Although the Committee reviews Meritage’s financing plans and reports recommendations to the full Board for approval, management has primary responsibility for our financial statements and the overall reporting process, including the Company’s internal controls. The independent auditors audit the annual consolidated financial statements prepared by management, express an opinion as to whether those consolidated financial statements fairly present the financial position, results of operations and cash flows of Meritage in conformity with accounting principles generally accepted in the United States of America and discuss with us any issues they believe should be raised with us.

This year, we reviewed Meritage’s audited consolidated financial statements and met with both management and KPMG LLP, our independent auditors, to discuss those consolidated financial statements. Management has represented to us that the consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. We have received from and discussed with KPMG LLP the written disclosure and the letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). These items relate to that firm’s independence from Meritage. We also discussed with KPMG LLP those matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees). Based on these reviews and discussions, we recommended to the Board that Meritage’s audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

Peter L. Ax—Chairman
Robert G. Sarver
Raymond Oppel
William G. Campbell

PERFORMANCE GRAPH

The following Performance Graph does not constitute soliciting material and should not be deemed filed or incorporated by reference into any Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this information.

The chart below graphs our performance in the form of cumulative total return to stockholders for the past five years. Our total return is compared to that of the Standard & Poor’s 500 Index and the peer group reported in our last Proxy Statement. Our peer group is consistent with the group our Board of Directors uses for purposes of calculating certain components of our Co-CEOs’ annual performance bonuses.

The comparison assumes $100 was invested on December 31, 1998 in Meritage common stock and in each of the other indices and assumes reinvestment of dividends.

	As of December 31,
	1998		1999		2000		2001		2002		2003
Meritage Corporation		100		89		306		421		552		1,088
S&P 500		100		120		107		93		72		90
Peer Group(1)		100		93		166		233		273		634

(1)

The Peer Group consists of the following companies: Beazer Homes USA, Inc., Dominion Homes, Inc., Hovnanian Enterprises, Inc., MDC Holdings, Inc., Ryland Group, Inc., Toll Brothers, Inc., Standard- Pacific Corporation, Technical Olympic USA, Inc., M/I Schottenstein Homes, Inc., WCI Communities, Inc., and William Lyon Homes.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Executive officers, directors and “beneficial owners” of more than ten percent of our common stock must file initial reports of ownership and changes in ownership with the Securities and Exchange Commission (SEC) under Section 16(a).

SEC regulations require these reporting persons to furnish us with copies of all Forms 3, 4 and 5, and amendments thereto, that they file with the SEC. Based solely on our review of the copies of such forms furnished to us, or representations that no forms were required, we believe that during 2003 all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Since 1997, we have leased office space in Plano, Texas from a Texas partnership owned by John Landon and his spouse. The lease expires in May 2005. Rents paid to the partnership were $241,825 in 2003 and $225,182 in 2002. Scheduled rent payments in 2004 are approximately $256,000.

We paid legal fees of approximately $1,032,000 in 2003 and $432,000 in 2002 to law firms of which C. Timothy White was a partner.

During 2003 and 2002, we chartered an aircraft from a company in which Steven J. Hilton has an ownership interest. The total amounts paid for the charter service were approximately $202,000 and $128,000, respectively.

In 2002, we entered into a contract with a limited partnership to acquire a parcel of land in Tucson, Arizona. The purchase price of the land is approximately $4.6 million. One of our directors, Robert G. Sarver, has an indirect 5% beneficial interest in this parcel of land through his investment in a partnership. The company anticipates it will acquire this parcel of land in 2004. In addition, during 2002, we chartered an aircraft from a company owned by Mr. Sarver. The total amounts paid for these charter services during 2002 was $27,604.

Prior to becoming a Meritage director, Raymond Oppel made various investments in partnerships that conducted business with the Company. By the end of 2001, Mr. Oppel discontinued making new investments in landbanking transactions that involved sales to Meritage. Mr. Oppel has minority investments in several limited partnerships that have entered into landbanking transactions with us. As of December 31, 2003, Mr. Oppel’s investment amounts had been returned to him. Mr. Oppel also has a 7.5% limited partnership interest in a joint venture that sells lots to Hammonds Homes, which agreement was made prior to our acquisition of Hammonds. During 2002, we acquired 175 lots at a cost of approximately $14.1 million from these partnerships and in 2003 we acquired 243 lots at a cost of approximately $17.7 million. We anticipate that in 2004 we will acquire additional lots from these partnerships pursuant to the existing option contracts and agreements. However, as the amount and timing of acquisitions is subject to a number of factors, including factors within and outside the control of Meritage, the exact amount of purchases in a given period that will be made by the partnerships Mr. Oppel has invested in cannot be reasonably estimated.

Management believes that the terms and fees negotiated for all transactions listed above are no less favorable than those that could be negotiated in arm’s length transactions.

PROPOSAL TO APPROVE AMENDMENT TO THE MERITAGE CORPORATION
STOCK OPTION PLAN
(Proposal No. 2)

On December 12, 2003, our Board of Directors adopted, subject to shareholder approval, amendments to the Meritage Corporation Stock Option Plan (the “Plan”) that would increase the number of shares of common stock reserved for issuance under the plan from 2,150,000 to 2,950,000 and change the maximum number of shares that can be granted to any one person from 300,000 shares in the aggregate to 100,000 shares per year. Certain material features of the plan are discussed below, however, the description is subject to, and qualified by the full text of the plan, attached as Exhibit B, which includes the proposed amendment highlighted in bold. The closing price for our common stock on March 15, 2004, as reported on the New York Stock Exchange, was $74.02 per share.

The affirmative vote of a majority of the shares of common stock present at the annual meeting, in person or by proxy, and entitled to vote is required to approve the proposal. Broker non-votes and abstentions will not be considered votes for this proposal.

The Board believes the plan promotes success and enhances our value, as it ties the personal interests of the participants to those of stockholders and provides the participants with an incentive for outstanding performance. The Board of Directors administers the plan, and has exclusive authority over it, including the power to determine a participant’s eligibility, the types of awards to be granted, the timing of the awards and the exercise price of awards.

General — Description of Available Awards

Incentive Stock Options. An Incentive Stock Option (“ISO”) is a stock option that satisfies the requirements specified in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). Under the Code, ISOs may only be granted to employees. In order for an option to qualify as an ISO, the price payable to exercise the option must be equal or greater than the fair market value of the stock at the date of the grant, the option must expire no later than 10 years from the date of the grant, and the stock subject to ISOs that are first exercisable by an employee in any calendar year must not have a value of more than $100,000 as of the grant date. Certain other requirements must also be met. The Board determines the amount of consideration to be paid to us upon exercise of any options. Payment may be made in cash, common stock or other property.

An optionee is not treated as receiving taxable income upon either the grant or the exercise of an ISO. However, the difference between the exercise price and the fair market value of the stock at the time of exercise is an item of tax preference in determining liability for the alternative minimum tax, assuming that the common stock is either transferable or is not subject to a substantial risk of forfeiture under Section 83 of the Code. If at the time of exercise, the common stock is both nontransferable and is subject to a substantial risk of forfeiture, the difference between the exercise price and the fair market value of the common stock (determined at the time the stock becomes either transferable or not subject to a substantial risk of forfeiture) will be a tax preference item in the year in which the stock becomes either transferable or not subject to a substantial risk of forfeiture.

If common stock acquired by the exercise of an ISO is not sold or otherwise disposed of within two years from the date of its grant and is held for at least one year after the date the stock is transferred to the optionee upon exercise, any gain or loss resulting from its disposition is treated as long-term capital gain or loss. If such common stock is disposed of before the expiration of the above-mentioned holding periods, a “disqualifying disposition” occurs. If a disqualifying disposition occurs, the optionee realizes ordinary income in the year of the disposition in an amount equal to the difference between the fair market value of the common stock on the date of exercise and the exercise price, or the selling price of the common stock and the exercise price, whichever is less. The balance of the optionee’s gain on a disqualifying disposition, if any, is taxed as a capital gain.

We are not entitled to any tax deduction as a result of the grant or exercise of an ISO, or on a later disposition of the common stock received, except in the event of a disqualifying disposition. In such case, we are entitled to a deduction equal to the amount of ordinary income realized by the optionee.

Non-Qualified Stock Options. A Non-Qualified Stock Option (“NQSO”) is any stock option other than an Incentive Stock Option. These options are referred to as “non-qualified” because they do not meet the requirements of, and are not eligible for, the favorable tax treatment provided by Section 422 of the Code.

The optionee realizes no taxable income upon the grant of an NQSO, nor are we entitled to a tax deduction by reason of such grant. Upon the exercise of an NQSO, the optionee realizes ordinary income in an amount equal to the excess of the fair market value of the common stock on the exercise date over the exercise price, and we are entitled to a corresponding tax deduction.

Upon subsequent sale or disposition of common stock acquired through exercise of an NQSO, the optionee realizes a short-term or long-term capital gain or loss to the extent of any intervening appreciation or depreciation. Such a resale by the optionee has no tax consequence to us.

Change of Control

Upon the occurrence of a Corporate Transaction (as defined in the Plan), if the surviving corporation or the purchaser does not assume Meritage’s obligation under the Plan, all outstanding options shall become immediately exercisable in full and each option holder shall be given the opportunity to exercise their options before the consummation of the Corporation Transaction so that the option holder can participate in the Corporate Transaction. The Plan defines a “Corporate Transaction” to include:

a merger or consolidation in which the Company is not the surviving entity,

the sale, transfer or other disposition of all or substantially all of the assets of the Company in a liquidation or dissolution of the company, or

any reverse merger in which the Company is the surviving entity but in which the beneficial ownership of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities are transferred to holders different from those who held such securities immediately prior to such merger.

To the extent that the Plan is unaffected and assumed by the successor corporation or its parent company, a Corporate Transaction will have no effect on the outstanding options and the options shall continue in effect according to their terms. Options which continue in effect shall be appropriately adjusted to account for the number and class of securities which would have been issued to the option holder in connection with the consummation of the Corporate Transaction had the option holder exercised the option immediately prior to the Corporate Transaction. Appropriate adjustments also shall be made to the exercise price of such options, provided that the aggregate exercise price shall remain the same.

Plan Benefits

The following table sets forth grants of options made under the current plan during 2003 to (i) each of the executive officers named on page 5, (ii) all current executive officers, as a group; (iii) all current directors and director nominees who are not executive officers, as a group; (iv) all employees, including all current officers who are not executive officers, as a group; and (v) all non-employees. Grants under the current plan and the new plan are made at the discretion of the Board of Directors.

Individual Or Group Name		Weighted Average Exercise Price Per Share
Executive Officers
John R. Landon	40,000	$	32.23
Steven J. Hilton	40,000	$	32.23
Larry W. Seay	15,000	$	32.00
Richard T. Morgan	10,000	$	32.00
Executive Officer Group (4 persons)	105,000	$	32.17
Non-Executive Officer Director Group (5 persons)	12,500	$	32.00
Non-Executive Officer Employee Group (55 persons)	230,500	$	32.89
Non-Employee Group (1 person)	1,000	$	39.40

Amendments to Plan

The Board of Directors has reviewed the options currently remaining in the option pool for the Plan and has determined that it is appropriate to increase the maximum number of shares authorized for issuance under the Plan and to change the maximum number of shares that can be issued to any one person. As of March 15, 2004, (i) 851,763 shares have been issued upon exercise of options and are included in the total number of shares outstanding Common Stock, and (ii) option grants representing 1,256,697 shares were outstanding under the Plan. The total number of shares of common stock available for awards under the Plan currently is 41,540. The Board believes that an increase in the number of authorized shares is necessary for the continued optimal use of the Plan, thus increasing the Plan’s success and its impact on our value. In addition, Messrs. Landon and Hilton, our co-chief executive officers, have each been issued 260,400 options under the Plan. Therefore, the Board is asking the stockholders to approve amendments to the Plan that would increase the number of shares authorized for issuance under the Plan from 2,150,000 to 2,950,000 and change the maximum number of shares that could be issued to any one person from 300,000 shares in the aggregate to 100,000 shares per year.

EQUITY COMPENSATION PLAN INFORMATION

The following presents information as of December 31, 2003 about the number of shares of our common stock to be issued upon exercise of outstanding options and the number of shares of our common stock remaining available for future issuance under existing equity compensation plans for (1) plans approved by stockholders and (2) plans not approved by stockholders. We have no outstanding warrants or stock appreciation rights.

	(a)		(b)		(c)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		1,346,512	$	22.74		57,540
Equity compensation plans not approved by security holders		0		0		0
Total		1,346,512	$	22.74		57,540

At December 31, 2003, we did not have any equity compensation plans that had been adopted without stockholder approval.

Securities Act Registration

We intent to register the additional shares of common stock available for issuance under a Registration Statement on Form S-8 to be filed with the Securities and Exchange Commission.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THIS PROPOSAL
TO AMEND THE MERITAGE CORPORATION STOCK OPTION PLAN.

INDEPENDENT AUDITORS

KPMG LLP served as our principal independent auditors for the fiscal years ended December 31, 2002 and 2003. We expect representatives of KPMG LLP to be present at our Annual Meeting to respond to appropriate questions, and they will be given an opportunity to make a statement if they wish to.

The following table presents fees for professional audit services rendered by KPMG LLP for the audit of our annual financial statements for 2003 and 2002, and fees billed for other services rendered by KPMG LLP.

	2003		2002
Audit fees (1)	$	459,089	$	361,319
Audit related fees (2)		12,000		11,000
Audit and audit related fees		471,089		372,319
Tax fees (3)		528,491		119,893
All other fees		—		—
Total fees	$	999,580	$	492,212

(1)

Audit fees consisted principally of fees for audit and review services, services related to various SEC filings and related research and the 2003 senior note add-ons. In 2002, audit fees consisted primarily of fees for audit and review services, services related to the acquisitions of Hammonds Homes and Perma-Bilt Homes, and our equity offering.

(2)

Audit related fees consisted of fees related to the audit of our 401(k) Plan.

(3)

Tax fees consisted of fees for income tax consulting and tax (including state and local tax procurement) compliance, including preparation of original and amended state and federal income tax returns, refund claims, and IRS tax audit assistance.

Each year, the Audit Committee approves the annual audit engagement in advance. The Audit Committee also has established procedures to pre-approve all non-audit services provided by the principal accountants. All 2003 non-audit services listed above were pre-approved.

STOCKHOLDER PROPOSALS

The Board of Directors and Nominating/Governance Committee will consider nominations from stockholders for the class of directors whose terms expire at the year 2005 Annual Meeting. Nominations must be made in writing to our Secretary, received at least 90 days prior to the 2005 Annual Meeting, and contain sufficient background information concerning the nominee’s qualifications. Our Corporate Secretary must receive any other stockholder proposals for the 2005 Annual Meeting by December 12, 2004 to be considered for inclusion in our 2005 Proxy Statement. Proposals to be presented at the 2005 Annual Meeting that are not intended for inclusion in the Proxy Statement must be submitted in accordance with our Bylaws. A nomination or other proposal will be disregarded if it does not comply with the above procedures.

OTHER MATTERS

The Board of Directors is not aware of any other matters to be presented at the meeting. If any other business should properly come before the meeting, the proxy holders will vote according to their best judgment.

ELECTRONIC DELIVERY OF FUTURE ANNUAL MEETING MATERIALS

We are offering our stockholders the opportunity to consent to receiving our future proxy materials and annual reports electronically by providing the appropriate information when voting via the Internet. Electronic delivery could save us a significant portion of the costs associated with printing and mailing annual meeting materials, and we hope that our stockholders find this service convenient and useful. If you consent and Meritage elects to deliver future proxy materials and/or annual reports to you electronically, then we will send you a notice (either by electronic mail or regular mail) explaining how to access these materials but will not send you paper copies of these materials unless you request them. We may also choose to send one or more items to you in paper form despite your consent to receive them electronically. Your consent will be effective until you revoke it by terminating your registration at the website www.InvestorDelivery.com if you hold shares at a brokerage firm or bank participating in the ADP program, or by contacting Mellon Investor Services if you hold shares in your own name.

By consenting to electronic delivery, you are stating to Meritage that you currently have access to the Internet and expect to have access in the future. If you do not have access to the Internet, or do not expect to have access in the future, please do not consent to electronic delivery because we may rely on your consent and not deliver paper copies of future annual meeting materials. In addition, if you consent to electronic delivery, you will be responsible for your usual Internet charges (e.g., online fees) in connection with the electronic delivery of the proxy materials and annual report.

Meritage Corporation

Larry W. Seay
Chief Financial Officer, Vice President-Finance
and Secretary
April 9, 2004

EXHIBIT A
MERITAGE CORPORATION
AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS CHARTER

PURPOSE AND AUTHORITY

The primary purpose of the Audit Committee is to prepare an Audit Committee report as required by the SEC to be included in the Corporation’s annual proxy statement and to assist the Board of Directors in fulfilling its oversight of the integrity of the Corporation’s financial statements, the Corporation’s compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence, and the performance of the Corporation’s internal audit function and independent auditors. Consistent with this purpose, the Audit Committee should encourage continuous improvement of, and should foster adherence to the Corporation’s policies, procedures and practices at all levels. The Audit Committee shall have the sole authority to appoint or replace the independent accountants and shall approve all audit engagement fees and terms and all significant non-audit engagements with the independent accountants. The Audit Committee shall consult with management but shall not delegate these responsibilities.

The Audit Committee’s primary duties and responsibilities are to:

Receive and review reports received from independent auditors, and review any audit problems.

Prepare audit committee reports for Corporation proxy statements.

Conduct periodic, separate meetings with each of the outside auditors, internal auditors and management.

Discuss earnings releases and analyst guidance with management.

Establish policies of the Corporation with respect to risk assessment and risk management.

Establish clear hiring policies with regard to current or past employees of the outside auditor that the Corporation may be seeking to hire as an employee of the Corporation.

Perform annual evaluations of the Audit Committee itself.

Make regular reports to the Board.

The Audit Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section IV of this Charter.

The Audit Committee shall have the authority and resources, to the extent it deems necessary or appropriate, to retain special legal, accounting or other consultants to advise the Audit Committee. The Audit Committee may request any officer or employee of the Corporation or the Corporation’s outside counsel or independent auditor to attend a meeting of the Audit Committee or to meet with any members of, or consultants to, the Audit Committee.

II.

COMPOSITION

The Audit Committee shall be comprised of three or more directors. The members of the Audit Committee shall meet the independence and experience requirements of the NYSE and the SEC.

All members of the Committee shall have a working familiarity with basic finance and accounting practices, and the Chair shall be a “financial expert.” Audit Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Corporation or an outside consultant. No member of the Audit Committee may serve simultaneously on the audit committees of more than three public companies.

A-1

Unless a Chair is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.

III.

MEETINGS

The Committee shall meet at least four times annually, or more frequently as circumstances dictate. As part of its job to foster open communication, the Committee should meet periodically with management and the internal and outside auditors in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately. In addition, the Committee or at least its Chair should meet with the independent accountants, internal auditors and management quarterly to review the Company’s financial statements consistent with IV.3 below.

IV.

RESPONSIBILITIES AND DUTIES

To fulfill its responsibilities and duties the Audit Committee shall:

Documents/Reports Review

Review and update this Charter periodically, at least annually, as conditions dictate. The Audit Committee shall annually review the Committee’s own performance.

Review the organization’s annual audited financial statements and any reports or other financial information submitted to any governmental body, or the public, including the Corporation’s disclosures and MD&A, any certification, report, opinion or review rendered by the independent accountants, and recommend whether the audited financial statements shall be included in the Corporation’s Form 10-K.

Review the Corporation’s Form 10-Q and quarterly financial statements with financial management and the independent accountants, if necessary, prior to its filing. The Chair of the Committee may represent the entire Committee for purposes of this review.

Independent Accountants

Select the independent accountants, considering independence and effectiveness and approve the fees and other compensation to be paid to the independent accountants.

Review the performance of the independent accountants and approve any proposed discharge of the independent accountants when circumstances warrant.

Meet in separate sessions with management, the independent auditors and those responsible for the internal audit function to enable a productive identification of any issues that would warrant the Audit Committee’s attention.

Review the experience and qualifications of the senior members of the independent accountant team and the internal audit team.

Obtain and review a report from the independent auditor at least annually regarding (a) all critical accounting policies and practices to be used, (b) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the Corporation, and (c) other material written communications between the independent accountant and management, such as any management letter or schedule of unadjusted differences. Evaluate the qualifications, performance and independence of the independent accountant, including considering whether the accountant’s quality controls are adequate and the provision of non-audit services is compatible with maintaining the accountant’s independence, and taking into account the opinions of management and the internal auditor. The Audit Committee shall present its conclusions to the Board and, as necessary, recommend that the Board take additional action to satisfy itself of the qualifications, performance and independence of the accountants.

A-2

At least annually, obtain and review a report on the outside auditor that addresses: the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one of more independent audits carried out by the firm, and any steps taken to deal with any issues; and all relationships between the independent auditor and the Corporation.

10.

Obtain and review the Corporation’s signing officer(s)’ disclosures regarding (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Corporation’s ability to record, process, summarize and report financial data and any material weaknesses in internal controls, and (b) any fraud whether or not material, that involves management or other employees who have a significant role in the Corporation’s internal controls.

11.

Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the lead audit partner or even the independent accounting firm itself on a regular basis.

12.

Ensure that the lead audit partner of the independent auditor has not performed audit services for the Corporation in each of the five (5) previous fiscal years of that Corporation.

13.

Recommend to the Board policies for the Corporation’s hiring of employees or former employees of the independent accountant who were engaged on the Corporation’s account.

14.

Discuss with the independent accountant any communications between the audit team and the firm’s national office with respect to auditing or accounting issues presented by the engagement.

15.

Meet with the independent accountant prior to the audit to discuss the planning and staffing of the audit and discuss budget and staffing of the Corporation’s internal audit function.

16.

Pre-approve all audit and non-audit services provided by the independent auditor, unless these services are de minimis.

Financial Reporting Processes

17.

Discuss with management and the independent accountants significant financial reporting issues and judgments made in connection with the preparation of the Corporation’s financial statements, including any significant changes in the Corporation’s selection or application of accounting principles, any major issues as to the adequacy of the Corporation’s internal controls, the development, selection and disclosure of critical accounting estimates, and analyses of the effect of alternative assumptions, estimates or GAAP methods on the Corporation’s financial statements.

18.

Discuss with management the Corporation’s earnings press releases, including the use of “pro forma” or “adjusted” non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies.

19.

Discuss with management and the independent accountants the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Corporation’s financial statements.

20.

Discuss with management the Corporation’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Corporation’s risk assessment and risk management policies.

Process Improvement

21.

Establish regular and separate systems of reporting to the Audit Committee by each of management and the independent accountants regarding any significant judgments made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgments.

A-3

22.

Following completion of the annual audit, review separately with each of management and the independent accountants any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.

23.

Review any significant disagreements among management and the independent accountants in connection with the preparation of the financial statements and management’s response.

24.

Review with the independent accountants and management the extent to which changes or improvements in financial or accounting practices, as approved by the Audit Committee, have been implemented. (This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Audit Committee.)

Ethical and Legal Compliance

25.

Review and update periodically the Corporation’s employee handbook and Code of Ethics and ensure that management has established a system to enforce these policies.

26.

Review management’s monitoring of the Corporation’s compliance with the organization’s conduct policies, and ensure that management has the proper review system in place to ensure that Corporation’s financial statements, reports and other financial information disseminated to governmental organizations, and the public, satisfy legal requirements.

27.

Establish procedures for the submission, receipt, retention and treatment of complaints and concerns regarding internal accounting controls, accounting matters or auditing matters and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

28.

Review, with the organization’s counsel, legal compliance matters including corporate securities trading policies.

29.

Review, with the organization’s counsel, any legal matter that could have a significant impact on the Corporation’s financial statements.

30.

Perform any other activities consistent with this Charter, the Corporation’s Bylaws and governing law, as the Audit Committee or the Board deems necessary or appropriate.

A-4

EXHIBIT B
MERITAGE CORPORATION
STOCK OPTION PLAN

ESTABLISHMENT, PURPOSE AND DEFINITIONS

The Stock Option Plan (the “Option Plan”) of Meritage Homes (the “Company”) is hereby adopted. The Option Plan shall provide for the issuance of incentive stock options (“ISOs”) and nonqualified stock options (“NSOs”).

The purpose of this Option Plan is to promote the long-term success of the Company by attracting, motivating and retaining key executives, consultants and directors (the “Participants”) through the use of competitive long-term incentives which are tied to stockholder interests by providing incentives to the Participants in the form of stock options which offer rewards for achieving the long-term strategic and financial objectives of the Company.

The Option Plan is intended to provide a means whereby Participants may be given an opportunity to purchase shares of Stock (as defined herein) of the Company pursuant to (i) options which may qualify as ISOs under Section 422 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), or (ii) NSOs which may not so qualify.

The term “Affiliates” as used in this Option Plan means parent or subsidiary corporations, as defined in Section 424(e) and (f) of the Code (but substituting “the Company” for “employer corporation”), including parents or subsidiaries which become such after adoption of the Option Plan.

ADMINISTRATION OF THE PLAN

The Option Plan shall be administered by members of the Board of Directors of the Company (the “Board”) qualifying as “non-employee directors” as such term is defined in Rule 16b-3 promulgated by the Securities and Exchange Commission (the “Commission”).

The Board may from time to time determine which employees of the Company or its Affiliates or other individuals or entities (each an “option holder”) shall be granted options under the Option Plan, the terms thereof (including without limitation determining whether the option is an incentive stock option and the times at which the options shall become exercisable), and the number of shares of Stock for which an option or options may be granted.

If rights of the Company to repurchase Stock are imposed, the Board may, in its sole discretion, accelerate, in whole or in part, the time for lapsing of any rights of the Company to repurchase shares of such Stock or forfeiture restrictions.

If rights of the Company to repurchase Stock are imposed, the certificates evidencing such shares of Stock awarded hereunder, although issued in the name of the option holder concerned, shall be held by the Company or a third party designated by the Board in escrow subject to delivery to the option holder or to the Company at such times and in such amounts as shall be directed by the Board under the terms of this Option Plan. Share certificates representing Stock that is subject to repurchase rights shall have imprinted or typed thereon a legend or legends summarizing or referring to the repurchase rights.

The Board shall have the sole authority, in its absolute discretion, to adopt, amend and rescind such rules and regulations, consistent with the provisions of the Option Plan, as, in its opinion, may be advisable in the administration of the Option Plan, to construe and interpret the Option Plan, the rules and regulations, and the instruments evidencing options granted under the Option Plan and to make all other determinations deemed necessary or advisable for the administration of the Option Plan. All decisions, determinations and interpretations of the Board shall be binding on all option holders under the Option Plan.

B-1

STOCK SUBJECT TO THE PLAN

“Stock” shall mean Common Stock of the Company or such stock as may be changed as contemplated by Section 3(c) below. Stock shall include shares drawn from either the Company’s authorized but unissued shares of Common Stock or from reacquired shares of Common Stock, including without limitation shares repurchased by the Company in the open market. The maximum number of shares of Common Stock that can be issued under this Option Plan is 2,950,000 shares, and the maximum number of shares of Common Stock that can be issued to any one person under this Option Plan is 100,000 shares per year.

Options may be granted under the Option Plan from time to time to eligible persons. Stock options awarded pursuant to the Option Plan which are forfeited, terminated, surrendered or canceled for any reason prior to exercise shall again become available for grants under the Option Plan (including any option canceled in accordance with the cancellation regrant provisions of Section 6(f) herein).

If there shall be any changes in the Stock subject to the Option Plan, including Stock subject to any option granted hereunder, through merger, consolidation, recapitalization, reorganization, reincorporation, stock split, reverse stock split, stock dividend, combination or reclassification of the Company’s Stock or other similar events, an appropriate adjustment shall be made by the Board in the number of shares of Stock. Consistent with the foregoing, in the event that the outstanding Stock is changed into another class or series of capital stock of the Company, outstanding options to purchase Stock granted under the Option Plan shall become options to purchase such other class or series and the provisions of this Section 3(c) shall apply to such new class or series.

The aggregate number of shares of Stock approved by the Option Plan may not be exceeded without amending the Option Plan and obtaining stockholder approval within twelve months of such amendment.

ELIGIBILITY

Persons who shall be eligible to receive stock options granted under the Option Plan shall be those individuals and entities as the Board in its discretion determines should be awarded such incentives given the best interests of the Company; provided, however, that (i) ISOs may only be granted to employees of the Company and its Affiliates and (ii) any person holding capital stock possessing more than 10% of the total combined voting power of all classes of Stock of the Company or any Affiliate shall not be eligible to receive ISOs unless the exercise price per share of Stock is at least 110% of the fair market value of the Stock on the date the option is granted.

EXERCISE PRICE FOR OPTIONS GRANTED UNDER THE PLAN

(a)

All ISOs and NSOs will have option exercise prices per option share not less than the fair market value of a share of the Stock on the date the option is granted, except that in the case of ISOs granted to any person possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate the price shall be not less than 110% of such fair market value. The price of ISOs or NSOs granted under the Option Plan shall be subject to adjustment to the extent provided in Section 3(c) above.

(b)

The fair market value on the date of grant shall be determined based upon the closing price on an exchange on that day or, if the Stock is not listed on an exchange, on the average of the closing bid and asked prices in the Over the Counter Market on that day.

TERMS AND CONDITIONS OF OPTIONS

Each option granted pursuant to the Option Plan shall be evidenced by a written stock option agreement (the “Option Agreement”) executed by the Company and the person to whom such option is granted. The Option Agreement shall designate whether the option is an ISO or an NSO.

B-2

The term of each ISO and NSO shall be no more than 10 years, except that the term of each ISO issued to any person possessing more than 10% of the voting power of all classes of stock of the Company or any Affiliate shall be no more than 5 years. Subsequently issued options, if Stock becomes available because of further allocations or the lapse of previously outstanding options, will extend for terms determined by the Board or the Committee but in no event shall an ISO be exercised after the expiration of 10 years from the date of its grant.

In the case of ISOs, the aggregate fair market value (determined as of the time such option is granted) of the Stock to which ISOs are exercisable for the first time by such individual during any calendar year (under this Option Plan and any other plans of the Company or its Affiliates if any) shall not exceed the amount specified in Section 422(d) of the Internal Revenue Code, or any successor provision in effect at the time an ISO becomes exercisable.

The Option Agreement may contain such other terms, provisions and conditions regarding vesting, repurchase or other provisions as may be determined by the Board. To the extent such terms, provisions and conditions are inconsistent with this Option Plan, the specific provisions of the Option Plan shall prevail. If an option, or any part thereof, is intended to qualify as an ISO, the Option Agreement shall contain those terms and conditions, which the Board determines, are necessary to so qualify under Section 422 of the Internal Revenue Code.

The Board shall have full power and authority to extend the period of time for which any option granted under the Option Plan is to remain exercisable following the option holder’s cessation of service as an employee, director or consultant, including without limitation cessation as a result of death or disability; provided, however, that in no event shall such option be exercisable after the specified expiration date of the option term.

As a condition to option grants under the Option Plan, the option holder agrees to grant the Company the repurchase rights as the Company may at its option require and as may be set forth in a separate repurchase agreement. Any option granted under the Option Plan may be subject to a vesting schedule as provided in the Option Agreement and, except as provided in this Section 6 herein, only the vested portion of such option may be exercised at any time during the Option Period. All rights to exercise any option shall lapse and be of no further effect whatsoever immediately if the option holder’s service as an employee is terminated for “Cause” (as hereinafter defined) or if the option holder voluntarily terminates the option holder’s service as an employee. The unvested portion of the option will lapse and be of no further effect immediately upon any termination of employment of the option holder for any reason. In the remaining cases where the option holder’s service as an employee is terminated due to death, permanent disability, or is terminated by the Company (or its affiliates) without Cause at any time, unless otherwise provided by the Committee, the vested portion of the option will extend for a period of three (3) months following the termination of employment and shall lapse and be of no further force or effect whatsoever only if it is not exercised before the end of such three (3) month period. “Cause” shall be defined in an Employment Agreement between Company and option holder and if none there shall be “Cause” for termination if (i) the option holder is convicted of a felony, (ii) the option holder engages in any fraudulent or other dishonest act to the detriment of the Company, (iii) the option holder fails to report for work on a regular basis, except for periods of authorized absence or bona fide illness, (iv) the option holder misappropriates trade secrets, customer lists or other proprietary information belonging to the Company for the option holder’s own benefit or for the benefit of a competitor, (v) the option holder engages in any willful misconduct designed to harm the Company or its stockholders, or (vi) the option holder fails to perform properly assigned duties.

No fractional shares of Stock shall be issued under the Option Plan, whether by initial grants or any adjustments to the Option Plan.

B-3

USE OF PROCEEDS

Cash proceeds realized from the sale of Stock under the Option Plan shall constitute general funds of the Company.

AMENDMENT, SUSPENSION OR TERMINATION OF PLAN

The Board may at any time suspend or terminate the Option Plan, and may amend it from time to time in such respects as the Board may deem advisable provided that (i) such amendment, suspension or termination complies with all applicable state and federal requirements and requirements of any stock exchange on which the Stock is then listed, including any applicable requirement that the Option Plan or an amendment to the Option Plan be approved by the stockholders, and (ii) the Board shall not amend the Option Plan to increase the maximum number of shares of Stock subject to ISOs under the Option Plan or to change the description or class of persons eligible to receive ISOs under the Option Plan without the consent of the stockholders of the Company sufficient to approve the Option Plan in the first instance. The Option Plan shall terminate on the earlier of (i) tenth anniversary of the Plan’s approval or (ii) the date on which no additional shares of Stock are available for issuance under the Option Plan.

No option may be granted during any suspension or after the termination of the Option Plan, and no amendment, suspension or termination of the Option Plan shall, without the option holder’s consent, alter or impair any rights or obligation under any option granted under the Option Plan.

[Reserved.]

Nothing contained herein shall be construed to permit a termination, modification or amendment adversely affecting the rights of any option holder under an existing option theretofore granted without the consent of the option holder.

ASSIGNABILITY OF OPTIONS AND RIGHTS

Each ISO and NSO granted pursuant to this Option Plan shall, during the option holder’s lifetime, be exercisable only by the option holder, and neither the option nor any right to purchase Stock shall be transferred, assigned or pledged by the option holder, by operation of law or otherwise, other than upon a beneficiary designation executed by the option holder and delivered to the Company or the laws of descent and distribution.

10. PAYMENT UPON EXERCISE

Payment of the purchase price upon exercise of any option or right to purchase Stock granted under this Option Plan shall be made by giving the Company written notice of such exercise, specifying the number of such shares of Stock as to which the option is exercised. Such notice shall be accompanied by payment of an amount equal to the Option Price of such shares of Stock. Such payment may be (i) cash, (ii) by check drawn against sufficient funds, (iii) such other consideration as the Board, in its sole discretion, determines and is consistent with the Option Plan’s purpose and applicable law, or (iv) any combination of the foregoing. Any Stock used to exercise options to purchase Stock (including Stock withheld upon the exercise of an option to pay the purchase price of the shares of Stock as to which the option is exercised) shall be valued in accordance with procedures established by the Board. If accepted by the Committee in its discretion, such consideration also may be paid through a broker-dealer sale and remittance procedure pursuant to which the option holder (i) shall provide irrevocable written instructions to a designated brokerage firm to effect the immediate sale of the purchased Stock and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate option price payable for the purchased Stock plus all applicable Federal and State income and employment taxes required to be withheld by the Company in connection with such purchase and (ii) shall provide written directives to the Company to deliver the certificates for the purchased Stock directly to such brokerage firm in order to complete the sale transaction.

B-4

11. WITHHOLDING TAXES

Shares of Stock issued hereunder shall be delivered to an option holder only upon payment by such person to the Company of the amount of any withholding tax required by applicable federal, state, local or foreign law. The Company shall not be required to issue any Stock to an option holder until such obligations are satisfied.

The Board may, under such terms and conditions as it deems appropriate, authorize an option holder to satisfy withholding tax obligations under this Section 11 by surrendering a portion of any Stock previously issued to the option holder or by electing to have the Company withhold shares of Stock from the Stock to be issued to the option holder, in each case having a fair market value equal to the amount of the withholding tax required to be withheld.

12. RATIFICATION

This Option Plan and all options issued under this Option Plan shall be void unless this Option Plan is or was approved or ratified by (i) the Board; and (ii) a majority of the votes cast at a stockholder meeting at which a quorum representing at least a majority of the outstanding shares of Stock is (either in person or by proxy) present and voting on the Option Plan within twelve months of the date this Option Plan is adopted by the Board. No ISOs shall be exercisable prior to the date such stockholder approval is obtained.

13. CORPORATE TRANSACTIONS

For the purpose of this Section 13, a “Corporate Transaction” shall include any of the following stockholder-approved transactions to which the Company is a party:

(i)

a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the State of the Company’s incorporation;

(ii)

the sale, transfer or other disposition of all or substantially all of the assets of the Company in liquidation or dissolution of the Company; or

(iii)

any reverse merger in which the Company is the surviving entity but in which beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to holders different from those who held such securities immediately prior to such merger.

Upon the occurrence of a Corporate Transaction, if the surviving corporation or the purchaser, as the case may be, does not assume the obligations of the Company under the Option Plan, then irrespective of the vesting provisions contained in individual option agreements, all outstanding options shall become immediately exercisable in full and each option holder will be afforded an opportunity to exercise their options prior to the consummation of the merger or sale transaction so that they can participate on a pro rata basis in the transaction based upon the number of shares of Stock purchased by them on exercise of options if they so desire. To the extent that the Option Plan is unaffected and assumed by the successor corporation or its parent company a Corporate Transaction will have no effect on outstanding options and the options shall continue in effect according to their terms.

Each outstanding option under this Option Plan which is assumed in connection with the Corporate Transaction or is otherwise to continue in effect shall be appropriately adjusted, immediately after such Corporate Transaction, to apply and pertain to the number and class of securities which would have been issued to the option holder in connection with the consummation of such Corporate Transaction had such person exercised the option immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to the option price payable per share, provided the aggregate option price payable for such securities shall remain the same. In addition, the class and number of securities available for issuance under this Option Plan following the consummation of the Corporate Transaction shall be appropriately adjusted.

B-5

The grant of options under this Option Plan shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

14.

REGULATORY APPROVALS

The obligation of the Company with respect to Stock issued under the Plan shall be subject to all applicable laws, rules and regulations and such approvals by any governmental agencies or stock exchanges as may be required. The Company reserves the right to restrict, in whole or in part, the delivery of Stock under the Plan until such time as any legal requirements or regulations have been met relating to the issuance of Stock, to their registration or qualification under the Securities Exchange Act of 1934, if applicable, or any applicable state securities laws, or to their listing on any stock exchange at which time such listing may be applicable.

15.

NO EMPLOYMENT/SERVICE RIGHTS

Neither the action of the Company in establishing this Option Plan, nor any action taken by the Board or the Committee hereunder, nor any provision of this Option Plan shall be construed so as to grant any individual the right to remain in the employ or service of the Company (or any parent, subsidiary or affiliated corporation) for any period of specific duration, and the Company (or any parent, subsidiary or affiliated corporation retaining the services of such individual) may terminate or change the terms of such individual’s employment or service at any time and for any reason, with or without cause.

16.

MISCELLANEOUS PROVISIONS

The provisions of this Option Plan shall be governed by the laws of the State of Arizona, as such laws are applied to contracts entered into and performed in such State, without regard to its rules concerning conflicts of law.

The provisions of this Option Plan shall insure to the benefit of, and be binding upon, the Company and its successors or assigns, whether by Corporate Transaction or otherwise, and the option holders, the legal representatives of their respective estates, their respective heirs or legatees and their permitted assignees.

The option holders shall have no dividend rights, voting rights or any other rights as a stockholder with respect to any options under the Option Plan prior to the issuance of a stock certificate for such Stock.

If there is a conflict between the terms of any employment agreement pursuant to which options under this Plan are to be granted and the provisions of this Plan, the terms of the employment agreement shall prevail.

B-6

		Please Mark Here for Address Change or Comments	£
		SEE REVERSE SIDE

ELECTION OF CLASS II DIRECTORS:
VOTE FOR nominees listed below

FOR

WITHHELD
FOR ALL

FOR

AGAINST

ABSTAIN

01 Steven J. Hilton

To approve amendment to Company’s
Stock Option Plan

02 Raymond Oppel

03 William G. Campbell

THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED AS YOU SPECIFY ABOVE. IF NO SPECIFIC VOTING DIRECTIONS ARE GIVEN BY YOU, THIS PROXY WILL BE VOTED FOR THE DIRECTOR NOMINEES LISTED AND AND FOR THE AMENDMENT OF THE STOCK OPTION PLAN IN PROPOSAL 2, AND WITH RESPECT TO SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, IN ACCORDANCE WITH THE DISCRETION OF THE APPOINTED PROXY. PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY.

WITHHELD FOR: (Write that nominee’s name in the space
provided below.)

Signature	Signature	Date
Please sign exactly as name(s) appear herein. If acting as an executor, administrator, trustee, custodian, guardian, etc., you should so indicate in signing. If the stockholder is a corporation, please sign the full corporate name, by a duly authorized officer. If shares are held jointly, each stockholder named should sign.
p FOLD AND DETACH HERE p

Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week

Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.

Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.

Internet http://www.eproxy.com/mth	OR	Telephone 1-800-435-6710	OR	Mail Mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site.		Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.

If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.

	MERITAGE CORPORATION

	ANNUAL MEETING OF STOCKHOLDERS - May 12, 2004`

	The undersigned hereby appoints each of John R. Landon or Steven J. Hilton or proxies with full power of substitution acting unanimously and voting or if only one is present and voting then that one, to vote the shares of stock of Meritage Corporation, which the undersigned is entitled to vote, at the Annual Meeting of Stockholders to be held at the The Crescent Club, 200 Crescent Court, Dallas, Texas 75201 on Wednesday, May 12, 2004 at 10:00 a.m. local time, and at any adjournment or adjournments thereof, with all the powers the undersigned would possess if present.

	IF YOU RETURN YOUR PROPERLY EXECUTED PROXY, WE WILL VOTE YOUR SHARES AS YOU DIRECT. IF YOU DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU WANT TO VOTE YOUR SHARES, WE WILL VOTE THEM FOR THE ELECTION OF THE DIRECTOR NOMINEES LISTED IN PROPOSAL 1 AND FOR THE AMENDMENT OF THE STOCK OPTION PLAN IN PROPOSAL 2 AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.

	Please mark, sign and date the reverse side and return the proxy card promptly using the enclosed envelope.

	(Continued on reverse side)



	Address Change/Comments (Mark the corresponding box on the reverse side)

p FOLD AND DETACH HERE p

Filed by the Registrant x
Filed by a Party other than the Registrant o

Check the appropriate box:

o	Preliminary Proxy Statement
o	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x	Definitive Proxy Statement
o	Definitive Additional Materials
o	Soliciting Material Pursuant to Rule 14a-12

x	No fee required.

o	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	1.	Title of each class of securities to which transaction applies:



	2.	Aggregate number of securities to which transaction applies:



	3.	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):



	4.	Proposed maximum aggregate value of transaction:



	5.	Total fee paid:



o	Fee paid previously with preliminary materials.

o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	1.	Amount Previously Paid:



	2.	Form, Schedule or Registration Statement No.:



	3.	Filing Party:



	4.	Date Filed:

Name Of Beneficial Owner	Position With The Company			Right To Acquire By May 15, 2004	Total Beneficial Shares	Percent Of Outstanding Shares
John R. Landon	Director, Co-Chairman and Co-CEO	1,010,168	(2)	97,200	1,107,368	8.3%
Steven J. Hilton	Director, Co-Chairman and Co-CEO	1,100,616	(3)	92,200	1,192,816	8.9%
Robert G. Sarver	Director	479,000	(4)	32,500	511,500	3.8%
Raymond Oppel	Director	—		7,500	7,500	*
Peter L. Ax	Director	—		16,500	16,500	*
William G. Campbell	Director	—		2,500	2,500	*
C. Timothy White	Director	632		32,500	33,132	*
Larry W. Seay	Chief Financial Officer, VicePresident-Finance and Secretary	14,108		46,400	60,508	*
Richard T. Morgan	Vice President and Treasurer	5,152		24,200	29,352	*
All directors and executive officers as a group (9 persons)		2,609,676		351,500	2,961,176	22.2%

		Shares Beneficially Owned At December 31, 2003
Certain Other Beneficial Owners	Address Of Beneficial Owner	Number		Percent
Capital Growth Management LP (1)	One International Place, Boston, MA 02110		1,052,700		8.0	%
FMR Corp. (2)	82 Devonshire Street, Boston, MA 02109		723,200		5.5	%
Wasatch Advisors, Inc. (3)	150 Social Hall Avenue, Salt Lake City, UT 84111		724,709		5.5	%
Wellington Management Company, LLP (4)	75 State Street, Boston, MA 02109		739,500		5.6	%

Board of Directors
John R. Landon
Steven J. Hilton
Robert G. Sarver*	X		X		X	**
Raymond Oppel*	X		X		X
Peter L. Ax* +	X	**	X	**
William G. Campbell*	X				X
C. Timothy White
Number of Meetings	8		4		1

	Annual Compensation									Long-Term Compensation Awards
Name And Principal Position	Year		Salary ($)		Bonus($)			Other Annual Compensation ($)		Securities Underlying Options (#)		All Other Compensation($)(4)
John R. Landon — Co- Chairman and Co-Chief Executive Officer		2003	$	712,500	$	2,582,856			—		40,000		$94,673
		2002		425,000		1,935,043			—		40,000		58,575
		2001		425,000		1,417,401			—		49,000		57,277
Steven J. Hilton — Co- Chairman and Co-Chief Executive Officer		2003		712,500		2,582,856			—		40,000		61,192
		2002		425,000		1,935,043			—		40,000		23,026
		2001		425,000		1,417,401			—		49,000		40,964
Larry W. Seay — Chief Financial Officer, Vice President-Finance and Secretary		2003		262,019		786,784	(1)		—		15,000		20,144
		2002		224,678		600,130	(2)		—		15,000		12,937
		2001		195,346		270,000	(3)		—		19,500		11,191

Richard T. Morgan — Vice President and Treasurer		2003		165,000		180,000	(1)		—		10,000		9,200
		2002		150,000		165,455	(2)		—		10,000		5,811
		2001		150,000		130,000	(3)		—		13,500		4,968

Name
John R. Landon	2003	$3,125	$74,445	$17,103	$94,673
	2002	3,087	39,816	15,672	58,575
	2001	2,250	38,347	16,680	57,277
Steven J. Hilton	2003	3,553	25,595	32,044	61,192
	2002	3,278	18,735	1,013	23,026
	2001	3,130	15,115	22,719	40,964
Larry W. Seay	2003	3,408	4,436	12,300	20,144
	2002	3,300	3,637	6,000	12,937
	2001	3,150	3,391	4,650	11,191
Richard T. Morgan	2003	2,715	6,485	—	9,200
	2002	2,475	3,336	—	5,811
	2001	2,362	2,606	—	4,968

	Individual Grants									Potential Realizable Value At Assumed Annual Rates Of Stock Price Appreciation For Option Term
Name	Number Of Shares Underlying Options Granted (#)		Percent of Total Options Granted to Employees In 2003			Exercise Of Base Price ($/Sh)		Expiration Date		5% ($)	10% ($)
John R. Landon		37,160		11.1	%		32.00		3/12/10	484,091	1,128,138
John R. Landon		2,840		0.8	%		35.20		3/12/08	27,619	61,031
Steven J. Hilton		37,160		11.1	%		32.00		3/12/10	484,091	1,128,138
Steven J. Hilton		2,840		0.8	%		35.20		3/12/08	27,619	61,031
Larry W. Seay		15,000		4.5	%		32.00		3/12/10	195,408	455,384
Richard T. Morgan		10,000		3.0	%		32.00		3/12/10	130,272	303,589

					Number Of Securities Underlying Unexercised Options At December 31, 2003 (#)				Value of Unexercised In- The-Money Options At December 31, 2003 ($)
Name	Shares Acquired On Exercise (#)		Value Realized ($)		Exercisable		Unexercisable		Exercisable		Unexercisable
John R. Landon		31,645		1,515,063		88,995		139,760		4,674,072		5,751,697
Steven J. Hilton		24,000		1,123,190		55,640		139,760		2,712,048		5,751,697
Larry W. Seay		14,000		789,666		32,600		64,400		1,733,828		2,902,622
Richard T. Morgan		34,000		1,372,585		10,800		40,200		511,984		1,760,426