Document:

Exhibit 10.1

STEVEN DAVIS EMPLOYMENT AGREEMENT

This Employment Agreement
(the “Agreement”) is effective as of October
16, 2006 by and between Meritage Homes Corporation, a Maryland corporation (the
“Company”) and Steven Davis, an
individual (“Executive”).

RECITALS

WHEREAS, the Company
desires to employ Steven Davis as its Executive Vice President - National Homebuilding
Operations, 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 as follows:

1.             Employment.  Subject to the terms and conditions of this
Agreement, the Company agrees to employ Executive as Executive Vice President -
National Operations of the Company, and Executive agrees to diligently perform
the duties associated with such positions. 
Executive will report directly to the Chief Executive Officer.  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 senior management executives.

2.             Term.  Executive will be employed under this
Agreement until October 16, 2008, unless Executive’s employment is terminated
earlier pursuant to Section 6. 
The Agreement will renew for additional one year periods (the “Renewal Term(s)”), unless on or before June 15, 2008 (or June
15 of any Renewal Term), either Executive or the Company notifies the other in
writing that it wishes to terminate employment under this Agreement at the end
of the term then in effect.

3.             Salary.  The Company will pay Executive a base salary
(the “Base Salary”) at the annual rate of $400,000.  The Base Salary will increase 5% on November
1, 2007 and on November 1 of each Renewal Term thereafter.  The Base Salary will be payable in accordance
with the payroll practices of the Company in effect from time to time.  The Base Salary may not be lowered without
Executive’s consent.

4.             Incentive Compensation.

A.            Bonus.  Executive
will be entitled to incentive compensation as specified in Exhibit A
hereto (the “Bonus”).  The Bonus will be due and payable in
accordance with Exhibit A.

B.            Stock Options. 
Effective on the date of your hire, you will be granted an option to
acquire 15,000 shares of Meritage Homes Corporation common stock.  In addition, commencing in 2007, during the
term of this Agreement the Company will annually grant Executive options to
acquire 15,000 shares (or equivalent consideration at the discretion of the
Board of Directors).  All options will
have an exercise price equal to the fair market value on the date of grant as
defined under the relevant plan.  Subject
to the provisions hereof and Executive’s 

 

change of control agreement entered into on even date
herewith, the options will be on the same terms and conditions as other
standard option grants to other executives of the Company.

C.            Restricted Stock Grant.  On the effective date of your hire, you will
be granted a restricted stock award of 25,000 shares.  These restricted shares will be subject to
the terms and conditions of a separate award agreement.

D.            Bonus Repayment. 
If Executive’s employment is terminated for any reason other than as set
forth in Section 6A below, he will repay to the Company a pro-rated
amount of the 2006 bonus set forth on Exhibit A ($400,000) as follows:  If Executive’s employment is terminated before
September 16, 2007, he will repay $400,000; if Executive’s employment is
terminated on or after September 16, 2007, but before September 16, 2008, he
will repay $266,666; and if Executive’s employment is terminated on or after
September 16, 2008 but before September 16, 2009, he will repay $133,333.

5.             Executive Benefits.  During the term of this Agreement, Executive
will be entitled to reimbursement of reasonable and customary business
expenses.  The Company will also provide
to Executive during the term of this Agreement a $1,250 per month auto
allowance, three weeks of annual paid vacation, and a Company paid annual
physical at a first class facility such as the Mayo Clinic and such other
fringe benefits and other Executive benefits as are regularly provided by the
Company to its senior corporate management; provided, however, that nothing
herein shall preclude the Company from amending or terminating any such other
employee or general executive benefit plans or programs.

6.             Termination.

A.            Voluntary Resignation by Executive (With Good Reason)
or Termination Without Cause by the Company.

(1)           If Executive voluntarily terminates
his employment with the Company with Good Reason, or if the Company terminates
Executive without Cause, the Company will (i) pay to Executive his Base Salary
through the Date of Termination; (ii) pay to Executive any unpaid bonus for the
previous year; (iii) pay to Executive a severance payment in an amount equal to
(x) Executive’s base salary on the Date of Termination plus (y) Executive’s
Bonus for the year preceding the Date of Termination (the “Severance
Payment”); and (iv) reimburse Executive for the cost of COBRA premiums
for one year (including group health insurance and dental and vision).  The amounts payable to Executive pursuant to this
Section 6A(1) (other than the 
reimbursement set forth in clause (iv)) shall be paid to Executive by
check within 15 business days of the Date of Termination.

(2)           Upon termination of Executive’s
employment pursuant to this Section 6A at any time after October 16,
2007, the restrictions on the restricted stock awarded to Executive on the
effective date of his hire (as referenced in Section 4C of this
Agreement) shall lapse.

(3)           Upon termination of Executive’s
employment pursuant to this Section 6A at any time after October 16,
2008, any options previously granted to 

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Executive shall accelerate and automatically vest and
Executive shall have a period of 90 days thereafter to exercise such options.

B.            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 to Executive (or his heirs or estate) (i) Executive’s then current Base
Salary through the Date of Termination, (ii) any unpaid bonus for the previous
year and a pro rated amount of Executive’s Bonus for the year in which the Date
of Termination occurs, which amount shall be payable at the time set forth in Exhibit
A.  In addition, upon such a
termination, (i) any options previously granted to Executive shall accelerate
and become vested (ii) any restrictions on any restricted stock awards shall
lapse, without further action and, to the extent permitted under the plan’s
governing documents, Executive (or his heirs or estate) shall have a period of
one year from the Date of Termination to exercise such options, and (iii) the
Company shall reimburse Executive (or his heirs or estate) for the cost o
Executive’s COBRA premiums for one year following such termination.

C.            Voluntary Termination by Executive (Without Good
Reason) or Termination for Cause by the Company.  If Executive resigns without Good Reason, it
being understood that Executive shall have the right to do so at any time, or
if the Company discharges Executive for Cause, then the Company will be
obligated to pay Executive’s Base Salary through the Date of Termination and
any unpaid bonus for the previous year and no bonus will be payable with
respect to the year in which the Date of Termination occurs.  Such amounts shall be payable to Executive
within 15 business days of the Date of Termination.

D.            Definitions. 
For purposes of this Agreement:

(1)         “Cause” will
exist in the following circumstances: (i) you are convicted of  a felony, (ii) you engage in any fraudulent
or dishonest act to the detriment of the Company, (iii) you fail to report for
work on a regular basis, except for periods of authorized illness or bona fide
illness, (iv) you misappropriate trade secrets, customer lists, or other
proprietary information belonging to the Company for your own benefit or for
the benefit of a competitor, (v) you engage in any willful misconduct designed
to harm the Company or its stockholders, or (vi) you fail to perform properly
your assigned duties.

(2)         “Change of Control”
shall mean to include the following transactions or situations:

(a)           A sale, transfer, or other disposition
by the Company through a single transaction or a series of transactions of
securities of the Company representing 33% or more of the combined voting power
of the Company’s then outstanding securities to any “Unrelated Person” or “Unrelated
Persons” acting in concert with one another. 
For purposes of this definition, the term “Person” shall mean and
include any individual, partnership, joint venture, association, trust,
corporation or other entity (including a “group” as referred to in Section
13(d)(3) of the Securities Exchange Act of 1934 (the “Act”)).  For purposes of this definition, the term “Unrelated
Person” shall mean and include any person other than the Company, or an
employee benefit plan of the Company.

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(b)           A sale, transfer, or other disposition
through a single transaction or a series of related transactions of all or
substantially all of the assets of the Company to an Unrelated Person or
Unrelated Persons acting in concert with one another.

(c)           Any consolidation or merger of the
Company with or into an Unrelated Person, unless immediately after the
consolidation or merger the holders of the common stock of the Company
immediately prior to the consolidation or merger are the beneficial owners or
securities of the surviving corporation’s then outstanding securities.

(3)          “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, (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 notice of termination is given to Executive by the Company,
or (v) if this Agreement is terminated by the Company without Cause, the date
notice of termination is given to Executive by the Company.

(4)         “Disability”
shall mean a disability that results in Executive being medically unable to
fulfill his duties under this Agreement for six consecutive months.

(5)         “Good Reason”
shall mean if following a Change of Control you are either (i) not offered a
comparable position in the surviving corporation or (ii) required to relocate
to any employment location that is more than thirty (30) miles from the Company’s
Scottsdale, Arizona headquarters.

7.             Non-Solicitation Covenant.  In consideration of the benefits provided in Section
6 of this Agreement, during the period of employment and for a period
of eighteen (18) months following the Date of Termination, Executive
hereby covenants and agrees that he will not directly or indirectly
solicit for employment (whether as an employee, consultant, independent
contractor, or otherwise) or encourage the termination of their relationship
with the Company, any person who is an employee of the Company or any of its
subsidiaries, or any person who was an employee of the Company during Executive’s
final year of employment with the Company, unless Company gives its advance
written consent to such solicitation.  The covenants set forth in
this Section 7 shall begin as of the date hereof and will survive the
termination of employment under Section 6.  This Section 7
shall not prohibit the general solicitation of employment in a widely circulated
media (such as the newspaper or internet job posting sites) and that are
not directly targeted to any Company employee.

If a court of
competent jurisdiction determines that the eighteen-month non-solicitation
period identified in this Section 7 is too broad to be enforced,
the parties agree that the non-solicitation period shall be the twelve
(12) months following the Date of Termination, whether such
termination is voluntary or involuntary.   If a court of competent
jurisdiction determines that this non-solicitation period as modified is
still too broad to be enforced, the parties agree that
the non-solicitation period shall be the nine (9) months following
the Date of Termination, whether such termination is voluntary or
involuntary.

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8.             Non-Disclosure of
Confidential Information.

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

C.            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 further agrees that
damages cannot 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. 
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
disclosed or 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,
information which 

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becomes available on a non-confidential basis from a
source other than Executive which source is not prohibited from disclosing such
confidential information by legal, contractual or other obligation shall not be
considered “Company Confidential Information.”

9.             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.

10.           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.

11.           Entire Agreement.  This Agreement, along with the change of control
agreement with Executive and the restricted stock agreement and stock option
agreement entered into on even date herewith, 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.

12.           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.

13.           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: Chief Executive Officer

With a copy to:                                                                                                             Meritage
Homes Corporation

17851 N. 85th Street, Suite 300

Scottsdale, Arizona 85255

Attention:  General Counsel

if to Executive:                                      Steven
Davis

To the address listed in the Company’s

Employment Records

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14.           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”).  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 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,
reasonable attorneys’ fees and costs 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,
Arizona metropolitan area.  The only
exception is that the Company may proceed in any court of competent
jurisdiction to obtain equitable relief under Sections 7 and 8 of this
Agreement, but any claim for monetary damages thereunder is subject to binding
arbitration.

15.           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 and bonus payments and
expense reimbursements through the 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 7 and 8
hereof.  If there is any conflict between
the provisions of the change of control 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 change of control agreement, will be reduced by any payments or
benefits (not including salary and bonus payments) provided in Section 6 of
this Agreement.

16.           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.

17.           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 of the Company.

[Signature
page follows]

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AGREED to this
16th day of October, 2006 by:

	
   

  	
   

  	
  MERITAGE HOMES CORPORATION, a

  
	
   

  	
   

  	
  Maryland
  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven J. Hilton

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Steven J. Hilton

  
	
   

  	
   

  	
  Title:

  	
  Chairman and Chief Executive Officer

  
						

 

AGREED to this 16th day of October, 2006 by:

	
  

  	
   

  	
  EXECUTIVE:   Steven Davis

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Steven Davis

  	
   

  

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EXHIBIT A 

BONUS TERMS FOR STEVEN DAVIS

For 2006, a bonus
of $400,000, provided that Executive is employed by the Company on December 31,
2006.  Such bonus to be paid on or around
January 31, 2007.

For 2007 and
during each Renewal Term (if any), Executive will be eligible for an annual
bonus, which is targeted to be between .25% and .33% of EBITDA.  The payout range will be based on Executive’s
achievement of specific goals to be mutually agreed upon between Executive and
CEO and approved by the Company’s Executive Compensation Committee of the Board
of Directors.  This annual bonus, which
is subject to leally required withholdings, will be paid in February following
the end of the respective fiscal year.

 9Exhibit
10.2

October
16, 2006

Mr. Steven Davis

257 Brokenbraugh Court

Metairie,
Louisiana 70005

Change of Control Agreement

Dear Steve:

The Board of Directors believes
that it is in the best interests of Meritage Homes Corporation (“Meritage”) to
take appropriate steps to allay any concerns you may have about your future
employment opportunities with Meritage and its subsidiaries (Meritage and its
subsidiaries are collectively referred to as the “Company”).  As a result, the Board has decided to offer
to you the benefits described below in this Change of Control Agreement.

Please note that the
benefits described below will only be effective if you sign the extra copy of
this Change of Control Agreement (the “Agreement”) which is enclosed and return
it to me.  This Agreement was drafted to
comply with the requirements of Section 409A of the Internal Revenue Code of
1986, as amended (“Code”) and the proposed regulations issued thereunder.  If the final regulations issued under Code
Section 409A provide for more liberalized rules than those under this Agreement,
and if the Company decides to amend the change of control agreements for other
Company executives to reflect any such change, this Agreement will be amended
in a manner consistent with the amendments made to those other change of
control agreements.

1.             TERM OF AGREEMENT.

This Agreement is
effective immediately and will continue in effect as long as you are actively
employed by the Company, unless you and the Company agree in writing to its
termination.

2.             SEVERANCE PAYMENT AND STOCK OPTION ACCELERATION.

If your employment with
the Company is terminated without “Cause” (as defined in Section 6) at any
time within two years following a “Change of Control” (as defined in Section
4), you will receive the “Severance Payment” described below.  You will also receive the Severance Payment
if you terminate your employment for “Good Reason” (as defined in Section 5) at
any time within two years following a Change of Control.

The “Severance Payment”
equals (i) your annual base salary on the date of termination of your
employment plus (ii) your incentive compensation for the year preceding the
year in which the Change of Control occurred. 
In addition, you will not be required to repay any portion of 

 
  

your relocation payments
or reimbursements upon such termination of employment.  The Severance Payment will be paid in one
lump sum within 15 business days of your termination of employment.

You are not entitled to
receive the Severance Payment if your employment is terminated for Cause, if
you terminate your employment without Good Reason, or if your employment is
terminated by reason of your “Disability” (as defined in Section 8(d)) or your
death.  In addition, you are not entitled
to receive the Severance Payment if your employment is terminated by you or the
Company for any or no reason before a Change of Control occurs or more than two
years after a Change of Control has occurred.

In order to receive the
Severance Payment, you must execute any release reasonably requested by the
Company.

The Severance Payment
will be paid to you without regard to whether you look for or obtain
alternative employment following your termination of employment with the
Company.

Notwithstanding anything
in this Agreement or in any option agreement to the contrary, upon a Change of
Control, without further action (i) any stock option granted to you shall
accelerate and become vested and (ii) any restrictions on restricted stock
awards shall lapse.  You will have a
period of one year from the date of termination to exercise such options.

3.             BENEFITS CONTINUATION.

If you are entitled to
severance under Section 2, you will continue to receive life, disability,
accident and group health insurance benefits substantially similar to those
which you were receiving immediately prior to your termination of employment
for a period of 18 months following your termination of employment.  Such benefits shall be provided on
substantially the same terms and conditions as they were provided prior to the
Change of Control.

The Company does not
intend to provide duplicative benefits. 
As a result, benefits otherwise receivable pursuant to this Agreement shall
be reduced or eliminated if and to the extent that you receive such benefits
pursuant to any employment agreement you may have with the Company.

Benefits otherwise
receivable pursuant to this Section 3 shall also be reduced or eliminated if
and to the extent that you receive comparable benefits from any other source
(for example, another employer); provided, however, you shall have no
obligation to seek, solicit or accept employment from another employer in order
to receive the benefits provided by this Agreement.

4.             CHANGE OF CONTROL DEFINED.

For purposes of this
Agreement, the term Change of Control shall mean and include the following
transactions or situations:

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(a)           A sale,
transfer, or other disposition by Meritage through a single transaction or a
series of transactions of securities of Meritage representing 33% or more of
the combined voting power of Meritage’s then outstanding securities to any “Unrelated
Person” or “Unrelated Persons” acting in concert with one another.  For purposes of this Section 4, the term “Person”
shall mean and include any individual, partnership, joint venture, association,
trust, corporation, or other entity (including a “group” as referred to in
Section 13(d)(3) of the Securities Exchange Act of 1934 (the “Act”)).  For purposes of this Section 4, the term “Unrelated
Person” shall mean and include any Person other than the Company, or an
employee benefit plan of the Company.

(b)           A sale,
transfer, or other disposition through a single transaction or a series of
related transactions of all or substantially all of the assets of Meritage to
an Unrelated Person or Unrelated Persons acting in concert with one another.

(c)           Any
consolidation or merger of Meritage with or into an Unrelated Person, unless
immediately after the consolidation or merger the holders of the common stock
of Meritage immediately prior to the consolidation or merger are the beneficial
owners of securities of the surviving corporation representing at least 50% of
the combined voting power of the surviving corporation’s then outstanding
securities.

5.             GOOD REASON DEFINED.

For purposes of this
Agreement, the term “Good Reason” shall mean if following a Change of Control
you are either (i) not offered a comparable position in the surviving
corporation or (ii) required to relocate to any employment location that is
more than thirty (30) miles from the Company’s Scottsdale, Arizona
headquarters.

6.             CAUSE DEFINED.

For purposes of this
Agreement, the term “Cause” will exist in the following circumstances:  (i) you are convicted of a felony, (ii) you
engage in any fraudulent or other dishonest act to the detriment of the
Company, (iii) you fail to report for work on a regular basis, except for
periods of authorized absence or bona fide illness, (iv) you misappropriate
trade secrets, customer lists, or other proprietary information belonging to
the Company for your own benefit or for the benefit of a competitor, (v) you
engage in any willful misconduct designed to harm the Company or its
stockholders, or (vi) you fail to perform properly your assigned duties.

7.             CEILING ON BENEFITS.

The Code places
significant tax burdens on you and the Company if the total payments made to
you due to a Change of Control exceed prescribed limits.  For example, if your limit is $749,999
(because your “Base Period Income” (as defined below) is $250,000) and the “Total
Payments” (as defined below) exceed the limit by even $1.00, you are subject to
an excise tax under Section 4999 of the Code of 20% of all amounts paid to you
in excess of $250,000.  If 

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your limit is $749,999,
you will not be subject to an excise tax if you receive exactly $749,999.  If you receive $750,000, you will be subject
to an excise tax of $100,000 (20% of $500,000).

In order to avoid this
excise tax and the related adverse tax consequences for the Company, by signing
this Agreement, you agree that the present value of your Total Payments will
not exceed an amount equal to 2.99 times your Base Period Income.  This is the maximum amount which you may
receive without becoming subject to the excise tax imposed by Section 4999 of
the Code or which the Company may pay without loss of deduction under Section
280G of the Code.

“Base Period Income” is
an amount equal to your “annualized includible compensation” for the “base
period” as defined in Sections 280G(d)(1) and (2) of the Code and the
regulations adopted thereunder. 
Generally, your “annualized includible compensation” is the average of
your annual taxable income from the Company for the “base period,” which is the
five calendar years prior to the year in which the Change of Control occurs (or
the number of years worked if less than five).  For example, if a Change of Control occurs in
2009, your base period compensation would be the average of the compensation
includible in your income for years 2006, 2007, 2008 and because you were first
employed in 2005, your annualized compensation for that partial year.  Any compensation includible in your income
for 2009 is disregarded for these purposes. 
These concepts are complicated and technical and all of the rules set
forth in the applicable regulations apply for purposes of this Agreement.

Your “Total Payments”
include the sum of the Severance Payment and any other “payments in the nature
of compensation” (as defined in Section 280G of the Code and the regulations
adopted thereunder).

If Meritage believes that
these rules will result in a reduction of the payments to which you are
entitled under this Agreement, it will so notify you within 60 days following
delivery of the “Notice of Termination” described in Section 8.  You and Meritage will then, at Meritage’s
expense, retain legal counsel, certified public accountants, and/or a firm of
recognized executive compensation consultants to provide an opinion or opinions
concerning whether your Total Payments exceed the limit discussed above.

Meritage will select the
legal counsel, certified public accountants and executive compensation
consultants.  If you do not accept one or
more of the parties selected by Meritage you may provide Meritage with the
names of legal counsel, certified public accountants and/or executive
compensation consultants acceptable to you. 
If Meritage does not accept the party or parties selected by you, the
legal counsel, certified public accountants and/or executive compensation
consultants selected by you and Meritage, respectively, will select the legal
counsel, certified public accountants and/or executive compensation consultants
to provide the opinions required.

At a minimum, the
opinions required by this Section 7 must set forth (a) the amount of your Base
Period Income, (b) the present value of the Total Payments and (c) the amount
and present value of any excess parachute payments.

 4
 

 

If the opinions state
that there would be an excess parachute payment, your payments under this
Agreement will be reduced to the extent necessary to eliminate the excess.

You will be allowed to
choose which payment should be reduced or eliminated, but the payment you
choose to reduce or eliminate must be a payment determined by such legal
counsel, certified public accountants, and/or executive compensation
consultants to be includible in Total Payments. 
You will make your decision in writing and deliver it to Meritage within
30 days of your receipt of such opinions. 
If you fail to so notify Meritage, it will decide which payments to
reduce or eliminate.

If the legal counsel,
certified public accountants, and/or executive compensation consultants
selected to provide the opinions referred to above so requests in connection
with the opinion required by this Section 7, a firm of recognized executive
compensation consultants, selected by you and Meritage pursuant to the
procedures set forth above, shall provide an opinion, upon which such legal
counsel, certified public accountants, and/or executive compensation
consultants may rely, as to the reasonableness of any item of compensation as
reasonable compensation for services rendered before or after the Change of
Control.

If Meritage believes that
your Total Payments will exceed the limitations of this Section 7, it will
nonetheless make payments to you, at the times stated above, in the maximum
amount that it believes may be paid without exceeding such limitations.  The balance, if any, will then be paid after
the opinions called for above have been received.

If the amount paid to you
by Meritage is ultimately determined, pursuant to the opinion referred to above
or by the Internal Revenue Service, to have exceeded the limitation of this
Section 7, the excess will be treated as a loan to you by Meritage and shall be
repayable on the 90th day following demand by Meritage, together with interest at
the “applicable federal rate” provided in Section 1274(d) of the Code.

In the event that the
provisions of Sections 280G and 4999 of the Code are repealed without
succession, this Section 7 shall be of no further force or effect.

8.             TERMINATION NOTICE AND PROCEDURE.

Any termination by the
Company or you of your employment within two (2) years following a Change of
Control shall be communicated by written Notice of Termination to you if such
Notice of Termination is delivered by the Company and to the Company if such
Notice of Termination is delivered by you, all in accordance with the following
procedures:

 5
 

 

(a)           The Notice
of Termination shall set forth in reasonable detail the facts and circumstances
alleged to provide a basis for termination.

(b)           Any Notice
of Termination by the Company shall be in writing signed by a senior executive
officer of the Company or member of the Executive Compensation Committee of the
Board of Directors of Meritage specifying the basis for such termination.

(c)           If during
the two (2) year period following a Change of Control the Company furnishes a
Notice of Termination for Cause and you in good faith notify the Company that a
dispute exists concerning such termination within the 15-day period following
your receipt of such notice, you may elect to continue your employment during
such dispute.  If it is thereafter
determined that (i) Cause did exist, your “Termination Date” shall be the
earlier of (A) the date on which the dispute is finally determined, either by
mutual written agreement of the parties or pursuant to the alternative dispute
resolution provisions of Section 15 or (B) the date of your death; or (ii)
Cause did not exist, your employment shall continue as if the Company had not
delivered its Notice of Termination and there shall be no Termination Date
arising out of such notice.

(d)           If during
the two (2) year period following a Change of Control the Company furnishes a
Notice of Termination by reason of Disability and you in good faith notify the
Company that a dispute exists concerning such termination within the 15-day
period following your receipt of such notice, you may elect to continue your
employment during such dispute.  Any
dispute relating to the existence of a Disability shall be resolved by the
opinion of the licensed physician selected by Meritage, provided, however, that
if you do not accept the opinion of the licensed physician selected by
Meritage, the dispute shall be resolved by the opinion of a licensed physician
who shall be selected by you; provided further, however, that if Meritage does
not accept the opinion of the licensed physician selected by you, the dispute
shall be finally resolved by the opinion of a licensed physician selected by
the licensed physicians selected by Meritage and you, respectively.  If it is thereafter determined that (i) a
Disability did exist, your Termination Date shall be the earlier of (A) the
date on which the dispute is resolved or (B) the date of your death; or (ii) a
Disability did not exist, your employment shall continue as if the Company had
not delivered its Notice of Termination and there shall be no Termination Date
arising out of such notice.  For purposes
of this Agreement, “Disability” shall mean a disability that results in you
being medically unable to fulfill your duties of employment for six (6)
consecutive months.

(e)           If during
the two (2) year period following a Change of Control and as a result of such
Change of Control you in good faith furnish a Notice of Termination for Good
Reason and the Company notifies you that a dispute exists concerning the
termination within the 15-day period following the Company’s receipt of
such notice, you may elect to continue your employment during such
dispute.  If it is thereafter determined
that (i) Good Reason did exist, your Termination Date shall be the earlier of
(A) the date on which the dispute is finally determined, either by mutual
written agreement of the parties or pursuant to the alternative dispute
resolution provisions of Section 15, (B) the date of your death or (C) one day
prior to the second anniversary of a Change of Control; or (ii) Good Reason did
not exist, your employment 

 6
 

 

shall continue after such determination as if you had not delivered the
Notice of Termination asserting Good Reason.

(f)            If during the
two (2) year period following a Change of Control you do not elect to continue
employment pending resolution of a dispute regarding a Notice of Termination,
and it is finally determined that the reason for termination set forth in such
Notice of Termination did not exist, if such notice was delivered by you, you
shall be deemed to have voluntarily terminated your employment other than for
Good Reason and if delivered by the Company, the Company will be deemed to have
terminated you other than by reason of Disability or Cause.

(g)           For purposes
of this Agreement, a transfer of your employment from Meritage to one of its
subsidiaries or a transfer of your employment from a subsidiary to Meritage or
another subsidiary shall not be treated as a termination of employment.

9.             SUCCESSORS.

Meritage will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of
Meritage to assume, whether expressly or by operation of law, this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.  Failure of Meritage to obtain such assumption
shall be a breach of this Agreement and shall entitle you to compensation in
the same amount and on the same terms to which you would be entitled hereunder
if you terminate your employment for Good Reason following a Change of Control,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Termination Date.  As used in this agreement “Company” shall
mean Company, as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law or otherwise.

10.          BINDING AGREEMENT.

This Agreement shall
inure to the benefit of and be enforceable by you and your personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.  If you should die
while any amount would still be payable to you hereunder had you continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee, legatee or other
designee or, if there is no such designee, to your estate.

11.          NOTICE.

For purposes of this
Agreement, notices and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses set forth on
the first page of this Agreement, provided that all notices to Meritage shall
be directed to the attention of the Chief Executive Officer of 

 7
 

 

Meritage with a copy to
the General Counsel of Meritage, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.

12.          MISCELLANEOUS.

No provision of this
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by you and a
senior executive officer of the Company or a member of the Executive
Compensation Committee of the Board of Directors of Meritage.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time.  No
agreement or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. 
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Texas without regard to
its conflicts of law principles.  All
references to sections of the Act or the Code shall be deemed also to refer to
any successor provisions to such sections. 
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law.

13.          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.

14.          COUNTERPARTS.

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

15.          ALTERNATIVE DISPUTE RESOLUTION.

All claims, disputes and
other matters in question between the parties arising under this Agreement
shall, unless otherwise provided herein (such as in Sections 7 and 8(d)), be
resolved by the arbitration provisions set forth below.

Any dispute, controversy,
or claim, whether contractual or non-contractual, between Meritage and you
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”).  Any arbitration shall be conducted by
arbitrators approved by the AAA and mutually acceptable to Meritage and
you.  All such disputes, controversies,
or claims 

 8
 

 

shall be conducted by a
single arbitrator, unless the dispute involves more than $100,000 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 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, Arizona metropolitan area.  The arbitrator(s) shall award reasonable
attorneys’ fees and costs to the prevailing party.

16.          EXPENSES AND INTEREST.

If a good faith dispute
shall arise with respect to the enforcement of your rights under this Agreement
or if any arbitration or legal proceeding shall be brought in good faith to
enforce or interpret any provision contained herein, or to recover damages for
breach hereof, and you are the prevailing party, you shall recover from the
Company any reasonable attorneys’ fees and necessary costs and disbursements
incurred as a result of such dispute or legal proceeding, and prejudgment
interest on any money judgment obtained by you calculated at the rate of
interest announced by Guaranty Bank from time to time as its prime rate from
the date that payments to you should have been made under this Agreement.

17.          PAYMENT OBLIGATIONS ABSOLUTE.

Meritage’s obligation to
pay you the compensation and to make the arrangements in accordance with the
provisions herein shall be absolute and unconditional and shall not be affected
by any circumstances; provided, however, that the Company may apply amounts
payable under this Agreement to any debts owed to the Company by you on your
Termination Date.  All amounts payable by
Meritage in accordance with this Agreement shall be paid without notice or
demand.  If Meritage has paid you more
than the amount to which you are entitled under this Agreement, the Company
shall have the right to recover all or any part of such overpayment from you or
from whomsoever has received such amount.

18.          ENTIRE AGREEMENT.

This Agreement sets forth
the entire agreement between you and Meritage concerning the subject matter
discussed in this Agreement and supersedes all prior agreements, promises,
covenants, arrangements, communications, 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.

19.          PARTIES.

This Agreement is an
agreement between you and Meritage.  In
certain cases, though, obligations imposed upon Meritage may be satisfied by a
subsidiary of Meritage.  Any payment 

 9
 

 

made or action taken by a
subsidiary of Meritage shall be considered to be a payment made or action taken
by Meritage for purposes of determining whether Meritage has satisfied its
obligations under this Agreement.

20.          SECTION 409A.

If any payments under
this Agreement are subject to the provisions of Code Section 409A, it is
intended that the Agreement will comply fully with and meet all the
requirements of Code Section 409A.

If you would like
to participate in this special benefits program, please sign and return the
extra copy of this letter which is enclosed.

	
  

  	
  Sincerely,

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By.

  	
  /s/ Steven J. Hilton

  	
   

  
	
   

  	
  Name:

  	
  Steven J. Hilton

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
							

 

ACCEPTANCE

I hereby accept the offer
to participate in this special benefits program and I agree to be bound by all
of the provisions noted above.

	
  

  	
  /s/ Steven Davis

  	
   

  
	
   

  	
  Steven Davis

  
				

 

 10

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