Document:

Exhibit 10.2

LARRY W. SEAY

SECOND AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

(Effective as of January 1, 2007)

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

RECITALS

WHEREAS,
the Executive is currently employed by the Company as its Chief Financial
Officer, Executive Vice President and Secretary of the Company;

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

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

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

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

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

1.                    Employment.  Subject to the terms and conditions of this
Agreement, the Company agrees to employ Executive as Executive Vice President
and Chief Financial Officer of the Company, and Executive agrees to diligently
perform the duties associated with such positions.  Executive will report directly to the
Chairman and 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 December 31, 2008, unless Executive’s
employment is terminated earlier pursuant to Section 6.  Thereafter, the Agreement will automatically
renew for additional periods of one year (“Renewal Term(s)”), unless on or
before September 15, 2007 (or September 15 of any Renewal Term), either
Executive or the

 

Company notifies the other in writing that it wishes
to terminate employment under this Agreement at the end of the term then in
effect.

3.                    Base Salary.  The Company will pay
Executive a base salary (“Base Salary”)
at the annual rate of $450,000 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.

4.                    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 (“Bonus”).  The Committee has the complete discretion to act
reasonably to reduce the amount of the annual incentive compensation
established pursuant to Exhibit A (including to zero) (the “Actual Bonus”)
and any such Actual Bonus, if any, will be due and payable in accordance with Exhibit
A.

B.                   Long-Term
Incentives.  During 2007, the
Committee shall grant the Executive an option to acquire 36,667 shares of the
Company’s stock under the Company’s 2006 Stock Incentive Plan (“2006 Plan”).  The option will have an exercise price equal
to the closing stock price on the date of grant, shall have a seven-year term,
and shall vest ratably over five years from the date of grant.  The option will also be subject to the terms
and conditions set forth in the 2006 Plan and the Company’s form of option
agreement.  In addition, the Committee
shall grant the Executive 7,333 shares of the Company’s stock under the 2006
Plan, which shares shall be subject to transfer restrictions which shall lapse
in equal increments over the three-year period beginning on the first
anniversary of the date of grant.  The
restricted stock grant will also be subject to the terms and conditions set forth
in the 2006 Plan and in the Company’s form of restricted stock award
agreement.  For periods beginning after
2007, Executive may receive awards under the 2006 Plan (or any successor plan)
in such amount (if any) and form and subject to such terms and conditions as
determined in the Board’s sole and absolute discretion.  The awards granted shall also be subject to
the accelerated vesting and other provisions set forth in the Second Amended
and Restated Change in Control Agreement between Executive and the Company,
effective as of January 1, 2007 (“CIC Agreement”).

5.                    Executive Benefits.  During the term of this Agreement, Executive
will be entitled to reimbursement of reasonable and customary business
expenses.  The Company will provide to
Executive a $1,200 per month automobile allowance, such fringe benefits and
other Executive benefits as are regularly provided by the Company to its
management (e.g., health and life insurance, paid vacation, etc.); provided,
however, that nothing herein shall preclude the Company from amending or
terminating any employee or general executive benefit plans or programs.  The Company shall provide Executive with $3,000,000
of term life insurance (subject to the Executive’s insurability), to which the
Company will pay up to $20,000 of annual premium payments towards the purchase
of such life insurance.  By signing this
Agreement, Executive hereby knowingly and voluntarily waives his right to any
payment under the SERBP.

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6.                    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; and
(iii) the Company shall reimburse Executive for COBRA premiums for the period
that the Company is required to offer COBRA coverage as a matter of law.

B.                   Voluntary
Resignation by Executive with Good Reason. 
If Executive voluntarily terminates his employment with the Company with
Good Reason, then (i) the Company will be obligated to pay Executive’s Base
Salary through the Date of Termination; (ii) no Bonus shall be payable for the
fiscal year in which the termination occurs; (iii) the Company shall reimburse
Executive for COBRA premiums for the period that the Company is required to
offer COBRA coverage as a matter of law; (iv) at the Company’s option, the
Executive shall render reasonable consulting services to the Company during the
12-month period following termination of employment as may be requested from
time to time by the Chairman of the Committee; and (v) the Company will pay
Executive an amount equal to the sum of (A) one times Executive’s Base Salary on
the Date of Termination of employment, and (B) one times the average of the Actual
Bonus compensation Executive earned in the two years prior to his termination
of employment; provided, however that the total amount set forth in this
Section 6(b)(v) shall not exceed $3 million. 
Unless otherwise provided in this Agreement, this amount shall be paid
over the one year period following Executive’s termination of employment (“Severance
Period”).

C.                   Termination
without Cause by the Company.  If the
Company terminates Executive without Cause, then (i) the Company will be
obligated to pay Executive’s Base Salary through the Date of Termination; (ii)
no Bonus shall be payable for the fiscal year in which the termination occurs,
except if the Company terminates Executive’s employment without Cause during
the last three months of the Company’s fiscal year, Executive will be paid a
pro rata bonus based upon the Company’s performance for the fiscal year,
payable at the time set forth in Exhibit A; (iii) the Company shall
reimburse Executive for COBRA premiums for the period that the Company is
required to offer COBRA coverage as a matter of law; (iv) any options granted
after the Effective Date will become fully vested and exercisable and all
restrictions on awards will lapse; (v) at the Company’s option, the
Executive shall render reasonable consulting services to the Company during the
12-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) one times Executive’s Base
Salary on the Date of Termination of employment, and (B) the average of the Actual
Bonus compensation Executive earned in the two years prior to his termination
of employment; provided, however that the amount set forth in this Section 6(c)(vi)
shall not exceed $3 million.  Unless
otherwise provided in this Agreement, this amount shall be paid over Severance
Period.

D.                  Termination
for Cause by the Company.  If the
Company terminates Executive’s employment for Cause, then, (i) the Company will
be obligated to pay Executive’s Base Salary through the Date of Termination;
and (ii) no Bonus shall be payable for the fiscal year in which the termination
occurs.  Upon a termination for Cause by
the Company, the provisions of Section 7 (Restrictive Covenant)
shall automatically become applicable for the six-month period set

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forth therein, without any further payment due
Executive.  Executive acknowledges and
agrees that the compensation herein is adequate consideration for such
covenants.

E.                   Termination
upon Death or Disability.  If
Executive’s employment is terminated as a result of Executive’s death or
Disability, then the Company will be obligated to pay (i) Executive’s then
current Base Salary through the Date of Termination, (ii) a pro rated amount of
Executive’s Actual Bonus for the year, payable at the time set forth in Exhibit
A, (iii) Executive’s COBRA premiums for the period that the Company is
required to offer COBRA coverage as a matter of law; and (iv) any options
granted after the Effective Date will become fully vested and exercisable and
all restrictions on awards will lapse and, to the extent permitted under the
plan’s governing documents, Executive (or Executive’s beneficiary(ies)) shall
have a period of one year from the Date of Termination of employment to
exercise such options.  If Executive dies
or becomes Disabled during any period that the Company is obliged to make payments
under Section 6(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, and (B) the Company materially breaches its obligations under
this Agreement and such breach is not cured within a reasonable period of time not
to exceed 30 days after written notice from the Executive;

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

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

G.                   Procedures
for Notices of Termination.  The
procedures set forth in Section 8 (a), (b) and (d) of the CIC Agreement shall
apply under this Agreement in connection with a notice of termination as to the
kind of termination events described in those subsections.

H.                  Compliance
with Section 409A of the Internal Revenue Code.  Any payment under this Section 6 shall be
subject to the provisions of this Section 7(h) (except for a payment pursuant
to Section 6(e)).  If Executive is a “Specified
Employee” of the Company for purposes of

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Internal Revenue Code Section 409A (“Code Section 409A”)
at the time of a payment event set forth in Sections 6 (b) or (c), then no
severance or other payments pursuant to Section 6 shall be made to Executive by
the Company until the amount of time has passed that is necessary to avoid
incurring excise taxes under Code Section 409A. 
Should this paragraph 6(h) result in a delay of payments to Executive,
on the first day any such payments may be made without incurring a penalty
pursuant to Section 409A (the “409A Payment Date”), the Company shall begin to
make such payments as described in this paragraph 6, provided that any amounts
that would have been payable earlier but for the application of this paragraph 6(h),
shall be paid in lump-sum on the 409A Payment Date along with accrued interest
at the rate of interest announced by Bank of America, Arizona from time to time
as its prime rate from the date that payments to you should have been made
under this Agreement.  The balance of
such severance payments shall be payable in accordance with regular payroll
timing and the COBRA premiums shall be reimbursed monthly.  For purposes of this provision, the term
Specified Employee shall have the meaning set forth in Section 409A(2)(B)(i) of
the Internal Revenue Code of 1986, as amended or any successor provision and
the treasury regulations and rulings issued hereunder.

7.                    Restrictive Covenant.

A.                  Executive hereby
covenants and agrees that for a period of six months from the Date of
Termination, Executive will not engage, directly or indirectly, either as a
principal, partner, joint venturer, consultant or independent contractor,
agent, or proprietor or in any other manner participate in the ownership,
management, operation, or control of any person, firm, partnership, limited
liability company, corporation, or other entity which engages in the business
of providing any products or services, including, without limitation,
homebuilding products or services, which are competitive with those products or
services offered or sold by Company or its subsidiaries within any jurisdiction
in which Company or its subsidiaries does or proposes to do business.  But nothing in this Agreement shall prohibit
Executive from engaging in land banking or lot or land development.

B.                   Executive
hereby covenants and agrees that for a period of one year from the Date of
Termination, Executive will not:

(1)                 Directly or
indirectly hire or solicit for employment for any other business entity other
than the Company (whether as an employee, consultant, independent contractor,
or otherwise) any person who is, or within the six month period preceding the
date of such activity was, an employee, independent contractor or the like of
the Company or any of its subsidiaries, unless Company gives its written
consent to such employment or offer of employment.

(2)                 Call on or
directly or indirectly solicit or divert or take away from Company or any of
its subsidiaries (including, without limitation, by divulging to any competitor
or potential competitor or company or its subsidiaries) any person, firm,
corporation, or other entity who was a customer or prospective customer of the
Company during Executive’s term of employment.

C.                   The covenants
set forth in this Section 7 shall begin as of the date hereof and will
survive the Executive’s termination of employment under Section 6.

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8.                    Non-Disclosure of Confidential Information.

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

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 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 senior management
level employee; (ii) information generally known by senior management
executives

 6
 

 

within the homebuilding and/or land development
industry; (iii) persons, entities, contacts or relationships of Executive that
are also generally known in the industry; and (iv) information which becomes
available on a non-confidential basis from a source other than Executive which
source is not prohibited from disclosing such confidential information by
legal, contractual or other obligation.

9.                    Cooperation; No Disparagement.  During the one-year period following the
Executive’s Date of Termination, 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.

10.                 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.

11.                 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.

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

13.                 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.

14.                 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:

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  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:

  	
  Snell & Wilmer L.L.P.

  
	
   

  	
   

  	
  One Arizona
  Center

  
	
   

  	
   

  	
  400 E. Van Buren
  Street

  
	
   

  	
   

  	
  Phoenix, Arizona
  85004-2202

  
	
   

  	
   

  	
  Phone: (602)
  382-6252

  
	
   

  	
   

  	
  Fax: (602)
  382-6070

  
	
   

  	
   

  	
  Attn: Steven D.
  Pidgeon, Esq.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  if to Executive:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  802 W. El
  Caminito Dr.

  
	
   

  	
   

  	
  Phoenix, Arizona
  85021

  
	
   

  	
   

  	
  Phone: (602)
  943-3128

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
  Gallagher & Kennedy, P.A.

  
	
   

  	
   

  	
  2575 E.
  Camelback Road, Suite 1100

  
	
   

  	
   

  	
  Phoenix, Arizona
  85016-9225

  
	
   

  	
   

  	
  Phone: (602)
  530-8407

  
	
   

  	
   

  	
  Fax: (602)
  530-8500

  
	
   

  	
   

  	
  Attn: Jay A.
  Zweig, Esq.

  

 

15.                 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.

16.                 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),

 8
 

 

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 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 provided hereunder.  Any payment
required under the CIC Agreement to be paid in a lump sum, as set forth in the
CIC Agreement, shall be so paid, and the remainder, if any, due under this
Agreement will be paid in equal monthly installments over the Severance Period.

17.                 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 4 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.

18.                 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.

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

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

	
  

  	
  MERITAGE
  HOMES CORPORATION, a

  Maryland corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ray Oppel

  
	
   

  	
  Name:

  	
  Ray Oppel

  
	
   

  	
  Title:

  	
  Exec.
  Compensation Committee Chairman

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE:
  LARRY W. SEAY

  
	
   

  	
   

  
	
   

  	
  /s/ Larry W.
  Seay

  
					

 

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EXHIBIT
A

INCENTIVE
COMPENSATION SCHEDULE

CFO
Bonus Compensation

Part I – Bonus

	
  2007 and any Renewal

  Term

  	
   

  	
  For 2007 (and any Renewal Term), Executive may, in
  the Board’s reasonable discretion, be entitled to a maximum bonus equal to
  .20% of the EBITDA if Company’s ROA is in the top 1/2 of public homebuilders
  having revenues of $500 million or more per year, and an additional .20% 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 .13% of EBITDA for the applicable measurement. If either measurement falls
  below the 33% threshold, then there will not be any formula bonus paid with
  respect to such measurement. This bonus is established pursuant to, and its
  terms and conditions shall be subject to, the Company’s 2006 Executive
  Management Incentive Plan. For bonuses to be considered for 2008 and
  subsequent years, the Board and Executive agree to discuss the bonus formula
  on or before September 30, 2007, and in each subsequent year.

  

 

Part II – Payment

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

 A-1Exhibit 10.3

SECOND AMENDED AND RESTATED

CHANGE OF CONTROL AGREEMENT

Effective January 1,
2007

(Original Date: February 1, 2000)

Dear Steve:

The Board of Directors
believes that it is in the best interests of Meritage Homes Corporation (“Meritage”),
and its shareholders to take appropriate steps to allay any concerns you (sometimes referred to herein as “Executive”)
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.

1.             Term of Agreement.

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

2.             Severance Payment.

If
your employment with the Company is terminated without “Cause” (as defined in
Section 7) at any time within 90 days prior to or within two years following a “Change
of Control” (as defined in Section 5), 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 6) at any time within two years following a Change of
Control.

The
Severance Payment equals the sum of (i) three times the higher of (x) your
annual base salary on the date of termination of your employment, or (y) your
annual base salary on the date preceding the Change of Control, and (ii) three times the highest of the
following:  (x) your average annual
incentive compensation for the two years prior to termination of your
employment or (y) your annual incentive compensation for the year
preceding the year in which the Change of Control occurred.  Notwithstanding the above, the Severance
Payment shall not exceed the lesser of (i) an amount that could be paid on
account of a Change of Control that is not subject to the imposition of any
excise tax under Code Section 4999 and is not otherwise subject to the
non-deductibility provisions of Code Section 280G, or (ii) $15 million.

The
Severance Payment will be paid in one lump sum as soon as administratively
feasible following termination of your employment, but in no event more than 30
days following termination of your employment; provided that if you are a “specified
employee” (as defined in Section 409A of the Internal Revenue Code of 1986, as
amended (“Code”)) and the payment does not comply with either the short-term
deferral or separation pay exception to the requirements of Code Section 409A,
as described in Prop. Treas. Reg. §§ 1.409A-1(b)(4) and 1.409A-1(b)(9)(iii) (or
successor provisions in the final 409A regulations), or any other exception to
Section 409A, the above payment will be paid to you in one lump sum on the
first day any such payments may be made without incurring a penalty
pursuant to the Code along with accrued interest at the rate of interest announced by Bank of America, Arizona from time
to

 

time
as its prime rate (the “Prime Rate”) from the date that payments to you should
have been made under this Agreement.  If you die after your
termination of employment but before receiving the above payment, the Company
will distribute the benefits to your beneficiary as soon as administratively
feasible following the date of your death.

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 (unless death or Disability occurs after a Notice of Termination).  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 prior to 90 days 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 mutual 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 termination of your employment with the
Company.

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 termination of your employment
for a period of 24 months following termination of your employment.  Such benefits shall be provided on
substantially the same terms and conditions as they were provided prior to the
Change of Control, provided that, if coverage for such benefits is not
available under the plans of the Company, the Company shall pay you an amount
in cash equal to the cost of your obtaining such alternative coverage.

Benefits
otherwise receivable pursuant to this Section also shall 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 such
benefits.

4.             Stock Option Acceleration.

Notwithstanding
anything in this Agreement or in any option agreement to the contrary, upon a
Change of Control, any stock options and restricted stock granted to you shall
accelerate and become vested without further action and, to the extent
permitted under the plan’s governing documents, Executive shall have a period
of one year from the date of termination to exercise such options.  In addition, all restrictions on awards
granted shall lapse.

5.             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)           The acquisition of beneficial ownership,
directly or indirectly, of securities having 35% or more of the combined voting
power of Meritage’s then outstanding securities by any “Unrelated Person” or “Unrelated
Persons” acting in concert with one another. 
For purposes of this Section, 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, the term “Unrelated Person” shall mean and
include any Person other than the Company, or an employee benefit plan of the
Company, or any officer, director, or 10% or more shareholder of the Company as
of the date of this Agreement.

(b)           A sale, transfer, or other disposition
through a single transaction or a series of 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.

(d)           A change during any period of two consecutive
years of a majority of the members of the Board of Directors of Meritage for
any reason, unless the election, or the nomination for election by the Company’s
shareholders, of each director was approved by the vote of a majority of the
directors then still in office who were directors at the beginning of the
period.

6.             Good Reason Defined.

For
purposes of this Agreement, the term “Good Reason” shall include the following
circumstances:  (a) if the Company
assigns you duties that are materially inconsistent with, or constitute a
material reduction of powers or functions associated with, your position,
duties, or responsibilities with the Company, or a material adverse change in your
titles, authority, or reporting responsibilities, or in conditions of your
employment, (b) if your base salary is reduced, (c) if the Company fails to
cause any successor to expressly assume and agree to be bound by the terms of
this Agreement, (d) any purported termination by the Company of your employment
for grounds other than for “Cause,” (e) if the Company relieves you of
your duties other than for “Cause,” (f) if you are required to relocate to an
employment location that is more than fifty (50) miles from Scottsdale,
Arizona, or (g) the Company materially breaches its obligations under this
Agreement and such breach is not cured within a reasonable period of time after
written notice from the Executive.  The
Company and you further acknowledge and agree that, if following a Change of
Control, you do not serve or are not serving as Chairman and Chief Executive
Officer of the parent corporation of the surviving organization, you have
experienced a material reduction of powers or functions associated with your
position, duties or responsibilities with the Company such that Good Reason
shall be deemed to exist.

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7.             Cause Defined.

For
purposes of this Agreement,
the term “Cause” will exist if Executive, during the term of this Agreement as
set forth in Section 1, (i) has engaged in malfeasance, willful or gross
misconduct, or willful dishonesty that materially harms the Company or its
stockholders, (ii) is convicted of a felony that is materially detrimental to
the Company or its stockholders, (iii) is convicted of or enters a plea of nolo contendere to a felony that materially damages the
Company’s financial condition or reputation or to a crime involving fraud; (iv)
is in material violation of the Company’s ethics/policy code, including breach
of duty of loyalty in connection with the Company’s business; (v) willfully
fails to perform duties under this Agreement or under the Second Amended and
Restated Employment Agreement between you and the Company effective as of
January 1, 2007 (“Employment Agreement”) after notice by the Board and an
opportunity to cure; (vi) impedes, interferes or fails to reasonably cooperate
with an investigation authorized by the Board or fails to follow a legal and
proper Board directive; and (vii) a restatement of financial results that
occurs as the result of your willful misconduct or gross negligence pursuant to
the Sarbanes-Oxley Act.

8.             Termination Notice And Procedure.

Any
termination by the Company
or you of your employment 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:

(a)           The Notice of Termination shall indicate the specific termination
provision in this Agreement relied upon and 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
the Chairman of the Compensation Committee (the “Committee”) of the Board of
Directors of the Company specifying in detail the basis for such termination.

(c)           If the Company shall furnish a Notice of Termination for Cause and you
in good faith notify the Company that a dispute exists concerning such
termination within the 30-day period following your receipt of such notice, you
may elect to continue your employment (or you may be placed on paid
administrative leave, at the Company’s option), 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.  A determination of Cause shall
be made by a majority of the members of the Board only after the Executive and
his counsel, if any, have been giving an opportunity to meet with the Board in
advance of the Board’s vote on the matter.

(d)           If the Company shall furnish a Notice of Termination by reason of
Disability and you in good faith notify the Company that a dispute exists
concerning such

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termination within the 30-day period following your receipt of such
notice, you may elect to continue your employment during such dispute (or you
may be placed on paid administrative leave, at the Company’s option).  The 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 be given the meaning ascribed to such term in your Employment Agreement
at the time the Disability determination is being made.

(e)           If 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 30-day period following the Company’s receipt of such notice, you
may elect to continue your employment (or you may be placed on paid
administrative leave with pay, at the Company’s option), 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, and your payments hereunder
shall reflect events occurring after you delivered Notice of Termination; or
(ii) Good Reason did not exist, your employment shall continue after such
determination as if you had not delivered the Notice of Termination asserting
Good Reason.  The Company shall be given
an opportunity to cure the event causing Good Reason within the 15-day period
following Executive’s Notice of Termination for Good Reason.

(f)            If 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 with Cause.

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 or any of its subsidiaries to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that Meritage
or any subsidiary would be required to perform it if no such succession had
taken place.  Failure of Meritage to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a material breach of this Agreement by Meritage and shall
entitle you to compensation in the same amount and on the

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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 as shown in the Employment Agreement, provided that
all notices to Meritage shall be directed to the attention of the Chairman of
the Committee with a copy to the Secretary 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 a 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
the Chairman of the Committee.  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 Arizona 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.  The
obligations of Meritage that arise prior to the expiration of this Agreement
shall survive the expiration of the term of this Agreement.

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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 be
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
Section 8), be resolved in accordance with the arbitration and mediation provisions included in your
Employment Agreement.

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, the prevailing party shall recover 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 calculated
at the Prime Rate from the date that payments were or 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. 
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, Meritage shall have
the right to recover all or any part of such overpayment from you or from
whomsoever has received such amount.

18.           Effect on Employment Agreement.

This
Agreement supplements, and does not replace, your Employment Agreement.  If there is any conflict between the
provisions of this Agreement and your Employment Agreement, such conflict shall
be resolved so as to provide the greater benefit to you.  However, the Company does not intend to
provide duplicative payments, severance or benefits with in the Employment
Agreement or under any employee severance plan to the extent such a plan
exists or is subsequently implemented by the Company.  As a
result, benefits otherwise receivable pursuant to this Agreement shall be
reduced or eliminated if and to the extent that you receive severance,
consulting or non-competition payments or benefits pursuant to the Employment

 7
 

 

Agreement,
including, but not limited to, payments or benefits pursuant to Section 7 of
the Employment Agreement, or pursuant to an employee severance plan.

19.           Entire Agreement.

This
Agreement, your Employment Agreement and your option grant documents set forth
the entire agreement between you and the Company concerning the subject matter
discussed in this Agreement and supersede 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.  Notwithstanding the
foregoing, nothing in this Agreement is intended to affect any previous
agreements pertaining to the grant of options to the Executive, including
without limitation, provisions set forth in Executive’s prior Change of Control
Agreement providing for acceleration upon a change of control.

20.           Deferral of Payments.

To
the extent that any payment under this Agreement, when combined with all other
payments received during the year that are subject to the limitations on
deductibility under Code Section 162(m), exceeds the limitations on
deductibility under Code Section 162(m), such payment shall be deferred to the
next calendar year.  The determination of
deductibility under the preceding sentence shall be made by legal counsel,
certified public accountants, and/or executive compensation consultants
selected by Meritage but who shall be reasonably acceptable to you.  Meritage will notify you as soon as it
becomes aware of specific information that may cause it to exercise its
discretion to require deferral and shall provide you with access to all
information on which its decision is based. 
If the date for payment of any amount is deferred pursuant to this
Section 20, then Meritage will transfer an amount in cash equal to the deferred
amount to a trust which shall be in substantially the same form as is set forth
in Revenue Procedure 92-64, 1992-2 C.B. 422. 
The terms of the trust, including the designation of trustee, shall be
determined by Meritage but shall be reasonably acceptable to you.  All deferred amounts held in the trust shall
bear interest at the Prime Rate from the date that the payment would have been
made to you but for this Section 20 to the date that such payment is actually
made to you.  Payment of the deferred
amounts shall be made no later than the 30th day after the end of the calendar
year in which the deferral occurs, provided that such payment, when combined
with any other payments subject to the Section 162(m) limitations received
during the year, does not exceed the limitations on deductibility under Code
Section 162(m).

21.           Parties.

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

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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/ Ray Oppel

  
	
   

  	
  Name:

  	
  Ray Oppel

  
	
   

  	
  Its:

  	
  Exec.
  Compensation Committee Chairman

  
					

 

Enclosure

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.

	
  

  	
  STEVEN
  J. HILTON

  
	
   

  	
   

  
	
   

  	
  /s/ Steven J.
  Hilton

  

 

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