Document:

Exhibit
10.3

 

DEFERRED BONUS AGREEMENT

2003 AWARD YEAR

 

THIS DEFERRED BONUS AGREEMENT (the “Agreement”) is
entered into as of March 17, 2004, by Rick Morgan (the “Executive”) and
Meritage Corporation, a Maryland corporation (the “Company”).

 

1.             PURPOSE.

 

The purpose of this Agreement is to reward Executive
for his service for the Company.

 

2.             COMPANY
CONTRIBUTION.

 

The Company agrees to make a “Company Contribution” of
$46,000 to the Deferred Bonus Account established pursuant to Section 3
effective as of December 31, 2003.  The
purpose of this Company Contribution is to further compensate Executive for his
many years of service to the Company as a tool to retain the valuable services
of the Executive.

 

3.             DEFERRED
COMPENSATION ACCOUNT.

 

The Company shall maintain a bookkeeping account (the
“Deferred Bonus Account”) to which it shall credit the Company Contribution in
accordance with Section 2. 
Interest shall be credited to the Deferred Bonus Account in accordance
with Section 5, below.  The
Deferred Compensation Account is a bookkeeping account only and Executive shall
not have any claim to any particular assets of the Company.

 

4.             VESTING.

 

As of the date of this Agreement, the Company
Contribution credited to Executive’s Deferred Bonus Account shall be unvested
and subject to forfeiture on the termination of Executive’s employment for any
reason prior to January 1, 2007. If Executive continues to be employed by the
Company on and through December 31, 2006, Executive shall be fully vested in
amounts credited to his Deferred Bonus Account and his rights and interests
therein shall not be forfeitable.

 

5.             INTEREST.  

 

Each December 31, the Company shall credit the
Deferred Bonus Account with interest calculated at an annual rate equal to 1.5%
plus the prime rate as announced in the Wall Street Journal on the first business
day of each year compounded annually (or, if no prime rate is announced in the Wall Street
Journal on such date, then on the first day of each year in which
the prime rate is reported in the Wall Street Journal), or such other
greater interest rate as determined by the Company in its discretion.

 

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6.             DISTRIBUTION
OF BENEFITS.

 

(a)           Distribution
of Benefits.  Payment to
Executive shall occur within thirty (30) days of the effective date of
Executive’s vesting in his Deferred Bonus Account. For purposes of determining
the distributable amount, the Deferred Bonus Account shall be valued through
the day prior to the day on which the Deferred Bonus Account is distributed,
less any claim, debt, reimbursement, recoupment, or offset the Company may have
against Executive.

 

(b)           In-Service
Distributions.  Executive
shall have no right to borrow money from his Deferred Bonus Account nor shall
he be allowed to receive a distribution except as provided above.

 

(c)           Method
of Distribution.  Distribution
of benefits shall be made in one cash lump sum.

 

7.             INALIENABILITY
OF BENEFITS.

 

(a)           General
Prohibition.  Executive,
nor creditors of Executive, shall have any right to assign, pledge,
hypothecate, anticipate or in any way create a lien upon Executive’s interest
created under this Agreement.  All
payments to be made to Executive shall be made only upon his personal receipt or
endorsement, and no interest under this Agreement shall be subject to
assignment or transfer or otherwise be alienable, either by voluntary or
involuntary act or by operation of law or equity, or subject to attachment,
execution, garnishment, sequestration, levy or other seizure under any legal,
equitable or other process, or be liable in any way for the debts or defaults
of Executive.

 

(b)           Permitted
Arrangements.  This
Section shall not preclude arrangements for the withholding of applicable taxes
from payments under this Agreement, or arrangements for direct deposit of
benefit payments to an account in a bank, savings and loan association or
credit union (provided that such arrangement is not part of an arrangement
constituting an assignment or alienation).

 

8.             BINDING
NATURE OF AGREEMENT.

 

This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of any and all interested
parties, present and future.

 

9.             NATURE
OF PAYMENTS.

 

Executive shall, for the purpose of this Agreement, be
treated as general creditors of the Company. 
Nothing in this Agreement or any action taken pursuant to this Agreement
shall create or be construed to create a fiduciary relationship between the
Company and Executive, or any other person.

 

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10.          DISPUTE
RESOLUTION.

 

All claims, disputes and other matters in question
between the parties arising under this Agreement shall be decided in accordance
with the dispute resolution provisions stated below:

 

(a)           Mediation. 
Any and all disputes arising under, pertaining to or touching upon this
Agreement, or the statutory rights or obligations of either party hereto,
shall, if not settled by negotiation, be subject to non-binding mediation
before an independent mediator selected by the parties pursuant to Section
10(d).  Notwithstanding the foregoing,
both Executive and Company may seek preliminary judicial relief if such action
is necessary to avoid irreparable damage during the pendency of the proceedings
described in this Section 10.  Any demand
for mediation shall be made in writing and served upon the other party to the
dispute, by certified mail, return receipt requested, at the address specified
in the signature blocks of this agreement. 
The demand shall set forth with reasonable specificity the basis of the
dispute and the relief sought.  The
mediation hearing will occur at a time and place convenient to the parties
within 30 days of the date of selection or appointment of the mediator.

 

(b)           Arbitration. 
In the event that the dispute is not settled through mediation, the
parties shall then proceed to binding arbitration before an independent
arbitrator selected pursuant to Section 10(d). 
The mediator shall not serve as the arbitrator.  EXCEPT AS PROVIDED IN SECTION 10(a), ALL
DISPUTES INVOLVING ALLEGED UNLAWFUL EMPLOYMENT DISCRIMINATION, TERMINATION BY
ALLEGED BREACH OF CONTRACT OR POLICY, OR ALLEGED EMPLOYMENT TORT COMMITTED BY
COMPANY OR A REPRESENTATIVE OF COMPANY, INCLUDING CLAIMS OF VIOLATIONS OF
FEDERAL OR STATE DISCRIMINATION STATUTES OR PUBLIC POLICY, SHALL BE RESOLVED
PURSUANT TO THIS SECTION 10 AND THERE SHALL BE NO RECOURSE TO COURT, WITH OR
WITHOUT A JURY TRIAL.  The arbitration
hearing shall occur at a time and place convenient to the parties within 90
days of selection or appointment of the arbitrator, or as otherwise agreed
to.  The arbitration shall be governed
by the Federal Arbitration Act, 9 U.S.C. §§ 1-16 and the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
(“AAA”) in effect on the date of the first notice of demand for
arbitration.  Notwithstanding any
provisions in such rules to the contrary, the arbitrator shall issue findings
of fact and conclusions of law, and an award, within 15 days of the date of the
hearing unless the parties otherwise agree.

 

(c)           Damages. 
In case of breach of contract or policy, damages shall be limited to
contract damages.  In cases of
discrimination claims prohibited by statute, the arbitrator may direct payment
consistent with the applicable statute. 
In cases of employment tort, the arbitrator may award punitive damages
if proved by clear and convincing evidence. 
Issues of procedure, arbitrability, or confirmation of award shall be
governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, except that court
review of the arbitrator’s award shall be that of an appellate court reviewing
a decision of a trial judge sitting without a jury.

 

(d)           Selection
of Mediator or Arbitrator.  The parties shall select the mediator and
arbitrator from a panel list made available by the AAA.  If the parties are unable to agree to a

 

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mediator or an arbitrator within 10 days of receipt of a demand for
mediation or arbitration, the mediator or arbitrator will be chosen by
alternatively striking from a list of five mediators or arbitrators obtained by
Company from the AAA. Executive shall have the first strike.

 

(e)           Fees and
Expenses.  The fees of the AAA and
Mediation/Arbitration shall be borne equally by the parties, unless ordered
otherwise by the Arbitrator.  Each party
shall bear its own attorney’s fees and other expenses, unless ordered otherwise
by the Arbitrator.

 

11.          VALIDITY.

 

The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

 

12.          NO
EMPLOYMENT OR SERVICE CONTRACT.

 

Nothing in this Agreement shall
confer upon Executive any right to continue in the service of the Company (or
any parent or subsidiary corporation of the Company employing or retaining
Executive) for any period of time.

 

13.          AMENDMENT
AND TERMINATION.

 

Any amendment, modification, change, or termination of
this Agreement must be done so in writing and signed by both parties.

 

14.          GOVERNING
LAW.

 

The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of
Arizona.

 

15.          COUNTERPARTS.

 

This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which together will
constitute one and the same instrument.

 

16.          ENTIRE
AGREEMENT.

 

This Agreement sets forth the entire agreement between
Executive and the Company concerning the subject matter discussed in this
Agreement and supersedes all prior agreements, promises, covenants,
arrangements, communications, and representations or warranties, whether
written or oral, by any officer, employee, or representative of the Company.  Any prior agreements or understandings with
respect to the subject matter set forth in this Agreement are hereby terminated
and canceled.

 

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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date set forth above.

 

 

	
   

  	
  MERITAGE CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
  8501 E.
  Princess Drive, Suite 290

  
	
   

  	
  Scottsdale, AZ 85255

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W.
  Seay

  
	
   

  	
  Its:

  	
  Vice President — CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Rick
  Morgan

  
	
   

  	
   

  
	
   

  	
  /s/ Richard T. Morgan

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  3551 Misty Meadow

  
	
   

  	
   

  
	
   

  	
   

  	
  Dallas, TX 72387

  
							

 

5Exhibit 10.4

 

EXHIBIT A

INCENTIVE COMPENSATION SCHEDULE

CEO BONUS COMPENSATION

	
  PART I — BONUS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  2004/05

  	
   

  	
  For 2004 and 2005 (and any
  Renewal Term), Executive shall be entitled to a bonus equal to .825% of
  EBITDA if Company’s ROA is in the top 1/2 of public homebuilders having
  revenues of $500 million or more per year, and an additional .825% of EBITDA
  if the Company’s ROA is in the top one-half of these public builders.  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.

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