Exhibit 10.1


STEVEN J. HILTON

SECOND AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

(Effective as of January 1, 2007)


This Employment
Agreement (“Agreement”)
is entered into on January 10, 2007 by and between Meritage Homes Corporation, a Maryland corporation (“Company”) and Steven J. Hilton, an
individual (“Executive”)
effective as of January 1, 2007 (“Effective Date”).


RECITALS


WHEREAS, the
Company and the Executive previously entered into an amended and restated
employment agreement defining the terms and conditions of Executive’s
employment with the Company, dated as of July 1, 2003, as subsequently amended
(“Original Agreement”);


WHEREAS, under the
Original Agreement, Executive’s title was Co-Chairman and Co-Chief Executive
Officer of the Company;


WHEREAS, pursuant
to a change in the Company’s executive personnel, the Board of Directors of the
Company (“Board”) has changed the Executive’s title to Chairman and Chief
Executive Officer of the Company;


WHEREAS, the
Original Agreement provided Executive with a certain benefits, including a
right to benefits under the Company’s Supplemental Executive Retirement
Benefits Program (“SERBP”);


WHEREAS, the
Company and Executive believe that is in the best interest of each to make
certain other changes to Executive’s terms and conditions of his employment
with the Company, including the Executive waiving any rights to any benefits
under the SERBP; and


WHEREAS, the
Company desires to continue to obtain the services of Executive, and Executive
desires to provide services to the Company, in accordance with the terms,
conditions and provisions of this Agreement.


NOW THEREFORE, in
consideration of the covenants and mutual agreements set forth herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and in reliance upon the representations, covenants and
mutual agreements contained herein, the Company and Executive agree to amend
and restate the Original Agreement as follows:


1.             Employment.  Subject
to the terms and conditions of this Agreement, the Company agrees to employ
Executive as Chairman and Chief Executive Officer of the Company, and Executive
agrees to diligently perform the duties associated with such positions.  Executive will report directly to the
Board.  Executive will devote
substantially all of his business time, attention and energies to the business
of the Company and will comply with the charters, policies and guidelines
established by the Company from time to time applicable to its directors and
senior management executives.










 



2.             Term.  Executive will be employed under this
Agreement until December 31, 2008, unless Executive’s employment is terminated
earlier pursuant to Section 7. 
Thereafter, the Agreement will automatically renew for additional periods
of one year (“Renewal Term(s)”), unless on or before September 15, 2007 (or
September 15 of any Renewal Term), either Executive or the Company notifies the
other in writing that it wishes to terminate employment under this Agreement at
the end of the term then in effect.


3.             Director Status.  For so long as Executive is Chief Executive
Officer, the Company shall use commercially reasonable efforts, subject to
applicable law and regulation of the New York Stock Exchange (“NYSE”), to cause Executive to be nominated
for election as a director and to be recommended to the stockholders for
election as a director.  Upon any
termination of employment as Chief Executive Officer, Executive will be deemed
to have resigned from the Board, unless (a) the Executive is not terminated for
Cause (as defined below) and owns 5% or more of the Company’s common stock then
outstanding, or (b) within 30 days thereof a majority of the independent
directors of the Board (as defined by rules of the NYSE) vote to enable
Executive to continue serving on the Board through the balance of his term.


4.             Base Salary.  The Company will pay Executive a base salary
(“Base Salary”) at the annual
rate of $1,017,500 per year.  The Board
may adjust Executive’s Base Salary from time to time, provided that the Base
Salary may not be reduced without Executive’s consent.  The Base Salary will be payable in accordance
with the payroll practices of the Company in effect from time to time.


5.             Incentive
Compensation.


(a)           Bonus.  Executive may, as determined in the
discretion of the Compensation Committee of the Board (“Committee”), be
entitled to annual incentive compensation based on the achievement of certain
goals and performance criteria established pursuant to the Company’s 2006
Executive Management Incentive Plan as specified in Exhibit A hereto
(the “Bonus”).  The Committee has the complete discretion to
act reasonably to reduce the amount of the annual incentive compensation
established pursuant to Exhibit A (including to zero) (the “Actual Bonus”)
and such Actual Bonus, if any, will be due and payable in accordance with Exhibit
A.


(b)           Long-Term Incentives.  During 2007, the Committee shall grant the
Executive an option to acquire 90,000 shares of the Company’s stock under the
Company’s 2006 Stock Incentive Plan (“2006 Plan”).  The option will have an exercise price equal
to the closing stock price on the date of grant, shall have a seven-year term,
and shall vest ratably over five years from the date of grant.  The option will also be subject to the terms
and conditions set forth in the 2006 Plan and the Company’s form of option
agreement.  In addition, the Committee
shall grant the Executive 18,000 shares of the Company’s stock under the 2006
Plan, which shares shall be subject to transfer restrictions which shall lapse
in equal increments over the three-year period beginning on the first
anniversary of the date of grant.  The
restricted stock grant will also be subject to the terms and conditions set
forth in the 2006 Plan and in the Company’s form of restricted stock award
agreement.  For periods beginning after
2007, Executive may receive awards under the 2006 Plan (or any successor plan)
in such amount (if any) and form and subject to such terms and conditions as
determined in the Board’s sole and absolute discretion.  The



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awards granted shall also
be subject to the accelerated vesting and other provisions set forth in the
Second Amended and Restated Change in Control Agreement between Executive and
the Company, effective as of January 1, 2007 (“CIC Agreement”).


6.             Executive Benefits.  During the term of this Agreement, Executive
will be entitled to reimbursement of reasonable and customary business
expenses.  The Company will provide
Executive with such fringe benefits and other Executive benefits as are
regularly provided by the Company to its senior management (e.g., health and long-term disability insurance, paid
vacation, etc.); provided, however, that nothing herein shall preclude the
Company from amending or terminating any employee or general executive benefit
plans or programs.  In addition, the
Company shall provide the Executive with the benefits set forth on Exhibit B,
which benefits may not be terminated or reduced during the term hereof.  By signing this Agreement, Executive hereby
knowingly and voluntarily waives his right to any payment under the SERBP.


7.             Termination.


(a)           Voluntary Resignation by Executive
without Good Reason.  If Executive
voluntarily terminates his employment with the Company without Good Reason,
then (i) the Company will be obligated to pay Executive’s Base Salary
through the Date of Termination; (ii) no Bonus shall be payable for the
fiscal year in which the termination occurs; (iii) the Company will pay
Executive $5 million (the Consulting, Severance and Non-Competition Payment”),
in monthly installments of $208,333.33 in cash or by check, over the next two
years (the “Consulting Period”) (subject to Executive’s compliance with this
Agreement, including Sections 8 and 9 as provided therein); (iv) the
Company shall reimburse Executive for COBRA premiums for the period that the
Company is required to offer COBRA coverage as a matter of law; and (v) at
the Company’s option, the Executive shall render reasonable consulting services
during the Consulting Period to the Company as may be requested from time to
time by the Chairman of the Committee.


(b)           Voluntary Resignation by Executive
with Good Reason.  If Executive
voluntarily terminates his employment with the Company with Good Reason, then
(i) the Company will be obligated to pay Executive’s Base Salary through the
Date of Termination; (ii) no Bonus shall be payable for the fiscal year in
which the termination occurs; (iii) the Company shall reimburse Executive for
COBRA premiums for the period that the Company is required to offer COBRA
coverage as a matter of law; (iv) at the Company’s option, the Executive shall
render reasonable consulting services to the Company during the 24-month period
following termination of employment as may be requested from time to time by
the Chairman of the Committee; and (v) the Company will pay Executive an amount
equal to the sum of (A) two times Executive’s Base Salary on the Date of
Termination of employment, and (B) two times the average of the Actual Bonus
compensation Executive earned in the two years prior to his termination of
employment; provided, however that the total amount set forth in this Section
7(b)(v) shall not be less than $5 million and shall not exceed $10
million.  Unless otherwise provided in
this Agreement, this amount shall be paid over the two year period following
Executive’s termination of employment (“Severance Period”).  The Company intends that the benefits
provided under this Section 7(b) shall be paid in lieu of, and not in addition
to,



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any benefit to which the
Executive may be entitled pursuant to his termination of employment with the
Company without Good Reason, as set forth in Section 7(a).


(c)           Termination without Cause by the
Company.  If the Company terminates
Executive without Cause, then (i) the Company will be obligated to pay
Executive’s Base Salary through the Date of Termination; (ii) no Bonus shall be
payable for the fiscal year in which the termination occurs, except if the
Company terminates Executive’s employment without Cause during the last three
months of the Company’s fiscal year, Executive will be paid a pro rata bonus
based upon the Company’s performance for the fiscal year, payable at the time
set forth in Exhibit A; (iii) the Company shall reimburse Executive for
COBRA premiums for the period that the Company is required to offer COBRA
coverage as a matter of law; (iv) any options granted after the Effective Date
will become fully vested and exercisable and all restrictions on awards will
lapse; (v) at the Company’s option, the Executive shall render reasonable
consulting services to the Company during the 24-month period following
termination of employment as may be requested from time to time by the Chairman
of the Committee; and (vi) the Company will pay Executive an amount equal to the
sum of sum of (A) two times Executive’s Base Salary on the Date of Termination
of employment, and (B) two times the average of the Actual Bonus compensation
Executive earned in the two years prior to his termination of employment;
provided, however that the total amount set forth in this Section 7(c)(vi)
shall not be less than $5 million and shall not exceed $10 million.  Unless otherwise provided in this Agreement,
this amount shall be paid over the Severance Period.


(d)           Termination for Cause by the
Company.  If the Company terminates
Executive’s employment for Cause, then (i) the Company will be obligated to pay
Executive’s Base Salary through the Date of Termination, and (ii) no Bonus
shall be payable for the fiscal year in which the termination occurs.  Upon a termination for Cause by the Company,
the provisions of Section 8 (Restrictive Covenant) shall
automatically become applicable for the two-year period set forth therein,
without any further payment due Executive. 
Executive acknowledges and agrees that the compensation herein is
adequate consideration for such covenants.


(e)           Termination upon Death or
Disability.  If Executive’s
employment is terminated as a result of Executive’s death or Disability, then
the Company will be obligated to pay (i) Executive’s then current Base
Salary through the Date of Termination, (ii) a pro rated amount of Executive’s
Actual Bonus for the year, payable at the time set forth in Exhibit A,
(iii) Executive’s COBRA premiums for the period that the Company is
required to offer COBRA coverage as a matter of law; and (iv) any options
granted after the Effective Date will become fully vested and exercisable and
all restrictions on awards will lapse and, to the extent permitted under the
plan’s governing documents, Executive (or Executive’s beneficiary(ies)) shall
have a period of one year from the Date of Termination of employment to
exercise such options.  If Executive dies
or becomes Disabled during any period that the Company is obliged to make payments
under Section 7(a), (b) or (c), the Company shall make a lump sum payment to
Executive (or his estate) of any unpaid amount within thirty (30) days of such
death or Disability.



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(f)            Definitions.  For purposes of this Agreement:


(1)           “Cause”
and “Good Reason” shall have the
meanings ascribed to them in the CIC Agreement, provided, that Good Reason also
exists under this Agreement if (A) the Company fails to cause any successor to
immediately assume the terms of this Agreement, and (B) the Company materially
breaches its obligations under this Agreement and such breach is not cured
within a reasonable period of time not to exceed 30 days after written notice
from the Executive;


(2)           “Date
of Termination” shall mean (i) if this Agreement is terminated as a
result of Executive’s death, the date of Executive’s death, (ii) if this
Agreement is terminated by Executive, the date on which he notifies the Company
in writing (but following the Company’s opportunity to cure as provided in the
CIC Agreement), (iii) if this Agreement is terminated by the Company for
Disability, the date a notice of termination is given, (iv) if this Agreement
is terminated by the Company for Cause, the date a final determination is
provided to Executive by the Company (following the procedures set forth in the
CIC Agreement), or (v) if this Agreement is terminated by the Company without
Cause, the date notice of termination is given to Executive by the Company; and


(3)           “Disability”
shall mean if, by reason of any medically determinable physical or metal
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, Executive is receiving
income replacement benefits for a period of not less than six months under an
accident and health plan established by the Company for its employees.


(g)           Procedures for Notices of
Termination.  The procedures set
forth in Section 10 (a), (b) and (d) of the CIC Agreement shall apply under
this Agreement in connection with a notice of termination as to the kind of
termination events described in those subsections.


(h)           Compliance with Section 409A of
the Internal Revenue Code.  Any
payment under this Section 7 shall be subject to the provisions of this Section
7(h) (except for a payment pursuant to Section 7(e)).  If Executive is a “Specified Employee” of the
Company for purposes of Internal Revenue Code Section 409A (“Code Section 409A”)
at the time of a payment event set forth in Sections 7 (a), (b), (c) or (d)
then no severance or other payments pursuant to Section 7 shall be made to
Executive by the Company until the amount of time has passed that is necessary
to avoid incurring excise taxes under Code Section 409A.  Should this paragraph 7(h) result in a delay
of payments to Executive, on the first day any such payments may be made
without incurring a penalty pursuant to Section 409A (the “409A Payment Date”),
the Company shall begin to make such payments as described in this paragraph 7,
provided that any amounts that would have been payable earlier but for the
application of this paragraph 7(h), shall be paid in lump-sum on the 409A
Payment Date along with accrued interest at the rate of interest announced by
Bank of America, Arizona from time to time as its prime rate from the date that
payments to you should have been made under this Agreement.  The balance of such severance payments shall
be payable in accordance with regular payroll timing and the COBRA premiums
shall be reimbursed monthly.  For
purposes of this provision, the term Specified Employee shall have the meaning
set forth in Section 409A(2)(B)(i) of the Internal Revenue



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Code of 1986, as amended
or any successor provision and the treasury regulations and rulings issued
hereunder.


8.             Restrictive
Covenant.  In
consideration of Executive’s employment, but subject to Section 7, Executive
agrees to the following:


(a)           During the Restriction Period (as
defined below), Executive will not, directly or indirectly, either as an
executive, partner, owner, lender, director, adviser or consultant or in any
other capacity or through any entity:


(1)           engage in any production homebuilding
or home sales within 100 miles of any Company project, provided, that, for purposes
of this Section 8(a)(1), Executive (a) may own stock in the Company and
less than 1% of any other publicly traded homebuilder, and (b) may engage in
custom homebuilding (up to 5 homes annually for third parties and 2 for family
members), land banking or lot or land development; provided, however,
that Executive may not directly or indirectly engage in the sale of finished
lots within the restricted area described above, unless at least 10 business
days prior to any offer to a third party, the lots are offered to the Company,
and if the Company (or its nominee) determines to purchase the property, the
applicable selling party negotiates a sale in good faith.  If no such sale is then consummated, then the
applicable selling party may pursue a sale with a third party.  If the terms of such third-party sale are
materially different than the offer made to the Company, the Company (or its
nominee) will have the right of first refusal to purchase the lots within three
business days of notice of the proposed sale to such a third party.  This notice must contain the specific terms and
conditions thereof and the proposed buyer. 
If the Company (or a nominee) does not respond in writing to the right
of first offer within 10 days or the right of first refusal within three days,
the Company will be deemed to have waived the applicable right.  The Company or a nominee can substitute cash
for any non-cash consideration (at the fair market value thereof).  This right will arise again if the third
party offer is materially modified or amended.


(2)           directly or indirectly, hire or
solicit for employment for any other business entity (other than the Company)
any person who is, or within the six month period preceding the date of such
activity was, an employee of or consultant to the Company (other than as a
result of a general solicitation for employment); or


(3)           solicit any customer or supplier of
the Company (including lot developers and land bankers) for a production
homebuilding business or otherwise attempt to induce any such customer or
supplier to discontinue or materially modify its relationship with the Company.  During the Restriction Period, Executive may
utilize the services of Company suppliers for business operations permitted
under Section 8(a)(1), i.e.,
custom homebuilding, land banking and land or lot development, so long as these
activities do not disrupt or adversely affect the Company’s relationships with
such suppliers.


(b)           The provisions of this Section 8
shall begin as of the date hereof, will survive the termination of this
agreement under Section 7 and will expire two years from the



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Date of Termination,
provided that, to the extent required, the notices under Section 7 are
given and the payments made as provided therein (“Restriction Period”).


(c)           Executive represents to the Company
that he is willing and able to engage in businesses that are not competing
businesses hereunder and that enforcement of the restrictions set forth in this
Section 8 would not be unduly burdensome to Executive.  Executive hereby agrees that the period of
time provided for in this Section 8 and other provisions and
restrictions set forth herein are reasonable and necessary to protect the
Company and its successors and assigns in the use and employment of the
goodwill of the business conducted by Executive.  Executive agrees that, if Executive in any
material respect violates the terms of this Section 8(A) or Section 9,
the Company shall not be obliged to pay any remaining Consulting, Severance,
and Non-Competition Payments and any other payments or benefits specified in
Section 7, provided that the Company must first provide Executive with
written notice of such violation and the opportunity to provide within thirty
(30) days any information showing that he has not in any material respect
breached such Agreement.  During any
notice period or any dispute regarding the violation of the terms of this Section
8 or Section 9, the Company will place such payments in an interest
bearing escrow account at Bank of America, Phoenix, or its successor.  Executive further agrees that damages cannot
adequately compensate the Company in the event of a violation of this Section
8 and that, if such violation should occur, injunctive relief shall be
essential for the protection of the Company and its successors and
assigns.  Accordingly, Executive hereby
covenants and agrees that, in the event any of the provisions of this Section
8 shall be violated or breached, the Company shall be entitled to obtain
injunctive relief against the party or parties violating such covenants without
bond but upon due notice, in addition to such further or other relief as may be
available at equity or law.  An
injunction by the Company shall not be considered an election of remedies or a
waiver of any right to assert any other remedies which the Company has at law
or in equity.  No waiver of any breach or
violation hereof shall be implied from forbearance or failure by the Company to
take action thereof.  The prevailing
party in any litigation, arbitration or similar dispute resolution proceeding
to enforce this provision will recover any and all reasonable costs and
expenses, including attorneys’ fees.


(d)           Executive agrees that the period of
time in which this Section 8 is in effect shall be extended for a period
equal to the duration of any breach of this Section 8 by Executive.


(e)           For purposes of Sections 8 and
9, the term “Company”
includes Meritage Homes Corporation and its subsidiaries and affiliates.  For purposes hereunder, an affiliate shall be
deemed to be any corporation or other business entity in which the Company or
its subsidiaries owns a controlling interest.


9.             Non-Disclosure of
Confidential Information.


(a)           It is understood
that in the course of Executive’s employment with Company, Executive will
become acquainted with Company Confidential Information (as defined
below).  Executive recognizes that
Company Confidential Information has been developed or acquired at great
expense, is proprietary to the Company, and is and shall remain the exclusive
property of the Company.  Accordingly,
Executive agrees that he will not, disclose to others, copy, make any use of,
or remove from Company’s premises any Company Confidential Information, except
as Executive’s duties may specifically require, without the



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express written
consent of the Company, during Executive’s employment with the Company and
thereafter until such time as Company Confidential Information becomes
generally known, or readily ascertainable by proper means by persons unrelated
to the Company.


(b)           Upon any termination of employment,
Executive shall promptly deliver to the Company the originals and all copies of
any and all materials, documents, notes, manuals, or lists containing or
embodying Company Confidential Information, or relating directly or indirectly
to the business of the Company, in the possession or control of Executive,
unless Executive remains a member of the Board, and in such case Executive may
retain and receive all Company Confidential Information provided to other Board
members.


(c)           Executive hereby agrees that the
period of time provided for in this Section 9 and other provisions and
restrictions set forth herein are reasonable and necessary to protect the
Company and its successors and assigns in the use and employment of the
goodwill of the business conducted by Executive.  Executive further agrees that damages cannot
adequately compensate the Company in the event of a violation of this Section
9 and that, if such violation should occur, injunctive relief shall be
essential for the protection of the Company and its successors and
assigns.  Accordingly, Executive hereby
covenants and agrees that, in the event any of the provisions of this Section
9 shall be violated or breached, the Company shall be entitled to obtain
injunctive relief against the party or parties violating such covenants,
without bond but upon due notice, in addition to such further or other relief
as may be available at equity or law. 
Obtainment of such an injunction by the Company shall not be considered
an election of remedies or a waiver of any right to assert any other remedies
which the Company has at law or in equity. 
No waiver of any breach or violation hereof shall be implied from
forbearance or failure by the Company to take action thereof.  The prevailing party in any litigation,
arbitration or similar dispute resolution proceeding to enforce this provision
will recover any and all reasonable costs and expenses, including attorneys’
fees.


(d)           “Company Confidential Information” shall mean confidential,
proprietary information or trade secrets of Company and its subsidiaries and
affiliates including without limitation the following:  (1) customer lists and customer information
as compiled by Company; (2) Company’s internal practices and procedures;
(3) Company’s financial condition and financial results of operation; (4)
supply of materials information, including sources and costs, designs,
information on land and lot inventories, and current and prospective projects;
(5) strategic planning, manufacturing, engineering, purchasing, finance,
marketing, promotion, distribution, and selling activities; (6) all other information
which Executive has a reasonable basis to consider confidential or which is
treated by Company as confidential; and (7) all information having
independent economic value to Company that is not generally known to, and not
readily ascertainable by proper means by, persons who can obtain economic value
from its disclosure or use. 
Notwithstanding the foregoing provisions, the following shall not be
considered “Company Confidential Information”: (i) the general skills of the
Executive as an experienced real estate and homebuilding entrepreneur and
senior management level employee; (ii) information generally known by
senior management executives within the homebuilding and/or land development
industry; (iii) persons, entities, contacts or relationships of Executive that
are also generally known in the industry; and (iv) information which becomes
available on a non-confidential basis from a source other than Executive which
source is not prohibited from disclosing such confidential information by
legal, contractual or other obligation.



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10.           Cooperation; No
Disparagement.  During the
Restriction Period, Executive agrees to provide reasonable assistance to the
Company (including assistance with litigation matters), upon the Company’s
request, concerning the Executive’s previous employment responsibilities and
functions with the Company. 
Additionally, at all times after the Executive’s employment with the
Company has terminated, Company and Executive agree to refrain from making any
disparaging or derogatory remarks, statements and/or publications regarding the
other, its employees or its services.


11.           Severability.  If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under any applicable law, then such
provision will be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification will make the
provision legal, valid and enforceable, then this Agreement will be construed
as if not containing the provision held to be invalid, and the rights and
obligations of the parties will be construed and enforced accordingly.


12.           Assignment
by Company.  Nothing in
this Agreement shall preclude the Company from consolidating or merging into or
with, or transferring all or substantially all of its assets to, another
corporation or entity that assumes this Agreement and all obligations and
undertakings hereunder.  Upon such
consolidation, merger or transfer of assets and assumption, the term “Company”
as used herein shall mean such other corporation or entity, as appropriate, and
this Agreement shall continue in full force and effect.


13.           Entire
Agreement.  This
Agreement, the CIC Agreement, and any agreements concerning stock options or
other benefits, embody the complete agreement of the parties hereto with
respect to the subject matter hereof and supersede any prior written, or prior
or contemporaneous oral, understandings or agreements between the parties that
may have related in any way to the subject matter hereof.  This Agreement may be amended only in writing
executed by the Company and Executive. 
Notwithstanding the foregoing, nothing in this Agreement is intended to
affect any previous agreements pertaining to the grant of options to the
Executive prior to the Effective Date, including without limitation, provisions
in Executive’s prior Change of Control Agreement, providing for acceleration
upon a change of control.


14.           Governing
Law.  This Agreement and
all questions relating to its validity, interpretation, performance and
enforcement, shall be governed by and construed in accordance with the internal
laws, and not the law of conflicts, of the State of Arizona.


15.           Notice.  Any notice required or permitted under this
Agreement must be in writing and will be deemed to have been given when delivered
personally or by overnight courier service or three days after being sent by
mail, postage prepaid, at the address indicated below or to such changed
address as such person may subsequently give such notice of:


	
  

  	
  if to Parent or
  Company:

  	
   

  	
  Meritage Homes Corporation

  
	
   

  	
   

  	
   

  	
  17851 N. 85th
  Street, Suite 300

  
	
   

  	
   

  	
   

  	
  Scottsdale,
  Arizona 85255

  
	
   

  	
   

  	
   

  	
  Attention:
  Chairman of the Committee

  



 



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  with a copy to:

  	
   

  	
  Snell & Wilmer L.L.P.

  
	
   

  	
   

  	
   

  	
  One Arizona
  Center

  
	
   

  	
   

  	
   

  	
  400 E. Van Buren
  Street

  
	
   

  	
   

  	
   

  	
  Phoenix, Arizona
  85004-2202

  
	
   

  	
   

  	
   

  	
  Phone: (602)
  382-6252

  
	
   

  	
   

  	
   

  	
  Fax: (602)
  382-6070

  
	
   

  	
   

  	
   

  	
  Attn: Steven D.
  Pidgeon, Esq.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  if to Executive:

  	
   

  	
  Steven J. Hilton

  
	
   

  	
   

  	
   

  	
  9586 E.
  Havasupai Drive

  
	
   

  	
   

  	
   

  	
  Scottsdale,
  Arizona 85255

  
	
   

  	
   

  	
   

  	
  Phone: (480)
  515-0480

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  	
  Gallagher & Kennedy

  
	
   

  	
   

  	
   

  	
  2575 E.
  Camelback Road

  
	
   

  	
   

  	
   

  	
  Phoenix, Arizona
  85016

  
	
   

  	
   

  	
   

  	
  Phone: (602)
  530-8407

  
	
   

  	
   

  	
   

  	
  Fax: (602)
  530-8500

  
	
   

  	
   

  	
   

  	
  Attn: Jay A.
  Zweig, Esq.

  



 


16.           Arbitration.  Any dispute, controversy, or claim, whether
contractual or non-contractual, between the parties hereto arising directly or
indirectly out of or connected with this Agreement, relating to the breach or
alleged breach of any representation, warranty, agreement, or covenant under
this Agreement, unless mutually settled by the parties hereto, shall be
resolved by binding arbitration in accordance with the Employment Arbitration
Rules of the American Arbitration Association (the “AAA”).  The parties
agree that before the proceeding to arbitration that they will mediate their
disputes before the AAA by a mediator approved by the AAA.  Any arbitration shall be conducted by
arbitrators approved by the AAA and mutually acceptable to Company and
Executive.  All such disputes,
controversies or claims shall be conducted by a single arbitrator, unless the
dispute involves more than $50,000 in the aggregate in which case the
arbitration shall be conducted by a panel of three arbitrators.  If the parties hereto are unable to agree on
the mediator or the arbitrator(s), then the AAA shall select the
arbitrator(s).  The resolution of the
dispute by the arbitrator(s) shall be final, binding, nonappealable, and fully
enforceable by a court of competent jurisdiction under the Federal Arbitration
Act.  The arbitrator(s) shall award
damages to the prevailing party.  The
arbitration award shall be in writing and shall include a statement of the
reasons for the award.  The arbitration
shall be held in the Phoenix/Scottsdale metropolitan area.  The Company shall pay all AAA, mediation, and
arbitrator’s fees and costs.  The
arbitrator(s) shall award reasonable attorneys’ fees and costs to the
prevailing party.


17.           Withholding;
Release; No Duplication of Benefits.  All of Executive’s compensation under this
Agreement will be subject to deduction and withholding authorized or required
by applicable law.  The Company’s
obligation to make any post-termination payments hereunder (other than salary
payments and expense reimbursements through a date of termination), shall be
subject to receipt by the Company from Executive of a mutually agreeable
release, and compliance by Executive with the covenants set forth in Sections
8 and 9 hereof.  If there is
any conflict between the provisions of the CIC Agreement and this Agreement,
such



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conflict shall be resolved so as to provide the
greater benefit to Executive.  However,
in order to avoid duplication of any monetary benefits, any payments or
benefits due under Executive’s CIC Agreement or under any employee severance
plan to the extent such a plan exists or is subsequently implemented by the
Company, will be reduced by any payments or benefits provided hereunder.  Any payment required under the CIC Agreement
to be paid in a lump sum, as set forth in the CIC Agreement, shall be so paid,
and the remainder, if any, due under this Agreement will be paid in equal
monthly installments over the Consulting Period or the Severance Period, as
applicable, except that in no event shall the payment of the Consulting,
Non-Competition and Severance payment be accelerated.


18.           Effect of Restatement of
Financial Results. 
Notwithstanding anything in this Agreement to the contrary, to the
extent any financial results are misstated as a result of Executive’s willful
misconduct or gross negligence, and as a result such financial results are
subsequently restated downward resulting in lower levels of bonuses pursuant to
Section 5 and the accompanying Exhibit A, offsets shall be made against future
bonuses.  If such future bonuses are
insufficient to offset the full difference between awarded bonuses and restated
bonuses and/or if such restatement occurs at the end of the Agreement Term and
subsequent Renewal Term(s), if any, bonuses previously earned and delivered
under this Agreement may be clawed-back.


19.           Successors
and Assigns.  This
Agreement is solely for the benefit of the parties and their respective
successors, assigns, heirs and legatees. 
Nothing herein shall be construed to provide any right to any other
entity or individual.


20.           Related Party Transactions.  Executive may not engage in any related party
transactions with the Company unless approved in the specific instance by the
Audit Committee of the Board.


IN WITNESS WHEREOF,
the parties have executed and delivered this Agreement as of the date first
above written.


	
  

  	
  MERITAGE
  HOMES CORPORATION, a

  Maryland corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ray Oppel

  
	
   

  	
  Name:

  	
  Ray Oppel

  
	
   

  	
  Title:

  	
  Exec.
  Compensation Committee Chairman

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:
  STEVEN J. HILTON

  
	
   

  	
   

  
	
   

  	
  /s/ Steven J.
  Hilton

  
					



 



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EXHIBIT
A


INCENTIVE
COMPENSATION SCHEDULE


Executive
Bonus Compensation


Part I – Bonus


	
   

  	
   

  	
   

  
	
  2007 and

  any Renewal Term

  	
   

  	
  For 2007 (and any Renewal Term), Executive may, in
  the Board’s reasonable discretion, be entitled to a maximum bonus equal to
  .825% of the EBITDA if Company’s ROA is in the top 1/2 of public homebuilders
  having revenues of $500 million or more per year, and an additional .825% of
  EBITDA if the Company’s ROE is in the top 1/2 of these public homebuilders.
  If either measurement falls within the 33% to 49% percentile, the bonus shall
  be .5363% of EBITDA for the applicable measurement. If either measurement
  falls below the 33% threshold, then there will not be any formula bonus paid
  with respect to such measurement. This bonus is established pursuant to, and
  its terms and conditions shall be subject to, the Company’s 2006 Executive
  Management Incentive Plan. For bonuses to be considered for 2008 and
  subsequent years, the Board and Executive agree to discuss the bonus formula
  on or before September 30, 2007, and in each subsequent year.

  



 


Part II – Payment


Any bonus shall be paid
in the form and time as determined by the Board in its reasonable discretion,
provided that the bonus shall be paid in cash no later than the later of (i)
March 15 of the year following the calendar year to which the payment relates,
or (ii) the date that is two and one-half months following the end of the
Company’s fiscal year to which the payment relates.



 A-1














 


EXHIBIT
B


SPECIFIED
BENEFITS


1.             Payments annually for Executive to purchase life
insurance in the amount of $5,000,000.


2.             Payments annually for Executive to purchase disability
insurance providing for monthly payments of an estimated $20,000 per month.


3.             Executive Supplemental Savings Plan enabling deferred
compensation in excess of 401(k) limitations.


4.             Use of any airplane owned or leased by the Company for
business use purposes only pursuant to the Company’s travel policy in effect
from time to time and subject to review annually.


5.             Use of Company car (same as current policy) pursuant to
the Company’s travel policy in effect from time to time and subject to review
annually.


6.             Taxes related to any payments and benefits above shall
be the sole responsibility of the Executive.



 B-1