying the option, which is generally determined as of the date of exercise, exceeds the aggregate exercise price of the option. Further, except in the case of an option holder’s death or disability, if an option is exercised more than three months after the option holder’s termination of employment, the option will cease to be treated as an incentive stock option and will be subject to taxation under the rules applicable to non-qualified stock options, as summarized below.

If an option holder sells the option shares acquired upon exercise of an incentive stock option, the tax consequences of the disposition will depend upon whether the disposition is “qualifying” or “disqualifying.” The disposition of the option shares will be a qualifying deposition if it is made at least two years after the date on which the incentive stock option was granted and at least one year after the date on which the incentive stock option was exercised. If the disposition of the option shares is qualifying, any excess of the sale price of the option shares over the exercise price of the option will be treated as long-term capital gain taxable to the option holder at the time of the sale. If the disposition is a disqualifying disposition, the excess of the fair market value of the option shares on the date of disposition over the exercise price will be taxable income to the option holder at the time of the disposition. Of that income, the amount up to the excess of the fair market value of the shares at the time the option was exercised over the exercise price will be ordinary income for income tax purposes and the balance, if any, will be long-term or short-term capital gain, depending upon whether or not the shares were sold more than one year after the option was exercised.

Unless an option holder engages in a disqualifying disposition, the Company will not be entitled to a deduction with respect to an incentive stock option. If an option holder engages in a disqualifying disposition, the Company will be entitled to a deduction equal to the amount of compensation income taxable to the option holder.

If an option holder pays the exercise price of an incentive stock option by tendering shares with a fair market value equal to part or all of the exercise price, the exchange of shares will be treated as a nontaxable exchange, except that this treatment will not apply if the option holder acquired the shares being tendered pursuant to the exercise of an incentive stock option and has not satisfied the special holding period requirements summarized above. The tax basis of the shares tendered to pay the exercise price will be treated as the substituted tax basis for an equivalent number of shares received, and the new shares will be treated as having been held for the same holding period as the holding period that expired with respect to the tendered shares.

Non-Qualified Stock Options.An option holder will not realize taxable income upon the grant of a non-qualified stock option. When an option holder exercises the option, however, the difference between the exercise price of the option and the fair market value of the shares subject to the option on the date of exercise will constitute compensation income taxable to the option holder. The Company will be entitled to a deduction equal to the amount of compensation income taxable to the option holder. If an option holder tenders shares in payment of part or all of the exercise price of a non-qualified stock option, no gain or loss will be recognized with respect to the shares tendered, even if the shares were acquired pursuant to the exercise of an incentive stock option. In such an event, the option holder will be treated as receiving an equivalent number of shares pursuant to the exercise of the option in a nontaxable exchange. The tax basis of the shares tendered will be treated as the substituted tax basis for an equivalent number of shares received, and the shares received will be treated as having been held for the same holding period as the holding period that expired with respect to the tendered shares. The difference between the aggregate exercise price and the aggregate fair market value of the shares received pursuant to the exercise of the option will be taxed as ordinary income, just as if the option holder had paid the exercise price in cash.

Restricted Stock.A grantee of restricted stock will not recognize any taxable income for federal income tax purposes in the year of the award if the common stock is subject to restrictions (that is, the restricted stock is nontransferable and subject to a substantial risk of forfeiture). The grantee, however, may elect under Section 83(b) of the Internal Revenue Code to recognize compensation income in the year of the award in an amount equal to the fair market value of the shares on the date of the award, determined without regard to the restrictions. If the grantee does not make such a Section 83(b) election, the fair market value of the shares on the date on which the restrictions lapse will be treated as compensation income to the grantee and will be taxable in the year in which the restrictions lapse. The Company generally will be entitled to a deduction for compensation paid equal to the amount treated as compensation income to the grantee in the year in which the grantee is taxed on the income, if the Company complies with applicable reporting requirements.

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Performance Awards.A distribution of common stock or a payment of cash in satisfaction performance awards will be taxable as ordinary income when the distribution or payment is actually or constructively received by the recipient. The amount taxable as ordinary income is the aggregate fair market value of the common stock determined as of the date it is received or the amount of the cash payment. The Company will be entitled to deduct the amount of such payments when such payments are taxable as compensation to the recipient if the Company complies with applicable reporting requirements.

Stock Appreciation Rights.The grant of SARs will not result in taxable income to the participant or a deduction to the Company. Upon exercise of a SAR, the holder will recognize ordinary income in an amount equal to the cash or the fair market value of the Common Stock received by the holder. The Company will be entitled to a deduction equal to the amount of any compensation income taxable to the grantee, and, as to SARs that are settled in shares of common stock, if the Company complies with applicable reporting requirements.

Equity Compensation Plan Information

The following table summarizes the Company’s equity plan information as of December 31, 2019.

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STOCK OWNERSHIP TABLE

The following table contains information about the beneficial ownership of our common stock as of March 1, 2020 (unless otherwise noted), by:

Percentages of common stock owned are based on 66,809,594 shares outstanding as of March 1, 2020.

Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. The number of shares deemed to be outstanding and beneficially owned includes shares of restricted stock and shares issuable upon settlement of restricted stock units that will vest within 60 days of March 1, 2020, and options that are currently exercisable or exercisable within 60 days of March 1, 2020. These shares, however, are not deemed outstanding for the purposes of computing the ownership percentage of any other person. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder. Unless otherwise indicated, the address of each of the individuals named below is the Company’s address listed on the last page of this proxy statement.

44      BMC Stock Holdings, Inc.

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STOCK OWNERSHIP INFORMATION

2020 Proxy Statement       45

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46       BMC Stock Holdings, Inc.

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FREQUENTLY ASKED QUESTIONS ABOUT THESE PROXY MATERIALS & VOTING