Document:

Exhibit 4.2

 

EXECUTION VERSION

 

REGISTRATION RIGHTS
AGREEMENT

 

This
REGISTRATION RIGHTS AGREEMENT dated January 19, 2010 (the “Agreement”) is entered into by and among Virgin Media
Secured Finance PLC, a public limited company organized under the laws of England
and Wales (the “Company”), Virgin Media Inc., a
Delaware Corporation (the “Parent”),
Virgin Media Finance PLC, a public limited company organized under the laws of
England and Wales (“VM FinanceCo”),
Virgin Media Investment Holdings Limited, a limited company incorporated under
the laws of England and Wales (“VMIH”), the
Initial Purchasers named in Schedule I-A hereto (the “Dollar
Purchasers”) and the Initial Purchasers
named in Schedule I-B hereto (the “Sterling  Purchasers” and together with the Dollar Purchasers, the “Initial  Purchasers”).

 

The
Company, the Guarantors and the Initial Purchasers are parties to the Purchase
Agreement dated January 13, 2010 (the “Purchase
Agreement”), which provides for the sale by the Company (i) to
the Dollar Purchasers an aggregate of U.S.$1,000,000,000 principal amount of
the 6.50% Senior Secured Notes due 2018 (the “Dollar Notes”)
and (ii) to the Sterling Purchasers an aggregate of £875,000,000 principal
amount of the 7.00% Senior Secured Notes due 2018 (the “Sterling
Notes”) and together with the Dollar Notes, the “Securities”) which will be guaranteed on a senior basis by
the Guarantors.  As an inducement to the
Initial Purchasers to enter into the Purchase Agreement, the Company and the
Guarantors have agreed to provide to the Initial Purchasers and their direct
and indirect transferees the registration rights set forth in this
Agreement.  The execution and delivery of
this Agreement is a condition to the closing under the Purchase Agreement.

 

In
consideration of the foregoing, the parties hereto agree as follows:

 

1.             Definitions.  As used in this Agreement, the following
terms shall have the following meanings:

 

“Additional Guarantor” shall mean any subsidiary of the
Company that executes a Subsidiary Guarantee under the Indenture after the date
of this Agreement.

 

“Business Day” shall mean any day that is not a
Saturday, Sunday or other day on which commercial banks in New York City or
London are authorized or required by law to remain closed.

 

“Company”
shall have the meaning set forth in the preamble and shall also include the
Company’s successors.

 

 

“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time.

 

“Exchange Dates” shall
have the meaning set forth in Section 2(a)(ii) hereof.

 

“Exchange
Offer” shall mean the exchange offer by the Company and the Guarantors of
Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof.”Exchange
Offer Registration” shall mean a registration under the Securities Act effected
pursuant to Section 2(a) hereof.

 

“Exchange
Offer Registration Statement” shall mean an exchange offer registration
statement on Form S-4 (or, if applicable, on another appropriate form) and
all amendments and supplements to such registration statement, in each case
including the Prospectus contained therein or deemed a part thereof, all
exhibits thereto and any document incorporated by reference therein.

 

“Exchange
Securities” shall mean senior secured notes issued by the Company and
guaranteed by the Guarantors under the Indenture containing terms identical to
the Securities (except that the Exchange Securities will not be subject to
restrictions on transfer or to any increase in annual interest rate for failure
to comply with this Agreement) and to be offered to Holders of Registrable
Securities in exchange for Securities pursuant to the Exchange Offer.

 

“Free
Writing Prospectus” shall mean a free writing prospectus, as defined in Rule 405
under the Securities Act.

 

“Guarantors”
shall mean the guarantors party to the Indenture and shall also include any
Guarantor’s successors and any Additional Guarantors.

 

“Holders”
shall mean the Initial Purchasers, for so long as they own any Registrable
Securities, and each of their successors, assigns and direct and indirect
transferees who become owners of Registrable Securities under the Indenture;
provided that for purposes of Sections 4 and 5 of this Agreement, the term “Holders”
shall include Participating Broker-Dealers.

 

“Indemnified
Person” shall have the meaning set forth in Section 5(c) hereof.

 

“Indemnifying
Person” shall have the meaning set forth in Section 5(c) hereof.

 

“Indenture”
shall mean the Indenture relating to the Securities dated as of January 19,
2010 among the Company, the Parent, VM FinanceCo, VMIH, the other Guarantors
party thereto, the Bank of New York Mellon Trust Company, National Association,
as trustee, and The Bank of New York Mellon 

 

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(Luxembourg)
S.A., as Luxembourg paying agent, as the same may be amended from time to time
in accordance with the terms thereof.

 

“Initial
Purchasers” shall have the meaning set forth in the preamble.

 

“Inspector”
shall have the meaning set forth in Section 3(a)(xiii) hereof.

 

“Issuer
Free Writing Prospectus” shall mean an issuer free writing prospectus, as
defined in Rule 433 under the Securities Act.

 

“Majority
Holders” shall mean the Holders of a majority of the aggregate principal amount
of the outstanding Registrable Securities; provided that whenever the consent
or approval of Holders of a specified percentage of Registrable Securities is
required hereunder, any Registrable Securities owned directly or indirectly by
the Company or any of its affiliates (as such term is defined in Rule 405
under the Securities Act) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage or
amount; and provided, further, that if the Company shall issue any additional
Securities under the Indenture prior to consummation of the Exchange Offer or,
if applicable, the effectiveness of any Shelf Registration Statement, such
additional Securities and the Registrable Securities to which this Agreement
relates shall be treated together as one class for purposes of determining
whether the consent or approval of Holders of a specified percentage of
Registrable Securities has been obtained.

 

“Parent”
shall have the meaning set forth in the preamble.

 

“Participating
Broker-Dealers” shall have the meaning set forth in Section 4(a) hereof.

 

“Person”
shall mean an individual, partnership, limited liability company, corporation,
trust or unincorporated organization, or a government or agency or political
subdivision thereof.

 

“Prospectus”
shall mean the prospectus included in, or, pursuant to the rules and
regulations of the Securities Act, deemed a part of, a Registration Statement,
including any preliminary prospectus, and any such prospectus as amended or
supplemented by any prospectus supplement, including a prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Securities covered by a Shelf Registration Statement, and by all other
amendments and supplements to such prospectus, and in each case including any
document incorporated by reference therein.

 

“Purchase
Agreement” shall have the meaning set forth in the preamble.

 

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“Registrable
Securities” shall
mean the Securities; provided that the Securities shall cease to be Registrable
Securities (i) when a Registration Statement with respect to such
Securities has become effective under the Securities Act and such Securities
have been exchanged or disposed of pursuant to such Registration Statement, (ii) when
such Securities are sold pursuant to Rule 144 (or any similar provision
then in force, but not Rule 144A) under the Securities Act or (iii) when
such Securities cease to be outstanding.

 

“Registration
Expenses” shall mean
any and all expenses incident to performance of or compliance by the Company
and the Guarantors with this Agreement, including without limitation: (i) all
SEC, stock exchange or Financial Industry Regulatory Authority registration and
filing fees, (ii) all fees and expenses incurred in connection with compliance
with state securities or blue sky laws (including reasonable fees and
disbursements of one firm of counsel for any Underwriters or Holders in
connection with blue sky qualification of any Exchange Securities or
Registrable Securities, which firm shall be selected by the Underwriters or the
Majority Holders) in an amount not to exceed $5,000, (iii) all expenses of
any Persons in preparing or assisting in preparing, word processing, printing
and distributing any Registration Statement, any Prospectus and any amendments
or supplements thereto, any underwriting agreements, securities sales
agreements or other similar agreements and any other documents relating to the
performance of and compliance with this Agreement, (iv) all rating agency
fees, (v) all fees and disbursements relating to the qualification of the
Indenture under applicable securities laws, (vi) the fees and
disbursements of the Trustee and its counsel, (vii) the fees and
disbursements of counsel for the Company and the Guarantors and, in the case of
a Shelf Registration Statement, the reasonable fees and disbursements of one
counsel for the Holders (which counsel shall be selected by the Majority
Holders and which counsel may also be counsel for the Initial Purchasers) and (viii) the
fees and disbursements of the independent public accountants of the Company and
the Guarantors, including the expenses of any special audits or “comfort”
letters required by or incident to the performance of and compliance with this
Agreement, but excluding fees and expenses of counsel to the Underwriters
(other than fees and expenses set forth in clause (ii) above) or the
Holders and underwriting discounts and commissions, brokerage commissions and
transfer taxes, if any, relating to the sale or disposition of Registrable
Securities by a Holder.

 

“Registration
Statement” shall mean any registration statement of the Company and the
Guarantors that covers any of the Exchange Securities, Registrable Securities
pursuant to the provisions of this Agreement and all amendments and supplements
to any such registration statement, including post-effective amendments, in
each case including the Prospectus contained therein or deemed a part thereof,
all exhibits thereto and any document incorporated by reference therein.

 

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“SEC”
shall mean the United States Securities and Exchange Commission.

 

“Securities”
shall have the meaning set forth in the preamble.

 

“Securities
Act” shall mean the Securities Act of 1933, as amended from time to time.

 

“Shelf Additional
Interest Date” shall have the meaning set forth in Section 2(d) hereof.

 

“Shelf
Effectiveness Period” shall have the meaning set forth in Section 2(b) hereof.

 

“Shelf
Registration” shall mean a registration effected pursuant to Section 2(b) hereof.

 

“Shelf
Registration Statement” shall mean a “shelf” registration statement of the
Company and the Guarantors that covers all or a portion of the Registrable
Securities (but no other securities unless approved by a majority of the Holders
whose Registrable Securities are to be covered by such Shelf Registration
Statement) on an appropriate form under Rule 415 under the Securities Act,
or any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein or deemed a
part thereof, all exhibits thereto and any document incorporated by reference
therein.

 

“Shelf
Request” shall have the meaning set forth in Section 2(b) hereof.

 

“Staff”
shall mean the staff of the SEC.

 

“Subsidiary
Guarantees” shall mean the subsidiary guarantees of the Securities and Exchange
Securities by the Subsidiary Guarantors under the Indenture.

 

“Subsidiary
Guarantors” shall have the meaning set forth in the Purchase Agreement.

 

“Trigger Date” shall have
the meaning set forth in Section 2(d) hereof.

 

“Trust
Indenture Act” shall mean the Trust Indenture Act of 1939, as amended from time
to time.

 

“Trustee”
shall mean the trustee with respect to the Securities under the Indenture.

 

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“Underwriter”
shall have the meaning set forth in Section 3(e) hereof.

 

“Underwritten
Offering” shall mean an offering in which Registrable Securities are sold to an
Underwriter for reoffering to the public.

 

“VM
FinanceCo” shall have the meaning set forth in the preamble.

 

“VMIH”
shall have the meaning set forth in the preamble.

 

2.             Registration Under the
Securities Act.  (a) 
To the extent not prohibited by any applicable law or applicable
interpretations of the Staff, the Company and the Guarantors shall use their
reasonable best efforts to (i) cause to be filed an Exchange Offer
Registration Statement covering an offer to the Holders to exchange all the
Registrable Securities for Exchange Securities not later than 300 days after
(or if the 300th day is not a Business Day, the first Business Day thereafter)
the date of original issue of the Securities and (ii) cause such Exchange
Offer Registration Statement to become effective under the Securities Act not
later than 110 days after filing (or if the 110th day is not a Business Day,
the first Business Day thereafter).  The
Company and the Guarantors shall commence the Exchange Offer promptly after the
Exchange Offer Registration Statement is declared effective by the SEC and use
their reasonable best efforts to complete the Exchange Offer not later than 30
Business Days after such effective date.

 

The
Company and the Guarantors shall commence the Exchange Offer by mailing the
related Prospectus, appropriate letters of transmittal and other accompanying
documents to each Holder stating, in addition to such other disclosures as are
required by applicable law, substantially the following:

 

(i)                                     that the
Exchange Offer is being made pursuant to this Agreement and that all
Registrable Securities validly tendered and not properly withdrawn will be
accepted for exchange;

 

(ii)                                  the dates of
acceptance for exchange (which shall be a period of at least 30 days from the
date such notice is mailed) (the “Exchange Dates”);

 

(iii)                               that any
Registrable Security not tendered will remain outstanding and continue to
accrue interest but will not retain any rights under this Agreement, except as
otherwise specified herein;

 

(iv)                              that any Holder
electing to have a Registrable Security exchanged pursuant to the Exchange
Offer will be required to (A) surrender such Registrable Security,
together with the appropriate letters of transmittal, to the institution and at
the address (located in the Borough of Manhattan, The City of New York) and in
the manner specified in the notice, or 

 

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(B) effect such exchange otherwise in compliance with the
applicable procedures of the depositary for such Registrable Security, in each
case prior to the close of business on the last Exchange Date; and

 

(v)                                 that any Holder will be entitled to
withdraw its election, not later than the close of business on the last
Exchange Date, by (A) sending to the institution and at the address
(located in the Borough of Manhattan, The City of New York) specified in the
notice, a telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Registrable Securities delivered
for exchange, such other information as may be reasonably required to identify
the Securities to be withdrawn and a statement that such Holder is withdrawing
its election to have such Securities exchanged or (B) effecting such
withdrawal in compliance with the applicable procedures of the depositary for
the Registrable Securities.

 

As a condition to
participating in the Exchange Offer, a Holder will be required to represent to
the Company and the Guarantors that (i) any Exchange Securities to be
received by it will be acquired in the ordinary course of its business, (ii) at
the time of the commencement of the Exchange Offer it has no arrangement or
understanding with any Person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Securities in violation of the
Securities Act, (iii) it is not an “affiliate” (within the meaning of Rule 405
under the Securities Act) of the Company or any Guarantor, (iv) if such
Holder is not a broker-dealer, that it is not engaged in, and does not intend
to engage in, the distribution of the Exchange Securities and (v) if such
Holder is a broker-dealer that will receive Exchange Securities for its own
account in exchange for Registrable Securities that were acquired as a result
of market-making or other trading activities, then such Holder will deliver a
Prospectus (or, to the extent permitted by law, make available a Prospectus to
purchasers) in connection with any resale of such Exchange Securities.

 

As
soon as practicable after the last Exchange Date, the Company and the
Guarantors shall:

 

(i)                                     accept for
exchange Registrable Securities or portions thereof validly tendered and not
properly withdrawn pursuant to the Exchange Offer; and

 

(ii)                                  deliver, or
cause to be delivered, to the Trustee for cancellation all Registrable
Securities or portions thereof so accepted for exchange by the Company and
issue, and cause the Trustee to promptly authenticate and deliver to each
Holder, Exchange Securities equal in principal amount to the principal amount
of the Registrable Securities tendered by such Holder.

 

The Company and the
Guarantors shall use their reasonable best efforts to complete the Exchange
Offer as provided above and shall comply with the

 

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applicable requirements
of the Securities Act, the Exchange Act and other applicable laws and
regulations in connection with the Exchange Offer.  The Exchange Offer shall not be subject to
any conditions, other than that the Exchange Offer does not violate any
applicable law or applicable interpretations of the Staff and customary
conditions relating to the delivery of Securities or other actions customarily
taken by Holders participating in the Exchange Offer or the execution and
delivery of customary documentation relating to the Exchange Offer.

 

(b)           In the event that (i) the Company and the
Guarantors determine that the Exchange Offer Registration provided for in Section 2(a) above
is not available or may not be completed as soon as practicable after the last
Exchange Date because it would violate any applicable law or applicable
interpretations of the Staff, (ii) the Exchange Offer is not for any other
reason completed by 475 days after (or if such 475th day is not a Business Day,
the first Business Day thereafter) the date of original issue of the
Securities, (iii) a Holder participating in the Exchange Offer does not
receive Exchange Securities on the date of the exchange that may be sold
without restriction under state and federal securities laws (other than due
solely to the status of such Holder as an affiliate of the Company within the
meaning of the Securities Act) and notifies the Company within 30 days after
such Holder first becomes aware of such restrictions or (iv) upon receipt
of a written request (a “Shelf Request”) from any Initial Purchaser
representing that it holds Registrable Securities following the consummation of
the Exchange Offer that are or were ineligible to be exchanged in the Exchange
Offer, the Company and the Guarantors shall use their reasonable best efforts
to cause to be filed, as soon as practicable after such determination, date or
Shelf Request, as the case may be, a Shelf Registration Statement providing for
the sale of all the Registrable Securities by the Holders thereof and to have
such Shelf Registration Statement become effective.

 

In
the event that the Company and the Guarantors are required to file a Shelf
Registration Statement pursuant to clause (iii) of the preceding sentence,
the Company and the Guarantors shall use their reasonable best efforts to file
and have become effective both an Exchange Offer Registration Statement
pursuant to Section 2(a) with respect to all Registrable Securities
and a Shelf Registration Statement (which may be a combined Registration
Statement with the Exchange Offer Registration Statement) with respect to
offers and sales of Registrable Securities held by the Initial Purchasers after
completion of the Exchange Offer.

 

The Company and the
Guarantors agree to use their reasonable best efforts to keep the Shelf
Registration Statement continuously effective until the earlier of (i) the
Securities covered by the Shelf Registration Statement cease to be Registrable
Securities, (ii) such time as all the Registrable Securities covered by the
Shelf Registration Statement have been sold pursuant to the Shelf Registration
Statement and (iii) a period of one year from the effective date of the 

 

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Shelf Registration
Statement (the “Shelf Effectiveness Period”).  The Company and the Guarantors further agree,
if necessary, to supplement or amend the Shelf Registration Statement and the
related Prospectus, as required by Section 3(a)(ii)  and to furnish
to the Holders of Registrable Securities registered on such Shelf Registration
Statement copies of any such supplement or amendment promptly after its being
used or filed with the SEC.

 

(c)           The Company and the Guarantors shall pay all
Registration Expenses in connection with any registration pursuant to Section 2(a) or
Section 2(b) hereof.  Each
Holder shall pay all underwriting discounts and commissions, brokerage
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder’s Registrable Securities pursuant to the Shelf Registration
Statement.

 

(d)           An Exchange Offer
Registration Statement pursuant to Section 2(a) hereof will not be
deemed to have become effective unless it has been declared effective by the
SEC.  A Shelf Registration Statement
pursuant to Section 2(b) hereof will not be deemed to have become
effective unless it has been declared effective by the SEC or is automatically
effective upon filing with the SEC as provided by Rule 462 under the
Securities Act.

 

(e)           In the event that either (i) any Registration
Statement is not filed on or prior to the applicable filing deadline, (ii) any
Registration Statement is not declared effective by the SEC on or prior to the
applicable effectiveness deadline or (iii) all of the Registrable
Securities validly tendered in accordance with the terms of the Exchange Offer
have not been exchanged for Exchange Securities on or prior to the 30th
Business Day following the effectiveness of the Exchange Offer Registration
Statement (each such event referred to in subclauses (i) through (iii) above
a “Registration Default”), then the
interest rate on the Registrable Securities will be increased by (1) 0.25%
per annum for the first 90-day period immediately following the occurrence of
any such Registration Default and (2) an additional 0.25% per annum with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum increase of 1.00% per annum.

 

If the Shelf Registration
Statement, if required hereby, is effective and thereafter either ceases to be
effective or the Prospectus contained therein ceases to be usable, in each case
whether or not permitted by this Agreement, at any time during the Shelf
Effectiveness Period, and such failure to remain effective or usable exists for
more than 30 days (whether or not consecutive) in any 12-month period (the 30th
such date, the “Trigger Date”), then the interest
rate on the Registrable Securities will be increased by 0.25% per annum
commencing on the 31st day in such 12-month period, and ending on such date
that the Shelf Registration Statement is again effective or the Prospectus
again becomes usable.

 

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(f)            Without limiting the
remedies available to the Initial Purchasers and the Holders, the Company and
the Guarantors acknowledge that any failure by the Company or the Guarantors to
comply with their obligations under Section 2(a) and Section 2(b) hereof
may result in material irreparable injury to the Initial Purchasers or the
Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such
relief as may be required to specifically enforce the Company’s and the
Guarantors’ obligations under Section 2(a) and Section 2(b) hereof.

 

(g)           The Company represents, warrants and covenants that it
(including its agents and representatives) will not prepare, make, use,
authorize, approve or refer to any Free Writing Prospectus without the prior
consent of the Initial Purchasers.

 

(h)           Notwithstanding anything
herein to the contrary and provided that the Company and the Guarantors have
complied with their notice obligations and other procedures set forth herein,
the Company and the Guarantors will have no further obligation under this
Agreement upon completion of the Exchange Offer to any Holder of Registrable
Securities who was eligible to participate in the Exchange Offer and did not
participate in the Exchange Offer.

 

3.             Registration Procedures.  (a) In connection with their obligations
pursuant to Section 2(a) and Section 2(b) hereof, the
Company and the Guarantors shall:

 

(i)            prepare and file with the
SEC a Registration Statement on the appropriate form under the Securities Act,
which form (x) shall be selected by the Company and the Guarantors, (y) shall,
in the case of a Shelf Registration, be available for the sale of the
Registrable Securities by the Holders thereof and (z) shall comply as to
form in all material respects with the requirements of the applicable form and
include or incorporate by reference all financial statements required by the
SEC to be filed therewith or incorporated by reference therein; and use their
reasonable best efforts to cause such Registration Statement to become
effective and remain effective for the applicable period in accordance with Section 2
hereof;

 

(ii)          prepare and file with the
SEC such amendments and post-effective amendments to each Registration
Statement as may be necessary to keep such Registration Statement effective for
the applicable period in accordance with Section 2 hereof and cause each
Prospectus to be supplemented by any required prospectus supplement and, as so
supplemented, to be filed pursuant to Rule 424 under the Securities Act;
and keep each Prospectus current during the period described in Section 4(3) of
and Rule 174 under the Securities Act that is applicable to transactions
by brokers or dealers with respect to the Registrable Securities or Exchange
Securities;

 

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(iii)          in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities included on such Shelf Registration Statement,
to counsel for the Initial Purchasers, to counsel for the Majority Holders and
to each Underwriter of an Underwritten Offering of Registrable Securities, if
any, without charge, as many copies of each Prospectus or preliminary
prospectus, and any amendment or supplement thereto, as such Holder, counsel or
Underwriter may reasonably request in order to facilitate the sale or other
disposition of the Registrable Securities thereunder; and the Company and the
Guarantors consent to the use of such Prospectus, preliminary prospectus and
any amendment or supplement thereto in accordance with applicable law by each
of the Holders of Registrable Securities and any such Underwriters in
connection with the offering and sale of the Registrable Securities covered by
and in the manner described in such Prospectus, preliminary prospectus or any
amendment or supplement thereto in accordance with applicable law;

 

(iv)          use their reasonable best efforts to
register or qualify the Registrable Securities under all applicable state
securities or blue sky laws of such jurisdictions as any Holder of Registrable
Securities covered by a Registration Statement shall reasonably request in
writing by the time the applicable Registration Statement becomes effective;
cooperate with such Holders in connection with any filings required to be made
with the Financial Industry Regulatory Authority; and do any and all other acts
and things that may be reasonably necessary or advisable to enable each Holder
to complete the disposition in each such jurisdiction of the Registrable
Securities owned by such Holder; provided that neither the Company nor
any Guarantor shall be required to (1) qualify as a foreign corporation or
other entity or as a dealer in securities in any such jurisdiction where it
would not otherwise be required to so qualify or (2) take any action which
would subject itself to general service of process or taxation in any such
jurisdiction if it is not so subject;

 

(v)          notify counsel for the Initial Purchasers and, in the
case of a Shelf Registration, notify each Holder of Registrable Securities
included on such Shelf Registration Statement and counsel for the Majority
Holders promptly and, if requested by any such Holder or counsel, confirm such
advice in writing (1) when a Registration Statement has become effective,
when any post-effective amendment thereto has been filed and becomes effective and
when any amendment or supplement to the Prospectus has been filed, (2) of
any request by the SEC or any state securities authority for amendments and
supplements to a Registration Statement or Prospectus or for additional
information after the Registration Statement has become effective, (3) of
the issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, including the receipt by the Company of any
notice of objection of the SEC to the use of a Shelf Registration Statement or
any post-effective amendment thereto pursuant to Rule 401(g)(2) under
the Securities Act, (4) if, between the applicable

 

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effective date of a Shelf
Registration Statement and the closing of any sale of Registrable Securities
covered thereby, the Company or any Guarantor receives any notification with
respect to the suspension of the qualification of the Registrable Securities
for sale in any jurisdiction or the initiation of any proceeding for such
purpose, (5) of the happening of any event during the period a
Registration Statement is effective that makes any statement made in such
Registration Statement or the related Prospectus untrue in any material respect
or that requires the making of any changes in such Registration Statement or
Prospectus in order to make the statements therein not misleading (in the case
of the Prospectus, in light of the circumstances under which they were made)
and (6) of any determination by the Company or any Guarantor that a
post-effective amendment to a Registration Statement or any amendment or
supplement to the Prospectus would be appropriate;

 

(vi)          use their reasonable best efforts to
obtain the withdrawal of any order suspending the effectiveness of a
Registration Statement or, in the case of a Shelf Registration, the resolution
of any objection of the SEC pursuant to Rule 401(g)(2), including by
filing an amendment to such Shelf Registration Statement on the proper form, at
the earliest possible moment and provide immediate notice to each Holder of the
withdrawal of any such order or such resolution;

 

(vii)         in the case of a Shelf Registration,
furnish to each Holder of Registrable Securities included on such Shelf
Registration Statement, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without any
documents incorporated therein by reference or exhibits thereto, unless
requested in writing);

 

(viii)        in the case of a Shelf Registration,
cooperate with the Holders of Registrable Securities included on such Shelf
Registration Statement to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends and enable such Registrable Securities to be issued in such
denominations and registered in such names (consistent with the provisions of
the Indenture) as such Holders may reasonably request at least one Business Day
prior to the closing of any sale of Registrable Securities;

 

(ix)          in the case of a Shelf Registration, upon
the occurrence of any event contemplated by Section 3(a)(v)(5) hereof,
use their reasonable best efforts to prepare and file with the SEC a supplement
or post-effective amendment to such Shelf Registration Statement or the related
Prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered (or, to the extent permitted
by law, made available) to purchasers of the Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and the Company
and the Guarantors

 

12

 

shall notify the Holders
of Registrable Securities to suspend use of the Prospectus as promptly as
practicable after the occurrence of such an event, and such Holders hereby
agree to suspend use of the Prospectus until the Company and the Guarantors
have amended or supplemented the Prospectus to correct such misstatement or
omission;

 

(x)            a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus other than any document
that is to be incorporated by reference into a Registration Statement or a
Prospectus after initial filing of a Registration Statement, provide copies of
such document to the Initial Purchasers and their counsel (and, in the case of
a Shelf Registration Statement, to the Holders of Registrable Securities
included on such Shelf Registration Statement and their counsel) and make such
of the representatives of the Company and the Guarantors as shall be reasonably
requested by the Initial Purchasers or their counsel (and, in the case of a
Shelf Registration Statement, the Holders of Registrable Securities included on
such Shelf Registration Statement or their counsel) available for discussion of
such document; and the Company and the Guarantors shall not, at any time after
initial filing of a Registration Statement, use or file any Prospectus, any
amendment of or supplement to a Registration Statement or a Prospectus, or any
document that is to be incorporated by reference into a Registration Statement
or a Prospectus, of which the Initial Purchasers of the Registrable Securities
covered by such Registration Statement and their counsel shall reasonably
object in writing within three Business Days after the receipt thereof (such
objection to be deemed timely made upon confirmation of telecopy transmission
within such period); provided, however, that this clause (x) shall not
apply to any filing by the Parent of any Annual Report on Form 10-K,
Quarterly Report on Form 10-Q or Current Report on Form 8-K with
respect to matters unrelated to the Securities and the offering or exchange
thereof;

 

(xi)           use reasonable best efforts to obtain
a CUSIP, ISIN and/or Common Code number, as applicable, for all Exchange
Securities or Registrable Securities, as the case may be, not later than the
initial effective date of a Registration Statement;

 

(xii)          use reasonable best efforts to cause
the Indenture to be qualified under the Trust Indenture Act in connection with
the registration of the Exchange Securities or Registrable Securities, as the
case may be; cooperate with the Trustee and the Holders to effect such changes
to the Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the Trust Indenture Act; and execute, and use
their reasonable best efforts to cause the Trustee to execute, all documents as
may be required to effect such changes and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so qualified in
a timely manner;

 

13

 

(xiii)        in the case of a Shelf Registration, make
available for inspection by a representative of the Holders of the Registrable
Securities (an “Inspector”), any Underwriter
participating in any disposition pursuant to such Shelf Registration Statement,
any attorneys and accountants designated by a majority of the Holders of
Registrable Securities to be included in such Shelf Registration and any
attorneys and accountants designated by such Underwriter, at reasonable times
and in a reasonable manner, all pertinent financial and other records,
documents and properties of the Parent and its subsidiaries, and cause the
respective officers, directors and employees of the Company and the Guarantors
to supply all information reasonably requested by any such Inspector,
Underwriter, attorney or accountant in connection with a Shelf Registration
Statement; provided that if any such information is identified by
the Company or any Guarantor as being confidential or proprietary, each Person
receiving such information shall take such actions as are reasonably necessary
to protect the confidentiality of such information to the extent such action is
otherwise not inconsistent with, an impairment of or in derogation of the
rights and interests of any Inspector, Holder or Underwriter;

 

(xiv)        in the case of a
Shelf Registration, use their reasonable best efforts to cause all Registrable
Securities to be listed on any securities exchange or any automated quotation
system on which similar securities issued or guaranteed by the Company or any
Guarantor are then listed if requested by the Majority Holders, to the extent
such Registrable Securities satisfy applicable listing requirements;

 

(xv)         if reasonably
requested by any Holder of Registrable Securities covered by a Shelf
Registration Statement, promptly include in a Prospectus supplement or
post-effective amendment such information with respect to such Holder as such
Holder reasonably requests to be included therein and make all required filings
of such Prospectus supplement or such post-effective amendment as soon as the
Company has received notification of the matters to be so included in such
filing;

 

(xvi)        in the case of a Shelf Registration,
enter into such customary agreements and take all other customary and
appropriate actions in connection therewith in order to expedite or facilitate
the disposition of such Registrable Securities including, but not limited to,
an Underwritten Offering and in such connection, (1) to the extent
possible, make such representations and warranties to the Holders and any
Underwriters of such Registrable Securities in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings as may be
reasonably requested by them, (2) use reasonable best efforts obtain
opinions of counsel to the Company and the Guarantors (which counsel and
opinions, in form, scope and substance, shall be reasonably satisfactory to the
managing Underwriters) addressed to each selling Holder and Underwriter of
Registrable Securities, covering the matters customarily covered in opinions requested
in underwritten offerings with 

 

14

 

customary exceptions and
qualifications, (3) use reasonable best efforts to obtain “comfort”
letters from the independent certified public accountants of the Parent (and,
if necessary, any other certified public accountant of any material subsidiary
of the Parent, or of any business acquired by the Parent for which financial
statements and financial data are or are required to be included in the
Registration Statement) addressed to each selling Holder (to the extent
permitted by applicable professional standards) and Underwriter of Registrable
Securities, such letters to be in customary form and covering matters of the
type customarily covered in “comfort” letters in connection with underwritten
offerings, including but not limited to financial information contained in any
preliminary prospectus or Prospectus and (4) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority in principal
amount of the Registrable Securities being sold or the Underwriters, and which
are customarily delivered in underwritten offerings.

 

(xvii)      so long as any Registrable
Securities remain outstanding, cause each Additional Guarantor upon the creation
or acquisition by the Company of such Additional Guarantor, to execute a
counterpart to this Agreement in the form attached hereto as Annex A and to
deliver such counterpart to the Initial Purchasers no later than five Business
Days following the execution thereof.

 

(b)           In the case of a Shelf Registration Statement, the
Company may require each Holder of Registrable Securities to furnish to the
Company such information regarding such Holder and the proposed disposition by
such Holder of such Registrable Securities as the Company and the Guarantors
may from time to time reasonably request in writing; provided that if such
Holder fails to provide the requested information within 20 Business Days, the
Company may exclude such Holder’s Registrable Securities from such Shelf
Registration Statement.

 

(c)           In the case of a Shelf Registration
Statement, each Holder of Registrable Securities covered in such Shelf
Registration Statement agrees that, upon receipt of any notice from the Company
and the Guarantors of the happening of any event of the kind described in Section 3(a)(v)(3) or
3(a)(v)(4) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the Shelf Registration Statement until such
Holder’s receipt of the copies of the supplemented or amended Prospectus or
Issuer Free Writing Prospectus contemplated by Section 3(a)(ix) hereof
and, if so directed by the Company and the Guarantors, such Holder will deliver
to the Company and the Guarantors all copies in its possession, other than
permanent file copies then in such Holder’s possession, of the Prospectus and
any Issuer Free Writing Prospectuses covering such Registrable Securities that
are current at the time of receipt of such notice.

 

(d)          If the Company and the Guarantors shall give any
notice to suspend the disposition of Registrable Securities pursuant to a
Registration

 

15

 

Statement, the Company
and the Guarantors shall extend the period during which such Registration Statement
shall be maintained effective pursuant to this Agreement by the number of days
during the period from and including the date of the giving of such notice to
and including the date when the Holders of such Registrable Securities shall
have received copies of the supplemented or amended Prospectus necessary to
resume such dispositions. The Company and the Guarantors may give any such
notice only twice during any 365-day period, any such suspensions shall not
exceed 45 days for each suspension and there shall not be more than two
suspensions in effect during any 365-day period.

 

(e)           The Holders of Registrable Securities covered by a
Shelf Registration Statement who desire to do so may sell such Registrable
Securities in an Underwritten Offering. 
In any such Underwritten Offering, the investment bank or investment
banks and manager or managers (each an “Underwriter”)
that will administer the offering will be selected by the Holders of a majority
in principal amount of the Registrable Securities included in such offering and
reasonably acceptable to the Company. 
However, each Holder agrees that, neither such Holder nor any
Underwriter participating in any disposition pursuant to any Registration
Statement on such Holder’s behalf, will make any offer relating to the
Registrable Securities that would constitute an Issuer Free Writing Prospectus
(as defined in Rule 433 under the Act) or that would otherwise constitute
a “free writing prospectus” (as defined in Rule 405 under the Act)
required to be filed by the Company with the Commission or retained by the
Company under Rule 433 of the Securities Act, unless it has obtained the
prior written consent of the Company.

 

No
Person may participate in any Underwritten offering hereunder unless such
Person (i) agrees to sell such Person’s Registrable Securities on the
basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.

 

4.             Participation of Broker-Dealers
in Exchange Offer.  (a)  The
Company has been advised that the Staff has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the
Exchange Offer in exchange for Securities that were acquired by such
broker-dealer as a result of market-making or other trading activities (a “Participating Broker-Dealer”) may be deemed to be an “underwriter”
within the meaning of the Securities Act and must deliver a prospectus  meeting
the requirements of the Securities Act in connection with any resale of such
Exchange Securities.

 

The
Company and the Guarantors have been advised that it is the Staff’s position
that if the Prospectus contained in the Exchange Offer Registration Statement
includes a plan of distribution containing a statement to the above 

 

16

 

effect
and the means by which Participating Broker-Dealers may resell the Exchange
Securities, without naming the Participating Broker-Dealers or specifying the
amount of Exchange Securities owned by them, such Prospectus may be delivered
by Participating Broker-Dealers (or, to the
extent permitted by law, made available to purchasers) to satisfy their
prospectus delivery obligation under the Securities Act in connection with
resales of Exchange Securities for their own accounts, so long as the
Prospectus otherwise meets the requirements of the Securities Act.

 

(b)           In light of the above, and
notwithstanding the other provisions of this Agreement, the Company and the
Guarantors agree to amend or supplement the Prospectus contained in the
Exchange Offer Registration Statement for a period ending on the date on which
a Participating Broker-Dealer is no longer required to deliver a prospectus in
connection with market-making or other trading activities, but no longer than
365 days after the date of issuance of the Securities, in order to expedite or
facilitate the disposition of any Exchange Securities by Participating
Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above.  The Company and the Guarantors further agree
that Participating Broker-Dealers shall be authorized to deliver such
Prospectus (or, to the extent permitted by law, make available) during such
period in connection with the resales contemplated by this Section 4.

 

5.             Indemnification and Contribution.  (a)  The Company and each Guarantor,
jointly and severally, agree to indemnify and hold harmless each Initial
Purchaser and each Holder, their respective affiliates, directors and officers
and each Person, if any, who controls any Initial Purchaser or any Holder
within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, legal fees and other expenses
incurred in connection with any suit, action or proceeding or any claim
asserted, as such fees and expenses are incurred), joint or several, that arise
out of, or are based upon, (1) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, or (2) any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus, any Issuer Free Writing Prospectus
used in violation of this Agreement or any “issuer information” contained in
any Free Writing Prospectus (“Issuer Information”)
filed or required to be filed pursuant to Rule 433(d) under the
Securities Act, or any omission or alleged omission to state therein a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case except
insofar as such losses, claims, damages or liabilities arise out of, or are
based upon, any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with any information furnished
to the Company in writing through the lead representative of the Initial Purchasers,
or any selling Holder,

 

17

 

respectively,
expressly for use therein.  In connection
with any Underwritten Offering permitted by Section 3, the Company and the
Guarantors, jointly and severally, will also indemnify the Underwriters, if
any, selling brokers, dealers and similar securities industry professionals
participating in the distribution, their respective affiliates and each Person
who controls such Persons (within the meaning of the Securities Act and the
Exchange Act) to the same extent as provided above with respect to the
indemnification of the Holders, if requested in connection with any
Registration Statement, any Prospectus, any Free Writing Prospectus or any
Issuer Information.

 

(b)           Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Guarantors, the Initial Purchasers
and the other selling Holders, the directors of the Company and the Guarantors,
each officer of the Company and the Guarantors who signed the Registration
Statement and each Person, if any, who controls the Company, the Guarantors,
any Initial Purchaser and any other selling Holder within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent
as the indemnity set forth in paragraph (a) above, but only with respect
to any losses, claims, damages or liabilities that arise out of, or are based
upon, any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with any information furnished to the
Company in writing by such Holder expressly for use in any Registration
Statement and any Prospectus.

 

(c) If
any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any Person
in respect of which indemnification may be sought pursuant to either paragraph (a) or
(b) above, such Person (the “Indemnified Person”)
shall promptly notify the Person against whom such indemnification may be
sought (the “Indemnifying Person”) in writing; provided
that the failure to notify the Indemnifying Person shall not relieve it from
any liability that it may have under paragraph (a) or (b) above
except to the extent that it has been materially prejudiced (through the
forfeiture of substantive rights or defenses) by such failure; and provided,
further, that the failure to notify the Indemnifying Person shall not
relieve it from any liability that it may have to an Indemnified Person
otherwise than under paragraph (a) or (b) above.  If any such proceeding shall be brought or
asserted against an Indemnified Person and it shall have notified the
Indemnifying Person thereof, the Indemnifying Person shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the Indemnified
Person and any others entitled to indemnification pursuant to this Section 5
that the Indemnifying Person may designate in such proceeding and shall pay the
fees and expenses of such proceeding and shall pay the reasonable fees and
expenses of such counsel related to such proceeding, as incurred.  In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified

 

18

 

Person
shall have mutually agreed to the contrary; (ii) the Indemnifying Person
has failed within a reasonable time to retain counsel reasonably satisfactory
to the Indemnified Person; (iii) the Indemnified Person shall have
reasonably concluded that there may be legal defenses available to it that are
different from or in addition to those available to the Indemnifying Person; or
(iv) the named parties in any such proceeding (including any impleaded
parties) include both the Indemnifying Person and the Indemnified Person and
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them.  It is understood and agreed that the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed as
they are incurred.  Any such separate
firm (x) for any Initial Purchaser, its affiliates, directors and officers
and any control Persons of such Initial Purchaser shall be designated in
writing by the lead representative of the Initial Purchasers, (y) for any
Holder, its directors and officers and any control Persons of such Holder shall
be designated in writing by the Majority Holders and (z) in all other
cases shall be designated in writing by the Company.  The Indemnifying Person shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the Indemnifying Person agrees to indemnify each Indemnified Person from and
against any loss or liability by reason of such settlement or judgment.  No Indemnifying Person shall, without the
written consent of the Indemnified Person, effect any settlement of any pending
or threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnification could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any
statement as to or any admission of fault, culpability or a failure to act by
or on behalf of any Indemnified Person.

 

(d)           If the indemnification provided for
in paragraphs (a) and (b) above is unavailable to an Indemnified
Person or insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such paragraph, in
lieu of indemnifying such Indemnified Person thereunder, shall contribute to
the amount paid or payable by such Indemnified Person as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors from the offering of the Securities and the Exchange Securities, on
the one hand, and by the Holders from receiving Securities or Exchange
Securities registered under the Securities Act, on the other hand, or (ii) if
the allocation provided by clause (i) is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) but also the relative fault of the Company and
the

 

19

 

Guarantors
on the one hand and the Holders on the other in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations.  The relative fault of the Company and the
Guarantors on the one hand and the Holders on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company and the Guarantors
or by the Holders and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

 

(e)           The Company, the Guarantors and the
Holders agree that it would not be just and equitable if contribution pursuant
to this Section 5 were determined by pro  rata allocation
(even if the Holders were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in paragraph (d) above.  The amount paid or payable by an Indemnified
Person as a result of the losses, claims, damages and liabilities referred to
in paragraph (d) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
Indemnified Person in connection with any such action or claim.  Notwithstanding the provisions of this Section 5,
in no event shall a Holder be required to contribute any amount in excess of
the amount by which the total price at which the Securities or Exchange
Securities sold by such Holder exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.  No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. 
The Holders’ obligations to contribute pursuant to this Section 5
are several and not joint.

 

(f)            The remedies provided for in this Section 5
are not exclusive and shall not limit any rights or remedies that may otherwise
be available to any Indemnified Person at law or in equity.

 

(g)           The indemnity and contribution
provisions contained in this Section 5 shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of the Initial Purchasers or any Holder or
any Person controlling any Initial Purchaser or any Holder, or by or on behalf
of the Company or the Guarantors or the officers or directors of or any Person
controlling the Company or the Guarantors, (iii) acceptance of any of the
Exchange Securities and (iv) any sale of Registrable Securities pursuant
to a Shelf Registration Statement.

 

20

 

6.
General.

 

(a)           No Inconsistent
Agreements.   The Company and the Guarantors represent,
warrant and agree that (i) the rights granted to the Holders hereunder do
not in any way conflict with and are not inconsistent with the rights granted
to the holders of any other outstanding securities issued or guaranteed by the
Company or any Guarantor under any other agreement and (ii) neither the
Company nor any Guarantor has entered into, or on or after the date of this
Agreement will enter into, any agreement that is inconsistent with the rights
granted to the Holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof.

 

(b)           Amendments and
Waivers.   The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company and the Guarantors have obtained the written consent
of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or consent; provided that no amendment, modification,
supplement, waiver or consent to any departure from the provisions of Section 5
hereof shall be effective as against any Holder of Registrable Securities
unless consented to in writing by such Holder. 
Any amendments, modifications, supplements, waivers or consents pursuant
to this Section 6(b) shall be by a writing executed by each of the parties
hereto.

 

(c)           Notices.  Except as otherwise specified herein, all
notices and other communications provided for or permitted hereunder shall be
made in writing by hand-delivery, registered first-class mail, telex,
telecopier, or any courier guaranteeing overnight delivery (i) if to a
Holder, at the most current address given by such Holder to the Company by
means of a notice given in accordance with the provisions of this Section 6(c),
which address initially is, with respect to the Initial Purchasers, the address
set forth in the Purchase Agreement; (ii) if to the Company and the
Guarantors, initially at the Company’s address set forth in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c); and (iii) to
such other persons at their respective addresses as provided in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c).  All such notices and communications shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed or e-mailed; when receipt is
acknowledged, if telecopied; and on the next Business Day if timely delivered
to an air courier guaranteeing overnight delivery.  Copies of all such notices, demands or other
communications shall be concurrently delivered by the Person giving the same to
the Trustee, at the address specified in the Indenture.

 

(d)           Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the successors,
assigns and transferees of each of the

 

21

 

parties,
including, without limitation and without the need for an express assignment,
subsequent Holders; provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of the terms of the Purchase Agreement or the Indenture.  If any transferee of any Holder shall acquire
Registrable Securities in any manner, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all the terms of this
Agreement, and by taking and holding such Registrable Securities such Person
shall be conclusively deemed to have agreed to be bound by and to perform all
of the terms and provisions of this Agreement and such Person shall be entitled
to receive the benefits hereof.  The
Initial Purchasers (in their capacity as Initial Purchasers) shall have no
liability or obligation to the Company or the Guarantors with respect to any
failure by a Holder to comply with, or any breach by any Holder of, any of the
obligations of such Holder under this Agreement.

 

(e)           Third Party Beneficiaries.  Each Holder shall be a third party
beneficiary to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent it deems
such enforcement necessary or advisable to protect its rights or the rights of
other Holders hereunder.

 

(f)            Counterparts.  This Agreement may be signed on counterparts
(which may include counterparts delivered by any standard forum of
telecommunication), each of which shall be an original and all of which
together shall constitute one and the same instrument.

 

(g)           Headings.  The headings in this Agreement are
for convenience of reference only, are not a part of this Agreement and shall
not limit or otherwise affect the meaning hereof.

 

(h)           Governing Law.  This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.

 

(j)            Entire Agreement;
Severability.  This Agreement contains the entire agreement
between the parties relating to the subject matter hereof and supersedes all
oral statements and prior writings with respect thereto.  If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable or against public policy, the remainder of the
terms, provisions, covenants and restrictions contained herein shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated.  The Company, the Guarantors
and the Initial Purchasers shall endeavor in good faith negotiations to replace
the invalid, void or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the
invalid, void or unenforceable provisions.

 

22

 

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

 

[Signature page follows]

 

23

 

	
   

  	
   

  	
  Virgin
  Media Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  BRYAN H. HALL

  
	
   

  	
   

  	
  Name:
  Bryan H. Hall

  
	
   

  	
   

  	
  Title:
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  Virgin
  Media Secured Finance PLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  ROBERT MACKENZIE

  
	
   

  	
   

  	
  Name:
  Robert Mackenzie

  
	
   

  	
   

  	
  Title:
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  Virgin
  Media Finance PLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  ROBERT MACKENZIE

  
	
   

  	
   

  	
  Name:
  Robert Mackenzie

  
	
   

  	
   

  	
  Title:
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  Virgin
  Media Investment Holdings Limited

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  ROBERT MACKENZIE

  
	
   

  	
   

  	
  Name:
  Robert Mackenzie

  
	
   

  	
   

  	
  Title:
  Director

  

 

24

 

Confirmed and accepted as of the date first
above written:

 

	
  J.P. Morgan Securities Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  CHRIS MUNRO

  	
   

  	
   

  
	
   

  	
  Name:
  Chris Munro

  	
   

  	
   

  
	
   

  	
  Title:
  Managing Director

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Goldman, Sachs & Co.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:
  

  	
  /s/
  GOLDMAN, SACHS & CO.

  	
   

  	
   

  
	
   

  	
  (Goldman,
  Sachs & Co.)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BNP Paribas

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:
  

  	
  /s/
  LBM FOSTER

  	
   

  	
   

  
	
   

  	
  Name:
  LBM Foster

  	
   

  	
   

  
	
   

  	
  Title:
  Authorised Signatory

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CALYON

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  YOUSSEF KHLAT

  	
   

  	
   

  
	
   

  	
  Name:
  Youssef Khlat

  	
   

  	
   

  
	
   

  	
  Title:
  Managing Director

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Credit
  Suisse Securities (Europe) Limited

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ N. SRINIVASAN

  	
   

  	
  By:

  	
  /s/ P. TAMPLIN

  
	
   

  	
  Name: N. Srinivasan

  	
   

  	
  Name: P. Tamplin

  
	
   

  	
  Title: Managing Director

  	
   

  	
  Title: Director

  

 

Registration Rights Agreement – Virgin Media Secured
Finance PLC

Dollar Notes

 

 

	
  Deutsche Bank Securities Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  MARK FEDORIK

  	
   

  
	
   

  	
  Name:
  Mark Fedorik

  	
   

  
	
   

  	
  Title:
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  KEVIN SHERLOCK

  	
   

  
	
   

  	
  Name:
  Kevin Sherlock

  	
   

  
	
   

  	
  Title:
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GE Capital Markets, Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  GLENN ASTORINO

  	
   

  
	
   

  	
  Name:
  Glenn Astorino

  	
   

  
	
   

  	
  Title:
  SR MANAGING DIRECTOR

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  HSBC Securities (USA) Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  DIANE M. KENNA

  	
   

  
	
   

  	
  Name:
  Diane M. Kenna

  	
   

  
	
   

  	
  Title:
  Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Lloyds TSB Bank plc

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  GUILLAUME FLEUTI

  	
   

  
	
   

  	
  Name:
  Guillaume Fleuti

  	
   

  
	
   

  	
  Title:
  Director

  	
   

  

 

Registration Rights Agreement – Virgin Media Secured
Finance PLC

Dollar Notes

 

 

	
  The Royal Bank of Scotland plc

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  LIZO ONWERE

  	
   

  
	
   

  	
  Name:
  Lizo Onwere

  	
   

  
	
   

  	
  Title:
  Authorised Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  UBS Securities LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  DAVID W. BARTH

  	
   

  
	
   

  	
  Name:
  David W. Barth

  	
   

  
	
   

  	
  Title:
  High Yield Capital Market

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  MICHAEL LAWTON

  	
   

  
	
   

  	
  Name:
  Michael Lawton

  	
   

  
	
   

  	
  Title:
  Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Barclays Capital Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  BENJAMIN BURTON

  	
   

  
	
   

  	
  Name:
  Benjamin Burton

  	
   

  
	
   

  	
  Title:
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Merrill Lynch International

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  P.B. MACAVER

  	
   

  
	
   

  	
  Name:
  P.B. Macaver

  	
   

  
	
   

  	
  Title:
  Director

  	
   

  

 

Registration Rights Agreement – Virgin Media Secured
Finance PLC

Dollar Notes

 

 

	
  Citigroup Global Markets Limited

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  TIM ODELL

  	
   

  
	
   

  	
  Name:
  Tim Odell

  	
   

  
	
   

  	
  Title:
  Delegated Signatory

  	
   

  

 

 

For themselves and on behalf
of the

several Initial Purchasers listed in Schedule I-A hereto.

 

Registration Rights Agreement – Virgin Media Secured
Finance PLC

Dollar Notes

 

 

Confirmed
and accepted as of the date first above written:

 

	
  J.P. Morgan Securities Ltd.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  CHRIS MUNRO

  	
   

  	
   

  
	
   

  	
  Name:
  Chris Munro

  	
   

  	
   

  
	
   

  	
  Title:
  Managing Director

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Goldman, Sachs & Co.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  GOLDMAN, SACHS & CO.

  	
   

  	
   

  
	
   

  	
  (Goldman,
  Sachs & Co.)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BNP Paribas

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  LBM FOSTER

  	
   

  	
   

  
	
   

  	
  Name:
  LBM Foster

  	
   

  	
   

  
	
   

  	
  Title:
  Authorised Signatory

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CALYON

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  YOUSSEF KHLAT

  	
   

  	
   

  
	
   

  	
  Name:
  Youssef Khlat

  	
   

  	
   

  
	
   

  	
  Title:
  Managing Director

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Credit
  Suisse Securities (Europe) Limited

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ N. SRINIVASAN

  	
   

  	
  By:

  	
  /s/ P. TAMPLIN

  
	
   

  	
  Name: N. Srinivasan

  	
   

  	
  Name: P. Tamplin

  
	
   

  	
  Title: Managing Director

  	
   

  	
  Title: Director

  

 

Registration Rights Agreement – Virgin Media Secured
Finance PLC

Sterling 
Notes

 

 

	
  Deutsche Bank AG, London Branch

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  MATHIAS RUSSWARM

  	
   

  
	
   

  	
  Name:
  Mathias Russwarm

  	
   

  
	
   

  	
  Title:
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  CAMELIA ROBU

  	
   

  
	
   

  	
  Name:
  Camelia Robu

  	
   

  
	
   

  	
  Title:
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GE Corporate Finance Bank SAS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  ADRIAN CLULOW

  	
   

  
	
   

  	
  Name:
  Adrian Clulow

  	
   

  
	
   

  	
  Title:
  Authorised Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  SIMON WHITE

  	
   

  
	
   

  	
  Name:
  Simon White

  	
   

  
	
   

  	
  Title:
  Authorised Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  HSBC Bank plc

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  C M DEWHURST

  	
   

  
	
   

  	
  Name:
  C M Dewhurst

  	
   

  
	
   

  	
  Title:
  Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Lloyds TSB Bank plc

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  GUILLAUME FLEUTI

  	
   

  
	
   

  	
  Name:
  Guillaume Fleuti

  	
   

  
	
   

  	
  Title:
  Director

  	
   

  

 

Registration Rights Agreement – Virgin Media Secured
Finance PLC

Sterling 
Notes

 

 

	
  The Royal Bank of Scotland plc

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  LIZO ONWERE

  	
   

  
	
   

  	
  Name:
  Lizo Onwere

  	
   

  
	
   

  	
  Title:
  Authorised Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  UBS Limited

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  EOGHAN HARRINGTON

  	
   

  
	
   

  	
  Name:
  Eoghan Harrington

  	
   

  
	
   

  	
  Title:
  Leveraged Finance

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  PATRICK KLOTZ

  	
   

  
	
   

  	
  Name:
  Patrick Klotz

  	
   

  
	
   

  	
  Title:
  Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Barclays Bank PLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  PAUL CLEWS

  	
   

  
	
   

  	
  Name:
  Paul Clews

  	
   

  
	
   

  	
  Title:
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Merrill Lynch International

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  P.B. MACAVER

  	
   

  
	
   

  	
  Name:
  P.B. Macaver

  	
   

  
	
   

  	
  Title:
  Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Citigroup Global Markets Limited

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  TIM ODELL

  	
   

  
	
   

  	
  Name:
  Tim Odell

  	
   

  
	
   

  	
  Title:
  Delegated Signatory

  	
   

  

 

 

For
themselves and on behalf of the

several Initial Purchasers listed in Schedule I-B hereto.

 

Registration Rights Agreement – Virgin Media Secured
Finance PLC

Sterling 
Notes

 

 

Schedule I-A

 

J.P. Morgan Securities Inc.

Goldman, Sachs &
Co.

BNP Paribas

CALYON

Credit Suisse Securities
(Europe) Limited

Deutsche Bank Securities
Inc.

GE Capital Markets, Inc.

HSBC Securities (USA) Inc.

Lloyds TSB Bank plc

The Royal Bank of Scotland
plc

UBS Securities LLC

Barclays Capital Inc.

Merrill Lynch International

Citigroup Global Markets
Limited

 

Schedule I-B

 

J.P. Morgan Securities Ltd.

Goldman, Sachs &
Co.

BNP Paribas

CALYON

Credit Suisse Securities
(Europe) Limited

Deutsche Bank AG, London
Branch

GE Corporate Finance Bank
SAS

HSBC Bank plc

Lloyds TSB Bank plc

The Royal Bank of Scotland
plc

UBS Limited

Barclays Bank PLC

Merrill Lynch International

Citigroup
Global Markets Limited

 

 

Annex A

 

Counterpart to Registration Rights Agreement

 

The undersigned hereby
absolutely, unconditionally and irrevocably agrees as a Guarantor (as defined
in the Registration Rights Agreement, dated as of January 19, 2010 by and
among the Company, the Parent, VM FinanceCo, VMIH, the other Guarantors, if
any, and the Initial Purchasers) to be bound by the terms and provisions of
such Registration Rights Agreement.

 

IN WITNESS WHEREOF, the
undersigned has executed this counterpart as of
                              .

 

	
   

  	
  [NAME]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  NAME:

  
	
   

  	
   

  	
  Title:Exhibit
10.1

 

STEVEN J. HILTON

THIRD AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

(Effective as of January 1, 2010)

 

This Employment Agreement (“Agreement”)
is entered into on January 19, 2010 by and between Meritage Homes Corporation, a Maryland corporation (“Company”) and Steven J. Hilton,
an individual (“Executive”)
effective as of January 1, 2010 (“Effective Date”).

 

RECITALS

 

WHEREAS, the Company
and the Executive previously entered into two amended and restated employment
agreements defining the terms and conditions of Executive’s employment with the
Company, dated as of July 1, 2003 and January 1, 2007 (“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 certain rights, responsibilities and benefits;

 

WHEREAS, the Company
and Executive believe that it is in the best interest of each to make certain
other changes to Executive’s terms and conditions of his employment with the
Company; 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.  Except as
otherwise specifically listed on Schedule 1, during the term of his employment
under this Agreement (as set forth in Section 2) Executive shall be

 

 

prohibited from engaging in any personal land banking or lot or land
development without the prior written consent of the Board.

 

2.             Term.  Executive will be employed under this
Agreement until December 31, 2012, 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 August 31, 2012 (or August 31 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 (the “Actual Bonus”) and such
Actual Bonus, if any, will be due and payable in accordance with Exhibit A.

 

(b)           Long-Term Incentives.  In February, 2009, the Committee granted to
Executive 112,500 shares of restricted Company stock (“Restricted Shares”)
under the Company’s 2006 Stock Incentive Plan (“2006 Plan”) which will vest
ratably in 2010, 2011 and 2012 if certain conditions are satisfied.  This Restricted Shares grant was designed to
constitute equity award grants for 2009, 2010 and 2011; provided, however that
the Committee will continue to review the Company’s operating results and may
from time to time consider additional stock option and/or restricted stock grants.  For years after 2011, the Committee shall grant
Executive an option to purchase a minimum of 90,000 shares of Company stock or
such equivalent number of shares subject to full value awards as the Committee
determines in its discretion.  The
Restricted Shares grant and any options or other equity-based awards shall,
upon termination of Executive’s employment under Section 7(b), (c), or (e) or
the nonrenewal of this

 

2

 

Agreement,
be immediately accelerated and become fully vested without further action and
all restrictions on such awards shall immediately lapse.  Such restricted stock, options and other
equity-based awards shall also be subject to the accelerated vesting and other
provisions set forth in the Amended and Restated Change in Control Agreement
between Executive and Company, effective as of January 1, 2010 (“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 employees
generally and senior management (e.g., health
and long-term disability insurance, Paid Time Off, 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 at the Company’s option, the
requirement of Sections 8 and 9 as provided therein); (iv) the Company
shall not pay or 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; provided however, that in no event will
the Executive be required to provide services to Company pursuant to this Section 7
at a level that exceeds 20% or less of the average level of bona fide services
Executive provided to Company in the immediately preceding 36 months.

 

(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 and
any Bonus earned in a previous year but not yet paid; (ii) no Bonus shall
be payable for the fiscal year in which the termination occurs; (iii) the
Company shall pay or 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; (v) any
restricted stock, options and other equity-based awards previously granted will
become fully vested and exercisable and all restrictions on restricted stock
awards will lapse; and (vi) the Company will

 

3

 

pay
Executive an amount equal to the sum of (A) two times the Executive’s Base
Salary on the Date of Termination of employment, and (B) two times the higher
of (x) the average of the Actual Bonus compensation Executive earned for the
two years prior to his termination of employment or (y) the annual bonus
paid to Executive for the year preceding the date of termination.  For purposes of determining the amount of the
Executive’s Bonus paid for any year during the above two-year period, the
amount of the Bonus compensation considered paid for purposes of this provision
shall be the greater of (a) the actual Bonus paid to the Executive, or (b) the
actual stock price on the day of grant of the shares of the Company’s
restricted stock, stock options and other equity awards that became vested in
such year; 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 in a lump-sum payment within 60 days following
Executive’s termination of employment. 
The Company intends that the benefits provided under this Section 7(b) shall
be paid in lieu of, and not in addition to, 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 and
any Bonus earned in a previous year but not yet paid; (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 six 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 in accordance with
the terms and conditions and at the time all as set forth in Exhibit A;
(iii) the Company shall pay or reimburse Executive for COBRA premiums for
the period that the Company is required to offer COBRA coverage as a matter of
law; (iv) any restricted stock, options and other equity-based awards previously
granted 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 for the two years prior to his termination
of employment (for purposes of determining the amount of the Executive’s Bonus
paid for any year during this two-year period, the amount of the Bonus
compensation considered paid for purposes of this provision shall be the
greater of (x) the actual Bonus paid to the Executive, or (y) the stock
price on the day of grant of the shares of the Company’s restricted stock,
stock options and other equity awards that became vested in such year;
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 in a lump-sum payment within 60 days following
Executive’s termination of employment.

 

(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 any Bonus earned in a previous year but not yet paid, 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

 

4

 

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 and any Bonus earned in a
previous year but not yet paid, (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 restricted
stock, options and other equity-based awards previously granted 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 (or if shorter, the
expiration date of the option).  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.

 

(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, or (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 actually hinders
Executive’s ability to perform his job and 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.

 

5

 

(4)           “Separation from Service” means, either (a) termination
of Executive’s employment with Company and all Affiliates, or (b) a
permanent reduction in the level of bona fide services Executive provides to
Company and all Affiliates to an amount that is 20% or less of the average
level of bona fide services Executive provided to Company in the immediately
preceding 36 months, with the level of bona fide service calculated in
accordance with Treasury Regulations Section 1.409A-1(h)(1)(ii).  Solely for purposes of determining whether
Executive has a “Separation from Service,” Executive’s employment relationship
is treated as continuing while Executive is on military leave, sick leave, or
other bona fide leave of absence (if the period of such leave does not exceed
six months, or if longer, so long as Executive’s right to reemployment with
Company or an Affiliate is provided either by statute or contract).  If Executive’s period of leave exceeds six
months and Executive’s right to reemployment is not provided either by statute
or by contract, the employment relationship is deemed to terminate on the first
day immediately following the expiration of such six-month period.  Whether a termination of employment has
occurred will be determined based on all of the facts and circumstances and in
accordance with regulations issued by the United States Treasury Department
pursuant to Section 409A of the Code.

 

(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)           Release Agreement.  Notwithstanding anything to the contrary
herein, no payment shall be made under this Section 6 unless
Executive executes (and does not revoke) a legal release (“Release Agreement”),
in the form and substance reasonably requested by the Company, in which
Executive releases the Company, Affiliates, directors, officers, employees,
agents and others affiliated with the Company from any and all claims,
including claims relating to Executive’s employment with the Company and the
termination of Executive’s employment. 
The Release Agreement shall be provided to Executive within 5 days
following Executive’s termination of employment (or “Separation from Service”
if Executive is a “Specified Employee”). 
The Release Agreement must be executed and returned to the Company
within the 21 or 45 day (as applicable) period described in the Release
Agreement and it must not be revoked by Executive within the 7-day revocation
period described in the Release Agreement.

 

(i)            Compliance with Section 409A
of the Internal Revenue Code.  Any payment under this Section 6 shall
be subject to the provisions of this Section 7(i) (except for a
payment pursuant to Section 6(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 6(b) or (c), and if no exception
from Section 409A applies in whole or impart, then the severance or other
payments pursuant to Section 6(c)(vi) shall be made to Executive by
the Company on the first day of the seventh month following the date of the
Executive’s Separation from Service (the “409A Payment Date”), should this
paragraph 6(i) result in a delay of payments to Executive, the Company
shall begin to make such payments as described in this paragraph 6, provided
that any amounts that would have been payable earlier but for the application
of this paragraph 6(i), 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 

 

6

 

under
this Agreement.  The balance of such
severance payments shall be payable in accordance with regular payroll timing
and the COBRA premiums shall be paid or reimbursed monthly.  For purposes of this provision, the term
Specified Employee shall have the meaning set forth in Section 409A(a)(2)(B)(i) of
the Internal Revenue 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.

 

7

 

(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 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 

 

8

 

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 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 

 

9

 

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.

 

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.  In
consideration for such cooperation, Company shall compensate Executive for the
time Executive spends on such cooperative efforts (at an hourly rate based on
Executive’s total compensation during the year preceding the Date of
Termination) and Company shall reimburse Executive for his reasonable
out-of-pocket expenses Executive incurs in connection with such cooperative
efforts.

 

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, restricted stock 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.

 

10

 

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

  
	
   

  	
   

  
	
  if to Executive:

  	
  Steven J. Hilton

  
	
   

  	
  10387 Rob’s Camp Road

  
	
   

  	
  Scottsdale, Arizona 85255

  
	
   

  	
  Phone: (480) 515-0480

  

 

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 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 

 

11

 

provided
hereunder.  This offset provision shall not
apply to accrued but unused paid time off amounts.

 

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/ Raymond Oppel

  
	
   

  	
   

  	
  Name:

  	
  Raymond Oppel

  
	
   

  	
   

  	
  Title:

  	
  Executive Compensation
  Committee Chair

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXECUTIVE: STEVEN J. HILTON

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Steven J. Hilton

  

 

12

 

EXHIBIT
A

 

INCENTIVE
COMPENSATION SCHEDULE

 

Executive
Bonus Compensation

 

Part I
— Bonus

 

	
  2010 and any Renewal Term

  	
   

  	
  For
  2010 (and any Renewal Term), Executive may, in the Board’s reasonable
  discretion, be entitled to a maximum bonus equal to .825% of the EBITDA
  (excluding impairments, one-time bond, refinancing, offering, significant
  litigation, settlement payments, by the Company and similar costs associated
  with one-time or extraordinary events) 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. Such
  bonus calculation will be determined before taking into account the deduction
  for the compensation of (i) the Executive; (ii) the General
  Counsel; (iii) the Chief Financial Officer; and (iv) the Chief
  Operating Officer. This bonus is established pursuant to, and its terms and
  conditions shall be subject to, the Company’s 2006 Executive Management
  Incentive Plan. Notwithstanding the above, the above calculation of EBITDA
  assumes that the Company makes an actual profit before calculating EBITDA. If
  the Company does not make an actual profit before calculating EBITDA, no
  bonus will be paid.

  

 

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.

 

In
addition, the Board at its discretion may award a subjective bonus to
Executive.

 

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.         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.

 

4.         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.

 

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

 

B-1

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